Devolution of business rates could lead to a high street war between towns, warn experts

Posted by This is Money on 22nd Nov 2015
The devolution of business rates could lead to a high street war between towns, experts have warned.

Empty shops have plagued some UK high streets with nearly 10,000 shops labelled as ‘long-term vacant’.

George Osborne announced last month that local government will be able to retain 100 per cent of local taxes – including all £26billion of revenue from business rates – to spend on services.

He is expected to give more detail on this in the Autumn Statement on Wednesday.

Once councils are able to control how much they charge, weaker towns could lose out with stronger towns attracting even more shops with cheaper rates.

Matthew Hopkinson, director of The Local Data Company, warned: ‘There is a competitive danger. Councils will be in competition with each other. There needs to be joined up thinking between towns in each local area otherwise we will have towns competing and the worst off will see further shop closures.’

He said the north will suffer the most because many towns already have a glut of empty shops – his recent report revealed the north had the most empty shops at an average of 16.4 per cent.

The Local Data Company tracks the health of Britain’s high streets and last month revealed the number of long-term empty shops increased by 24 per cent to nearly 10,000 in the first half of 2015 – equal to more than six Liverpool city centres.

He added: ‘The good times are no longer rolling. Shop prices have been falling for more than two years and the costs of people and property continue to rise.’

Mark Robinson, joint-founder of property company Ellandi which owns more than 20 shopping centres in the UK valued at nearly £1billion, said: ‘This is a forthcoming disaster. Devolution in principle may be sound but it has unforeseen circumstances.

‘It will lead to problems because councils that can least afford to reduce rates and help their ailing town centres will lose out to those who can offer discounts to attract retailers. Deprived town centres will get worse.’

He said in many towns the business rates are more than the rent paid by retailers – a crippling cost to many.

He added: ‘We need a robust system of rates valuations done regularly. By devolving the power to councils the government is side stepping the long-awaited overhaul of the rating system.’

Business rates expert and High Street campaigner Paul Turner-Mitchell warned that devolution of rates will mean councils will want more out of town shopping developments where retailers will be willing to pay higher rates to the ‘detriment of our struggling high streets.’

He added: ‘Hopes of a meaningful structural review of the “antiquated system” of business rates seems further away than ever before.’

Business rates were set in 2010 - on valuations of properties made in 2008 - and are supposed to be updated every five years, but government has delayed for at least another year and is currently reviewing the system. 

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