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The UK chancellor is being urged to ease the burden of business rates after new figures suggested councils are sending bailiffs to 310 companies a day over arrears.
English councils sent bailiffs to more than 69,000 companies that have struggled to pay their business rates in the year to the end of March, according to responses to a series of freedom of information requests made by the property consultancy Altus.
The firm estimates the figures equate to around one in 16 of all business premises facing the prospect of having their goods seized by bailiffs last year.
The numbers come a month after 50 retailers – including Marks & Spencer, Harrods and Iceland – wrote to the chancellor Sajid Javid, demanding action on the business rates burden to safeguard the future of the high street.
Firms across England could see their rates increase by a total £536m for 2020-21, if the headline rate of inflation of 1.7% remains unchanged in September, according to Altus. Retailers will shoulder £137m of that hike.
Robert Hayton, head of UK business rates at Altus, said: “It’s not the mechanics of the rating system that is of primary concern of business but the level of the actual rates bills.”
What’s the problem?
Physical retailers have been hit by a combination of changing habits, unseasonably warm weather, rising costs and broader economic problems. In 2018 Toys R Us, Maplin and Poundworld disappeared as a result.
In terms of habits, shoppers are switching to buying online. The likes of Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying ‘stuff’ as more people live in smaller homes and rent rather than buy. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high-street presence want the government to change business rates. They also want more political certainty as the potential for a no deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs after October 2019. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges which they say put off shoppers.
What is the government doing?
In the October 2018 budget the government announced some relief on business rates for independent shopkeepers. It has also set up a £675m ‘future high streets’ fund under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
What is the outlook in 2019?
Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further Brexit wobbles to come – retailers are facing a tough 2019. Another rise in the national minimum wage in April and the falling value of the pound against the dollar, which is used to buy goods in the far east, have also added to costs and hit profits.
“Commercial property is already making a significant contribution to overall UK tax revenues. With the highest property taxes across the EU, the chancellor should recognise this in his upcoming autumn budget by removing the automatic inflationary increase.”
Business rates – the commercial equivalent of council tax, based on a property’s value – have become a totemic issue for retailers struggling with the impact of economic uncertainty and competition from digital services. They point to the comparatively lower business rate burdens for online-only players such as Amazon, who pay rates on their warehouses but do not have a significant high street presence.
Altus received details on how many business premises were referred to bailiffs from 264 English councils covering 1.7m properties out of 1.9m liable for rates.
The responses, which cover nearly 90% of all non-domestic properties, show a total of 69,367 instructions to bailiffs were made – representing 4% of all commercial premises in England.
The Altus research discovered that Birmingham city council referred the most premises to bailiffs over the year, at 3,755 – or nearly 8% of business premises in its area. Westminster and Manchester City Councils followed with 3,007 and 2,701 referrals respectively, or 7.7% and 10% of premises respectively.
Haringey, Barking and Dagenham, Lewisham and Blackpool councils, all sought collection of arrears through bailiffs on more than 15% of the business premises in their areas.
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