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Taxing the high street out of existence?

By • Dec 12th, 2012 • Category: Guestblog, Insight January 2013, News

Portas one year on: 5 – business rates

It was the year when ministers talked about “bringing back the bustle to our high streets”, then taxed many small businesses out of existence, writes Paul Turner-Mitchell.  In retail terms 2012 will be remembered for the Mary Portas Review and the sight of household names like Comet, Clintons and Peacocks going into administration. But it should also be remembered for the Government introducing the biggest increase in business rates in 20-years.

While ministers queued up for photo ops with Mary Portas and talked of kick starting a high street renaissance with the paltry spend of £20 million on Portas Pilots, very little was said about the fact they’d just raided retailers for an extra £350 million in business rates with a 5.6 per cent increase.

Next year, ministers are planning another £175 milllion raid on retailers and remain seemingly oblivious to a growing chorus of criticism from retailers that unfair business rates are seriously testing the viability of retail.

“At our store in the Metro Centre in Gateshead we pay £160,000 a year in business rates,” explained the chief executive of Kurt Geiger, Britain’s third largest shoe retailer. “It basically makes the store completely unviable. When we sit down and explain this to our American owners, they say, ‘What are you getting for this £160,000?’ and we actually have no idea.”

But if business rates were considered unfair in out of town shopping locations, consider the position in the context of online retail, the biggest threat to our high streets. The business rates for the Amazon fulfilment centre in Doncaster are calculated at £44.00/m2 yet, for Comet out of town in Rochdale, at £125.00/m2, nearly 3 times the cost. The position gets even worse in primary town centre sites. The business rates for an ASOS distribution centre in Barnsley, for example, are calculated at £40.00/m2. In contrast the rates for a unit in a Rochdale shopping centre are £1,080.00/m2!

These are examples of a flawed and outdated business rate model. A model that now damages the high street. All are examples of retail businesses. All competing for the same pound. Different platforms of retail – high street, online and out of town yet huge differences in operating costs so far as business rates are concerned. How can high streets recover without urgent reform to take into account modern day retailing?

The same unlevel playing field can be found all over the country and businesses are quite rightly angry about it. The head of the North West high street chain Timpson is one of many to argue that business rates are holding the high street back. James Timpson said he’d looked at opening a new site in Stockport earlier this year but the business rates were almost double the rent.

“Business rates have got completely out of hand,” he said. “It’s become a real stifler and is stopping businesses from taking more space and trying new things. The higher the business rates, the harder the gamble is to pay off.”

This sense of unfairness was compounded in October when ministers decided to postpone next year’s business rates revaluation until 2017. Essentially this means the Government want to keep business rates pegged back against 2008 property prices – at close to the peak of the boom – instead of against today’s property prices, which, outside of the south east, have generally fallen. In my town, for example, retail property prices have fallen by as much as 40 per cent.

Branded as nothing short of a scandal, this Government wheeze is all about squeezing the maximum amount of money out of the high street regardless of the impact it’ll have on retailers who are struggling to survive. Liz Peace, chief executive of the British Property Federation, is one of many industry voices to label it unfair:

“The postponement embeds injustices in the current system, where businesses pay top-of-the-market rates in a depressed climate, for an additional two years at the worst possible time,” she argued.

It’s now nearly two years since David Cameron promised to establish the most “pro-business, pro-growth, pro-jobs agenda ever unleashed by a government.” That’s quite a boast. Even for a politician. But as long as Treasury mandarins keep focusing all their energies on clever wheezes to pull the wool over retailers’ eyes and squeeze the life out of the high street then he’s going to continue falling a long way short.

What next?

  • This piece appears as part of Portas one year on, a collection of perspectives published by AMT to coincide with the one year anniversary of the Portas Review
  • Read the other Portas one year on pieces and our summary
  • High street campaigner Paul Turner-Mitchell owns Rochdale’s 25 Ten boutique, writes columns for Drapers and Retail Week and contributed to Mary Portas’ high street review. He was recently included in the Drapers 2011 top 100 Powerlist as one of the most influential people in fashion. Contact Paul via email and on twitter
  • AMT occasionally carries guest blogs to encourage debate and share opinion. AMT does not necessarily endorse, share, or support the opinions of guest bloggers
  • Read other guest blog posts
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is Jamie is AMT's Communications Manager and works for AMT for 2 days per week looking after press, external affairs, website content, social media, marketing, some events and some membership support. A freelance consultant to charities, social enterprises and small businesses, Jamie co-founded and was managing director of the respected 'New Start magazine' (now owned by the Centre for Local Economic Strategies) and has worked in a PLC. Jamie lives in Sheffield, is an active rock climber and mountain biker, and is a volunteer board member for a local social enterprise.
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