Autumn statement: Disappointment for retail as business rates support does not extend to bigger businesses

Chancellor Jeremy Hunt said he was "backing British business with 110 growth measures" but there was bitter disappointment in retail that the business rates relief announced did not extend to larger businesses with multiple stores.

In his statement the Chancellor announced that the standard multiplier for rates on high-value properties would increase in line with inflation, while the small business multiplier will freeze for a further year. In addition, the 75% rates discount for retail, hospitality and leisure, introduced during the COVID era, will all be extended for another year up to £110,000 per business.

However, nothing was said to support the larger retail and hospitality businesses who will be faced with a 6.62% rise on their business rates bills next April.

John Webber Head of Business Rates at property firm Colliers said the news was a major blow to the high street: “By adding the CPI inflation figure to the existing multiplier he has grabbed even more cash from hard pressed retailers. For these businesses, the multiplier will be 0.546 – meaning business rates is heading towards being a 60% tax.

“The Chancellor’s actions will be a massive hit to the high street. Although most businesses in the retail and hospitality sectors have benefited to some extent from the 2023 Revaluation, the sectors are still under pressure facing higher occupational costs across the board as energy, employment and insurance costs soar- yesterday’s rise in the national living wage only adds to the pressure.”

Webber continued: “In his rush to save his job, the Chancellor has ignored the calls of the BRC and UK Hospitality and seems to have forgotten that the larger retailer and hospitality companies are the main employers in their sectors. Hitting them with a 6.62% rise in their rates bills next April will have a dire impact and certainly dampen expansion and growth plans. For some businesses it might be the last straw. The situation is even more bizarre when we see the current inflation figure has already fallen to 4.6% and may be around 3% next April, but we would see such businesses tied to the 6.62% figure for the year.”

To illustrate the point, Colliers looked at ZARA's rates liability (bills) which it estimates will rise from £15.29 million this year to £16.3 million next, while NEXT will see a rise from £97.3 million to £103.6 million and H&M's bill will rise from £33.5 million to £35.7 million. In Oxford Street, Selfridges’ rates bill will increase by over £550,000 to £9.5 million per annum. The increases are not only confined to Central London, with Primark in High Street Birmingham facing a rates bill increase from £681,000 to £725,000 next year.

“The Chancellor’s failure to support those retailers and hospitality companies with multiple stores or outlets, will lead to a hardship and do nothing to stem the trail of bankruptcies we have seen from such chains in recent years from Toys r Us and Carluccio's to most recently Wilko. Last year 67,000 retail workers lost their jobs and 5,5000 retail stores shut shop. The lack of support is astounding," said Webber.

“It’s pointless worrying about Capital Allowance benefits on empty shops. Aside from freezing the multiplier for small businesses, the government has also yet again failed to fulfil its election manifesto and introduce proper business rates reform. None of the following matters, that we have been campaigning for have been addressed.

The reforms Colliers have been campaigning for are:

• Reduce The Multiplier (the UBR used to calculate rate bills) to around 34 p in the £.
• Reform of the Sticking Plaster Reliefs System and Remove Business Rates Deserts, where no business rates are paid.
• Extend Empty Property Rates Relief to Twelve Months and to Other Sectors.
• Introduce Annual Revaluations.
• Review Rating of Plant and Machinery.
• Improve Transparency from the VOA.
• Reform Unfriendly and Ill-Equipped Appeal System.
• Address Rogue Rating Advisors by Regulating the Ratings Industry.

Webber added: “The Chancellor spoke of creating a tax regime pro-business and designed for further 'levelling up'. The failure to freeze the larger multiplier fundamentally means substantial business rates rises for the UK’s biggest businesses from 2024. Nowhere else in Europe do businesses pay approaching 60% the rental of their premises in property taxes and at current levels this is unsustainable and deters new investment in businesses, despite the Chancellor’s claims. This is a damning indictment for the Conservative Government who have failed their manifesto promise to reduce this tax.”

David Parker, Head of Rating at Savills, also spoke of his disappointment at the measures: “The renewal of the retail, leisure and hospitality relief, which will benefit some shops, pubs, restaurants, gyms, etc, is welcome news. The relief has become a necessity since COVID struck, and continues to be required as we collectively face the cost pressures that energy, the cost of borrowing and inflation have brought with them. The disappointing aspect is the continued cap on the benefit at £110,000 per business as most medium to large businesses will see relatively little benefit from the relief.

"The financial pressures faced in the retail, leisure and hospitality sectors are not unique to small operators. Larger venues and portfolios, as well as ancillary businesses supplying those sectors, are also impacted, yet the relief doesn’t extend to them. As the sectors as a whole are impacted by these ongoing financial pressures, extending the relief to larger operators and supporting businesses would avoid further casualties and ease the pressure on the wider participants in these markets.”

Scott Parsons, Chief Operating Officer UK at Unibail-Rodamco-Westfield, agreed: “Although there is some relief for small business, once again the Chancellor’s lack of impactful reform to business rates is disappointing news for British retail. The industry is screaming out for permanent reductions to occupancy taxes, which still stand at up to ten times more than other European countries, putting the UK at a huge competitive disadvantage.

"On top of this, it’s a blow for the industry to see no moves towards an online sales tax to level the playing field between online and physical retailers, or reinstating tax-free shopping for international visitors to fuel tourist demand, boost consumer spend and support economic growth.

“This was the moment for clear, decisive action from the government, however yet again too few meaningful solutions have been offered to support sector growth, at a time when the industry needs it the most.”