Retailers on London’s famous West End shopping streets are set to be the big losers from the next business rates revaluation, with research undertaken by property consultancy and rating specialist Gerald Eve showing they face increases in their bills of over 80%.
The firm – which has used its expertise, market intelligence and specialist knowledge across the full range of sectors to undertake a ‘shadow revaluation’ of all 1.8 million non-domestic properties in England – identifies that shops situated on Bond Street, Oxford Street and Regent Street will pay a total of £293 million per year as a result of the revaluation, a rise of £131 million on the previous 12 months.
Bond Street, which has seen an influx of international luxury brands since the last revaluation in 2010, will be particularly hard hit, with rates bills on this street more than doubling.
The revaluation, based on property rental values on April 1st 2015, comes into effect in April 2017 and is designed to redistribute the £24 billion rates burden across all assessed properties. Total Government revenue from business rates increases annually in line with inflation, including following a revaluation. This means that the revaluation effect on business rates bills for each property depends on whether its assessed rateable value changes by more or less than the total change across the country.
The results of the 2017 revaluation being undertaken by the Valuation Office Agency (VOA) will only be revealed in autumn 2016, but Gerald Eve’s innovative shadow revaluation highlights the dominance of London over the rest of the UK economy. The £293 million to be paid by the 497 retailers on just three of the capital’s streets is on a par with the total rates revenue of entire cities; for example all 24,650 properties in Manchester, not just shops, presently pay rates totalling £320m.
London’s contribution to business rates revenues is underlined by Gerald Eve’s forecasts of the rates bills faced by the capital’s office occupiers. Central London offices face bills exceeding £3 billion a year after the revaluation, more than all the other offices across the whole of England combined.
Indeed, occupiers of London’s seven most iconic office buildings – Gherkin, Shard, Walkie Talkie, Cheesegrater, Tower 42, Heron Tower and One Canada Square – will have to stump up a total of £142 million per year, a rise of 34%. Prime West End offices will see similar increases, with other London office locations such as King’s Cross, Soho and Southwark predicted to see even more dramatic rises.
But more businesses are set to gain rather than lose from the revaluation, especially away from the capital. Retailers on the worst-affected high streets will belatedly get some relief from excessive rates bills. High street shops across large swathes of the country have seen rents tumble since April 2008, the valuation date on which current rates bills are still set, and retailers are anticipating significant falls in rates bills in 2017 as a consequence. Among others, Gerald Eve’s research forecasts rates bills falls of 30% for retailers in Portsmouth and Wigan, 35% in West Bromwich, Stockport and Crewe, and 40% or more in Walsall, Stockton and Dewsbury.
Jerry Schurder, head of business rates at Gerald Eve, said: “The results of our shadow revaluation not only highlight the huge disparities between locations that have performed relatively well since the recession and those that have struggled to reverse the decline, but also underline what a mistake it was to postpone the revaluation by two years. Firms in the worst affected areas should have benefited from lower bills today rather than in two years’ time.
“More than anything, the extreme volatility in rates bills that will hit businesses in 2017 underlines the need for revaluations to be undertaken far more frequently so that bills respond quickly to market changes. Rather than the Government’s review of business rates, launched in March, having to be fiscally neutral, business rates should become a ‘floating’ system with bills adjusting in line with property values and prevailing economic circumstances. Rates are the only tax where the take remains fixed in real terms and businesses are tired of being treated as a cash cow with bills rising with inflation even if business prosperity flounders.”
Gerald Eve’s shadow revaluation is the culmination of more than six months work to attribute rateable values to each of the 1.8m rateable properties in England. In addition to the standard shops, offices and warehouses the firms’ experts have reviewed the more specialist sectors such as bingo halls, schools and power stations. “We’ve even attributed values to crematoria,” says Jerry Schurder, “and we’re forecasting bills for these properties will rise by over 25%. This brings new meaning to Benjamin Franklin’s quote about the certainty of death and taxes.”
Jerry Schurder added: “The long gaps between revaluations – seven years this time – generate enormous volatility and make it virtually impossible for firms to budget accurately for liabilities. April 1st is the revaluation date, but businesses won’t find out their liabilities for at least 18 months.
“We know how critical it is for our corporate clients to be able to prepare accurate budgets of their property costs three to five years ahead and our shadow revaluation means we have the capability now to help them understand what their bills should be once the revaluation takes effect in two years’ time.”
Gerald Eve is the UK’s leading authority on business rates, providing advice on some 70,000 properties including 25% of FTSE 100 companies. To date, the firm has saved clients £1.6 billion through appealing the 2010 revaluation assessments, and handles over £1 billion of clients’ business rates payments.
The figures quoted for rises / falls in business rates liabilities are the gross changes and do not reflect the impact of potential schemes such as transitional arrangements and small business rates relief, which are yet to be confirmed as applying to rates bills from April 2017 onwards.