Retailers fear business rates surge with inflation-linked rise expected

By

Nigel TAYLOR

Published
Oct 20, 2022

Getting through the winter isn’t going to be the only hurdle retailers face. Business rates in England could rise by as much as £3 billion next April, experts have warned, as commercial premises face up to a £25 billion hike over the next five years.

That’s if the government reverts to tagging rates to inflation following the end of the pandemic support package when inflation-linked business rate rises were cancelled between 1 April 2020 and 31 March 2023.

Figures from real estate adviser Altus Group showed that if rates were based on September’s Office for National Statistics consumer price inflation of 10.1%, they would rise by more than £2.7 billion in England from April 2023-24. 

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The cumulative effect would add an extra £24.63 billion over the next five years, Altus Group said, even if inflation falls back to its target 2% by 2025.

The government has not confirmed what will happen at the end of this period, leading to concerns that a jump in rates will pile extra pressure on businesses already crippled by rising costs, and also leading to more calls for a fairer way of setting business rates. 

Altus Group UK president Robert Hayton told Property Week the government must end this “ridiculous policy of growing the tax base through inflation rather than focusing on growth to boost local tax revenues to fund services”. 

Josh Myerson, partner and head of rating at Montagu Evans, also said: “The government needs to let go of the idea that [rates] revenue needs to be automatically moved forwards by inflation.” 

In the coming weeks, the government is set to publish a draft list of new property revaluations used to calculate business rates. While this could see some retail valuations – and rates liabilities – fall significantly, there is a lack of clarity on whether any reduced liability would be tapered over a number of years. 

John Webber, head of business rates at Colliers, also told the publication: “The government needs to publish the rating list sooner, and announce what it is going to do about phasing in any of those reductions. They also need to ensure they do not bake in any inflation figures next year.” 

The revaluation of buildings will come into effect on 1 April 2023 in England, based on an estimate of open market rents on 1 April 2021, but Altus Group noted that the revaluation would be revenue neutral. This means it would not raise extra money for the Treasury, and overall business rates revenue for 2023-24 would still be increased by September’s CPI measure of inflation.