Rates revaluation delay spells bad news for hospitality businesses

22 October 2012 by
Rates revaluation delay spells bad news for hospitality businesses

A decision by the Government to delay the business rates revaluation process could spell bad news for the hospitality industry, senior figures in the sector have warned.

The news that the revaluation of business rates would be postponed from 2015 to 2017 came last week, and means that hotels, restaurants and pubs will continue to pay business rates based on high 2008 rents for a further two years.

The original plan was that 2015 rates would be calculated on 2013 rents, but now that rates will be revalued in 2017, they will be based on 2015 rents, which are likely to be higher than they would have been in 2013.

Mark Rigby, chief executive of business rates specialist CVS, said: "Economic conditions are extremely tough out there. Extending the current charging regime until 2017 - nine years after rateable values were last measured - is unjustifiable and is simply heaping pain upon pain for businesses crying out for some respite from government. Low consumer spending, high property rents and rising overheads such as energy bills and staff costs are making trading conditions hard enough on the high street and right across business. Today's announcement simply creates a toxic cocktail, which is going to be very hard for thousands of businesses to swallow and survive.

"No business could get away with charging prices that are so many years out of date. Struggling firms shouldn't have to take it from the Government, yet they are being required to do so. It's not what businesses need right now and, frankly, they deserve better. As an announcement it thoroughly flies in the face of pro-business claims from government."

Brigid Simmonds, chief executive of the British Beer & Pub Association (BBPA), added: "This will come as bad news for many pubs, which were relying on the revaluation to reduce business rates because their turnover had dropped. The revaluation is an opportunity to get a fairer rates bill, so any delay is very unwelcome."

But Brandon Lewis, parliamentary under secretary of state for communities and local government, who is also the pubs minister, said last week in a statement announcing the move: "Business rates are the third-biggest outgoing for local firms after rent and staff costs. This decision will avoid local firms and local shops facing unexpected hikes in their business rate bills over the next five years. As business rates are linked to inflation, there will be no real-terms increase in rates over this period. This reform will provide certainty for business to plan and invest, supporting local economic growth.

"Since the last revaluation (based on 2008 valuations), the economy and property market have faced exceptional changes. A revaluation at this point would be likely to result in sharp changes to business rate bills in many parts of the country and in many sectors."

Liz Peace, chief executive of the British Property Federation, said: "A revaluation should shift the burden from those who are suffering to those who are prospering. By postponing, the Government is not allowing the downward adjustment that would otherwise take place for suffering retailers.

"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."

By Neil Gerrard

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