High street handed £1.1bn Christmas present

The high street has been handed a £1.1bn Christmas present by the Chancellor after he unveiled a string of measures to ease the burden of business rates.

After intense lobbying from business leaders, George Osborne cut the scheduled increase in business rates next April from 3.2pc to 2pc and also said pubs, restaurants and small shops will receive a £1,000 discount on their rates for the next two years.

Businesses that move into vacant shops on Britain’s struggling high streets will, in addition, enjoy a 50pc discount on their rates for 18 months, while rates relief for small businesses will be extended for another year.

The Government also made the first steps to reforming business rates after the next election by stating it will “discuss with business options for longer-term administrative reform of business rates post-2017”.

The measures follow a Fix the Rates campaign from The Telegraph, which called for a two-year freeze in business rates and for the tax to be reformed in order to ease the pressure on the high street.

“The people in these businesses epitomise the hardworking values this Government supports,” the Chancellor said. “We’re backing Britain’s businesses all the way.”

The proposals mean more than 300,000 shops, cafés and pubs will enjoy a tax cut next April and were the highlight of a collection of measures in the Autumn Statement designed to support business.

Mr Osborne also said that:

  • Employer national insurance contributions will be scrapped for under-21s, affecting 1.5m jobs
  • New loans worth £1bn will be provided to help unlock housing developments
  • An export finance capacity for UK businesses will be doubled to £50bn to help firms break into emerging markets
  • A 2p increase in fuel duty scheduled for 2014 has been cancelled

Businesses welcomed the Chancellor’s package of business rates schemes, although warned his measures will only be worthwhile if the tax is eventually reformed.

Ian Cheshire, the chief executive of B&Q-owner Kingfisher and chairman of the British Retail Consortium, said: “Bearing in mind that the room for manoeuvre was limited, this is the most radical Autumn Statement that we have seen for some time.”

John Cridland, director-general of CBI, added: “The pressure on the high street has been recognised. The 2pc cap on business rates and discount for very small businesses are positive, as is the reoccupation relief.”

The changes to business rates mean the Government will bank £1.1bn less from the tax in the 2014/2015 financial year.

The small business rates relief is worth £500m, while the £1,000 discount will apply to roughly 300,000 properties and is worth £350m.

The 2pc cap for 2014/2015 will save businesses £270m, but because of the way business rates are calculated it will cost the Treasury another £1.06bn over the following four years.
Cafés, local shops, pubs and even high street clothes shops are now likely to enjoy a tax cut in April.

Ben Field, who has run a clothing retailer in Bexhill-on-Sea for more than 50 years, said a cut to business rates was long overdue. He said: “The Government gets locked in and tied up with legislation. It’s a bit of a dinosaur when it comes to change. If you were to kick its tail, a week later it would say now.”

Nonetheless, business rates will still rise overall by £400m in April. Supermarkets and the largest retail chains will see an increase in the amount they pay, although companies including Kingfisher, Marks & Spencer and Waitrose said they would save more than £1m from the 2pc cap.

According to Deloitte, a retailer with typical shop at a major shopping centre such as the Trafford Centre in Manchester will now see rates rise by £3,100 to £166,800, rather than by £5,200 to £168,900.

The 50pc discount for businesses reoccupying empty shops is also unlikely to solve the challenges facing high streets across the country. The scheme will only be open to properties that have been vacant for more than a year. According to Treasury estimates, between 14,000 and 21,000 retail sites fall into this categories, out of a total of almost 60,000 empty properties.

John Rogers, chief financial officer at J Sainsbury, who is leading a review of business rates for the industry, insisted that the Government had to do more to ease the burden of business rates.

“Business rates continue to place a significant and unfair burden on bricks and mortar retailers in the UK and are discouraging investment in local jobs and communities,” he said.
“An urgent rethink of business rates policy is required in order to level the playing field between traditional retailers and online players if we are to avoid an irreversible decline in our towns and high streets.”