Retailers braced for rates shock
Published: 12 October, 2010
Retailers face a shock when they receive their 2011 rates bills in April next year, after stubbornly high inflation this autumn pushed up the level of fixed increases.
Under the current system, September’s Retail Price Index is used to calculate the annual increase in commercial property taxes for England and Wales that will be introduced the following April. And the government has just announced that September’s RPI rose by 4.6 per cent. Retail lobby groups have immediately started campaigning to have the increase reduced or postponed.
British Retail Consortium director general Stephen Robertson has already written to the Secretary of State for Communities and Local Government urging the Government to use alternative ways of calculating the next increase, something it has the power to do. He said: “No one seriously expected inflation to fall so stubbornly slowly from the highs of January and February. As recently as this spring most forecasters expected RPI to be significantly lower by now and few retailers have budgeted for the scale of business rates rises that may now result.”
And BCSC president Neil Varnham said: “This increased burden would come at a time when retailers, who’s businesses survive on very low margins, will be experiencing pressure from the January 2011 VAT increase, falling consumer income, low levels of bank lending, rising unemployment and weak consumer confidence. With many retailers seeing significant increases in their rates bills following revaluation an additional 4.6 per cent will affect profitability, thus impacting on expansion plans and potentially leading to job losses as retailers look to cut operating costs. “
The BRC has advocated using a different measure for index-linking business rates “Basing a whole year’s rates bills on one, almost random, month’s RPI makes no sense,” said Robertson. “The Government must switch to another way for next April and beyond. Using the Consumer Price Index (CPI), as it does for pensions is one option. Or using the 12-month average RPI rate from October 2009 to September 2010, which would iron out inflation rate volatility.”
