The long awaited and much feared revaluation of business premises for the calculation of business rates, last done in 2010 takes effect from 1st April 2017. It threatens to destroy thousands of small businesses in London and the South East as they see their rates bills soar by up to 300% over the next five years. The Federation of Small Businesses estimates that 510,000 SMEs will be affected. The victims will not just be retailers. Schools, day nurseries, cafes, pubs and restaurants will also be hit.
Small businesses do not make big profits or have cash reserves so many will be unable to absorb these extra costs, which will run into thousands of pounds for many. Operating in highly competitive markets, most will be unable to raise their prices to compensate for this new burden. Insolvencies and closures are inevitable. The long term damage to the UK’s high streets may be severe and for some, terminal.
The main impact of the revaluation will hit London and the South East disproportionately because the value of business premises there have risen faster than elsewhere in England. There will also changes in Scotland and Wales is considering implementing its own revaluation. In a savage twist of irony, one of the major winners will be Amazon. It’s out of town warehouses, many located in the North of England will see their rates bills fall, further increasing their advantage over their bricks-and-mortar retail competitors.
Our Business Risk Adviser, Nick Hood explained the deeply worrying implications of the revaluation in a live interview with Sam Walker on the BBC Radio 5 Live programme, Sunday Breakfast. He suggested that a more acceptable solution may be a shift to the sales tax approach common elsewhere around the world.
To listen to the full interview, click on the link below. The clip starts at 36:55 into the programme