Business rate hikes about to hit retailers

Retailers are bracing themselves for increased property costs in the form of newly calculated business rates which take effect in April 2017.

After rent and staff costs, business rates represent the biggest outgoing for many businesses. For information on how rates are calculated, click here.

Traditional bricks and mortar retailers with large property portfolios, particularly in the South East, are likely to be hit hardest by the increased rates with purely online retailers being the least affected. Indeed, many UK retailers feel that the current rating system penalises the traditional property based retail model and adds to the already significant challenge of the growth of online retail.

Taking an international perspective, there are concerns that foreign retailers are unlikely to want to prioritise investment in the UK over other markets due to high costs, including business rates, and other factors such as increasing wage costs and post-Brexit uncertainty.

In terms of what can be done to mitigate against the increase in rates, we would recommend that retailers check with their specialist real estate consultants whether any reductions to their assessed rates are available (if they haven't done so already). For example, exemptions may apply and reliefs may also be available. Additionally, the Valuation Office Agency (VOA) has made available the incoming property valuations (upon which the new rates will be calculated) in draft form on its website (click here), to enable businesses to check their valuations and inform the VOA of any inaccuracies before they go live on 1 April 2017.   In the longer term, retailers may consider joining lobby groups calling for the Government to overhaul the current rates scheme.