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Sunak’s Budget business rates discount ‘falls short’

Chancellor Rishi Sunak announced today that companies in the retail, hospitality and leisure sectors will be given a 50% discount on business rates, up to a maximum of £110,000, as part of the government’s Fundamental Review of Business Rates.
He also …

Chancellor Rishi Sunak announced today that companies in the retail, hospitality and leisure sectors will be given a 50% discount on business rates, up to a maximum of GBP110,000, as part of the government's Fundamental Review of Business Rates. He also said the government will make the business rates system fairer and timelier, with more frequent revaluations every three years, compared with the current system of five. The new revaluation cycle will come into effect from 2023.

The planned increase in the multiplier will also be cancelled. Business rates are currently calculated by multiplying a property's rateable value (RV) by the relevant multiplier (or uniform business rate, UBR) and applying any relevant reliefs. The small business rates multiplier is currently 49.9p for every GBP1 of rateable value, and applies to properties with RVs below GBP51,000.

The standard multiplier for properties with an RV above GBP51,000 is 51.2p. "We were thrilled to hear about today's government announcement on business rates discounts to boost economic recovery," said Guy and Leeanne Hundleby, owners and co-founders of accessories brand Strathberry. "This will really encourage independent businesses like ours to invest more in new store openings and increase their confidence in supporting an industry that was so heavily impacted by the pandemic.

It's the economic relief we need for businesses to bounce back from the challenges of the last 18 months and thrive."


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Helen Brocklebank, Walpole CEO, Drapers Imagery

Helen Brocklebank, CEO of UK luxury body Walpole, welcomed the business rates discount Helen Brocklebank, CEO of UK luxury body Walpole, said: "The chancellor's decision to half business rates for the retail, hospitality and leisure sectors is very welcome news and will be a significant help to the British luxury sector over the course of the next 12 months. Luxury businesses are doing all they can to provide solutions to the problems that they face.

"Before the pandemic, the sector was outstripping GDP [gross domestic product] in growth each year, supporting more than 160,000 jobs in each of the nations and regions. With temporary support measures, the sector will recover and will be an important generator of future growth for UK [companies]."

jace tyrrell headshot

Jace Tyrrell, CEO of New West End Company said welcomed the reform but said business rates are still too high However, Jace Tyrrell, CEO of New West End Company, which represents West End businesses, said: "It's encouraging to see the chancellor finally act upon the need to reform the business rates system.

Cancelling the inflation-linked rise to the multiplier may ensure that rates won't go up this year, but they are still too high. "A 50% discount for the retail and hospitality sectors will help some struggling high street businesses, but not all. By capping the 50% high street discount at GBP110,000, the benefit means little to city centre businesses.

For a store in London's West End, it will result in less than a 1% cut in their business rates bills for just one year. "This only results in a cut of around GBP1bn each year on a GBP25bn business rates bill in England - the equivalent of a 4% cut.  This falls far short of a fundamental review and is a very disappointing outcome. It does little in the long term to meet the government's manifesto commitment to reduce the burden of business rates."


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Chris Sanger, auditing firm EY's head of tax policy, said: "With revaluations moved to every three years, the chancellor has improved the system.

However, beyond the immediate cut, this still leaves retailers paying almost five times more in business rates than their share of the economy. The half-price offer for the next year will help, but does not address the long-term issue."

Online sales tax

The government will continue to explore the arguments for and against a UK-wide online sales tax (OST), the revenue from which would be used to reduce business rates for retailers with properties in England and with the block grants of the devolved administrations increased in the usual way, because of the explosion in internet shopping during the pandemic. The government said it will publish a consultation "shortly".

Next, Asos and the British Retail Consortium (BRC) have been lobbying against an online sales tax, which they argue would have to be passed on to consumers.

Business rates by numbers

  • The non-domestic rating income for 2019/20 was GBP25.3bn
  • UK business rates are the highest property taxes in the OECD (Organisation for Economic Co-operation and Development)
  • Retailers pay 25% of all business rates paid by UK companies (largest single category for business rates)
  • Of the taxes paid by retail businesses, 42% are business rates
  • The government introduced a 12-month business rates holiday for retail, hospitality and leisure businesses in March 2020
  • Vacant and to-let retail premises in England were excluded from the business rates holiday and charged GBP1bn in rates in the 2021/21 financial year

Meanwhile, the chancellor also confirmed the UK's National Living Wage, which applies to all workers aged over 23, is to go up to GBP9.50/hour from April 2022, representing a pay rise for millions of low-paid workers. Ministers have accepted the Low Pay Commission's recommendation for a 6.6% increase from GBP8.91, which applies to workers aged 23 and over. For those aged 21 to 22, the minimum will increase from GBP8.36 to GBP9.18.

Helen Masters, retail lingerie consultant and former owner of Pudding Lingerie, an independent in Windsor, said: "I know for many businesses, the initial reaction to the increase in living wage may be negative - yet another increase in cost base in a tough trading environment. "However, I think we have to take the longer-term view and see the increase in living wage as a positive step for the fashion industry and particularly for face to face retail staff. "Today's fashion retailers need a reason to bring customers into store and there are only really three options to achieve that: price, convenience and experience.

For many businesses, the focus has to be on creating a customer experience with the wow factor and that means having skilled, motivated teams. We simply cannot expect people to deliver on the experience modern retailers need to create if we don't pay them adequately." Jon Goodwin, finance director at lifestyle retailer Weird Fish, agreed: "The increase on the National Living Wage is a positive step forwards in helping relieve cost of living pressures.

Weird Fish has been paying the Real Living Wage since April 2021 and does not use the age brackets to lower younger workers' pay." Graham Griffiths, director of the Living Wage Foundation, a campaigning organisation in the UK that aims to persuade employers to pay a living wage, said: "The past 18 months has been a perfect storm for workers and families, including those in industries such as fashion that have been hard hit. Costs like fuel and energy have risen, and many have seen cuts to household incomes, so it's positive to see a significant increase in the minimum wage from April 2022.

"However, the Real Living Wage [a voluntary rate of pay that employers can choose to give to their staff, unlike the government-set National Minimum Wage] is calculated annually based on covering living costs. Next month, as part of Living Wage Week, new living wage rates will be announced that reflect the rising living costs we've all been experiencing. These rates will see a substantial gap remain between the Real Living Wage and next year's government National Minimum Wage.

"We all need a wage that provides a decent standard of living.

If we're to recover and rebuild over the coming months and years - including in the fashion sector - we'll need to see more employers commit to go beyond the government minimum.

Do the right thing now and commit to pay a Real Living Wage."