Businesses call on government to move to CPI inflation figures

16 October 2017 by
Businesses call on government to move to CPI inflation figures

It is thought that the government will delay the switching of business rates indexation from RPI to CPI until 2020.

Although the government is due to announce inflation figures tomorrow, Colliers International warn that this could have costly implications for the pub and leisure industry already suffering from business rate rises this year.

The September 2017 RPI inflation figures to be announced this week are likely to show inflation running at 4%, or higher, which will mean operators and owners will see at least a 4% rise in their rates bill in April next year.

If business rates were tied to CPI figures (currently running at 2.9%) instead of RPI, "at least some of the pain would be reduced" Colliers said.

John Webber, head of business rating at Colliers, said: "The Treasury has recognised that many pub and leisure businesses are suffering from the business rating revaluation in 2017 and has finally accepted that CPI rather than RPI is a fairer measure of inflation to link business rate rises to. So why instead of introducing the new indexation immediately, is it waiting three years to 2020? How much pain do such businesses have to suffer? With inflation on the rise at the moment, by the time we reach April 2020, we could see some very uncomfortably high rating levels."

Companies saw business rate hikes in April 2017, following the revaluation, however those businesses are not benefitting as much as expected. Colliers has blamed this on the two-year delay in the reduction of their rates bill when the Revaluation was delayed from 2015 to 2017, but also because of the introduction of the five-year transition period before they are allowed to pay their bills at the new lower revalued level.

Webber added: "A pub or hotel owner or operator could find itself with a lower rateable value, but because of transition, is only seeing a 2% or 3% decrease in its rate bill each year for the next five years. With RPI at 4% or above any benefit is immediately wiped out. And for some companies, it is even more ridiculous. They could have a 50% decrease in rateable value but due to rising inflation actually find themselves with higher rate bills next year. Hardly an improvement in their finances!

"The Treasury has claimed the change to CPI indexing would save companies £1b in the first three years, including a £250m saving for the retail sector. If this is the case, the government should act now. Many businesses have been hammered in the recent business rates revaluation, particularly the high street retailers and with delays in receiving promised reliefs and the failures of the new business rates appeal system, many are finding themselves squeezed or even worse."
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