Business

Business rates changes 'are threat’ to High Streets

A general view of shops on Northcote Road, London Image copyright Getty Images

There's a warning the health of Britain's high streets is being threatened by various business costs which will rise in April.

The Federation of Small Businesses is warning its members could struggle because of a planned rise in business rates and the National Living Wage.

In April, the amount companies in England pay in business rates will change for the second year in a row.

It follows a major revaluation by the government, which was introduced in 2017. It saw some bills going up, and others going down.

"Increases in rates bills are set to significantly outpace inflation this year," said Mike Cherry, national chairman of the Federation of Small Businesses.

Image caption Raj Jain fears he will be forced to close his shop

But many of the businesses whose rates are falling say they're being penalised in order to soften the blow for the losers.

"It's really hard to pay £3,500 every month," says Raj Jain, who owns a mobile phone repair shop in the centre of Canterbury, Kent.

His walls are stuffed with phone cases and chargers. He's recently diversified into vaping paraphernalia to try to increase custom.

The rateable value of the shop has fallen by 53%, according to the Valuation Office Agency.

But its business rates bill is down by just 21%, two years into the changes.

The shop won't see the full benefit of the last revaluation by the time the next one's due in 2021.

"It doesn't help. If it's in one go, at least you know where you stand and you can survive," says Mr Jain.

His fear? "We will close," he says.

Bills are falling slowly for some to help cushion the blow for those whose bills are rising.

Many retailers have been complaining loudly about their costs. Some have closed down stores.

The list of high street firms publicly acknowledging problems recently is long -- New Look, Maplin, Byron, and on and on.

Image caption "The legislation should be changed," says Jerry Schurder

Experts say the system's a mess.

"To deny the reductions to those who have been trading in difficult circumstances makes absolutely no sense at all and is unfair," says Jerry Schurder, the head of business rates at Gerald Eve LLP.

"The legislation should be changed," insists Mr Schurder.

The government said the revaluation must be "revenue neutral", so couldn't raise more or less money from the changes.

That meant there were always going to be winners and losers.

The government has estimated that 510,000 businesses are set to see an increase in their business rates, 420,000 will stay the same and 920,000 will see a decrease.

"Rising business rates are threatening high streets all over the country. This is a regressive tax that hits firms before they've made their first penny in turnover, let alone profit," said Mike Cherry. The national chairman of the Federation of Small Businesses.

"Too many small firms have been left waiting months for support from the 'emergency' business rates hardship fund launched this time last year," he went on.

While it might take a few years for some of the winners to feel the full benefits of the recent changes, some firms already have.

Image caption But for cafe owner Dan Grimwood, the rates changes have bought benefits

In a small, trendy café on the edge of Canterbury city centre, the lunchtime rush means there's not a single empty table.

That's not the only thing the Refectory Kitchen feels good about.

Its owner, Dan Grimwood, explains the recent adjustment in business rates means his bill has fallen from £4,300 a year to zero.

"The money I've saved has helped me reinvest in equipment and also upkeep of my property to help push the business forward," he says.

That's because the government increased the threshold for what's known as Small Business Rate Relief from £6,000 to £12,000. The valuation of Dan's café is below that new, higher level.

A government spokesman said, "We have introduced over £9 billion worth of business rate support so that many small businesses now pay no rates and from this weekend we are reducing annual rises which will save companies a further £4bn."

In the Spring Statement, the Chancellor Philip Hammond announced the government will bring forward the next revaluation of business rates from 2022 to 2021.

Many companies have welcomed more regular revaluations.

"Done right, this will make the rates regime fairer, meaning bills better reflect up-to-date property values and the strength of the local economy," said the FSB's Mike Cherry.

The National Living Wage is increasing for over 25s from £7.50 an hour to £7.83.

"Small firms are helping to keep employment levels close to record highs," said Mr Cherry.

"Now they need more support in managing the costs associated with making that possible."