The business rates system is still broken and in need of wholesale reform despite a package of support announced in the autumn budget, the BRC has said.
BRC CEO Helen Dickinson was responding to an announcement from the Treasury this morning that retail’s business rates bill is set to drop by a fifth from April.
The reduction is the result of a £13.6bn support package including an extension and increase in relief for retail, hospitality and leisure from 50% to 75% in 2023-24. It also includes freezing the business rates multiplier for another year, and ending so-called ‘downwards transitioning’, meaning new rates will apply immediately from April instead of being phased in over three years.
Dickinson said ending downwards transitioning had been an “essential step” but that the measures still fell well short of the fundamental reform promised by the Conservative Party ahead of the last election in 2019. She also slammed the tax for taking no account of a business’s profits.
Read more: Superstores to benefit from £687m cut in business rates over three years
“The need for business rates reform is far from over,” Dickinson said.
“The broken business rates system is a drag on investment, jobs, and the vibrancy of town and city centres. For example, while other business taxes like corporation tax and VAT rise and fall with the changes in the economy, business rates must be paid in full whether firms are making a profit or a loss.
“This makes business rates a final nail in the coffin of many struggling stores; shutting shops, costing jobs and preventing new openings. Any meaningful plan for the future of our town and city centres must have wholesale reform of our business rates system at its heart.”
According to the Treasury, the total business rates bill paid by retail is predicted to fall by 20% from April, while large distribution warehouses will see a 27% increase.
Read more: Business rates hike could mean financial collapse for many, warehousing sector warns
Victoria Atkins, financial secretary to the Treasury, said: “The firms that make up our high streets are facing challenging times and I want them to know the government is on their side. One of the ways we can help them is by making it easier – and cheaper – to do business.
“This package does just that. It protects all from rising inflation, partly caused by Putin’s brutal war in Ukraine, it means a tax cut for many as shops will pay one fifth less in rates and it reflects the modern market by finally addressing the balance between online and in-store sales.”
The rateable value of shops in England and Wales, on which the tax is based, will fall by 10% on average from April, and as much as 30% or 40% for some shops, with department store-sized units and larger among the biggest winners, according to Colliers. The property consultancy has said the imminent savings are already spurring store openings for some retailers, pointing to plans recently announced by M&S and Poundland.
However, not all bricks & mortar retailers are set to benefit. Food stores of the size favoured by Lidl and Aldi are forecast to pay more, thanks to a surge in demand for such properties driven by the growth of the discounters themselves.
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