The UK retail industry is urging action due to fears that the commercial property tax cut could be flattened by transitional relief.
Leading UK retailers and the British Retail Consortium are urging the government to pass on an expected reduction in business rates immediately, ahead of the revaluation of commercial real estate for the first time since 2017.
The government consults on the mechanics of transitional relief as part of each revaluation, to help smooth the effect of rising valuations on business rates. This is funded by limiting the benefit of falls.
In most regions, shop rental values have fallen sharply in recent years, and the latest revaluation was delayed in order to take in the full impact of the pandemic. In the five years since the last revaluation, transitional relief of £633 million was given to retailers facing increased rates. The relief was cancelled out by the £1.28 billion withheld from those whose liabilities fell.
Tom Ironside, BRC director of business and regulation, commented: “The business rates system is damaging our high streets and town centres by directly undermining store viability. The retail industry accounts for 5% of the economy, yet is saddled with 25% of the total business rates bill. This is directly contributing to the loss of shops and jobs, particularly in many of the parts in the UK in need of ‘levelling-up’ and putting additional pressure on prices.
“Transitional relief is a flawed system that could cost retailers over £1 billion during the next three years, leaving them with no choice but to close those shops which are most impacted by artificially inflated rates bills.
“This is money which would be used to help address the cost of living, or support the vitality of towns and cities around the UK. In the short run, the most impactful change that any new Prime Minister could make to reform business rates, would be to scrap the downwards phasing part of Transitional Relief.”