Rochdale businesses 'shouldering unfair proportion of business rates'

Experts have renewed calls for the Government to re-examine the business rates system following a record Regent Street letting that has highlighted the unfairness of the decision to delay the 2015 rating revaluation - that leaves Rochdale businesses "shouldering an unfair proportion of the business rates burden and supporting high-end retailers such as Hackett on Regent Street." 

Luxury menswear retailer Hackett has this week signed a new 15-year deal to lease the former Ferrari store at 193/197 Regent Street at a street-record Zone A rent of £645 per sq ft. The deal followed intense competition from high-end brands seeking to secure the best space and underlined the continued upward pressure on prime London rents.

However, following the Government’s decision to delay the 2015 rating revaluation, Hackett’s annual business rates bill will continue to be based on rental levels in 2008 – when Zone A rents on the same property were much less at £278.50 per sq ft. To put this into context, Hackett will face a rates bill on the unit’s ground floor alone of £285,000 per year compared to £767,000 if the revaluation had gone ahead as planned, an annual saving of £482,000. With two further floors included in the lease, Hackett’s total savings on business rates as result of the delayed revaluation will be well in excess of half a million pounds a year.

Jerry Schurder, head of rating at Gerald Eve, said: “The purpose of rating revaluations is to redistribute the rates burden across all businesses to reflect changes in the economy and the market since the last revaluation, but this letting to Hackett at a record rent provides additional proof – were any required – of the perversity of the Government’s postponement decision.

“Retailers in central London, which could evidently have afforded to pay a greater share of the rates burden, are being protected from rates increases, while those in declining high streets up and down the land have to continue to pay an excessive burden until 2017. Rochdale retailers are supporting Regent Street’s leading brands – a situation that is crazy but true.”

Paul Turner-Mitchell, director of 25 Ten, added: “Delaying the revaluation creates unfairness by requiring struggling businesses to subsidise those that have fared better. These figures crystallise the unfairness. In essence, rents which have fallen by as much as 40% since the last revaluation in Rochdale mean businesses there are shouldering an unfair proportion of the business rates burden and supporting high-end retailers such as Hackett on Regent Street.”

The delay in the revaluation of business rates was announced in October 2012 by local government minister Brandon Lewis. The Government has said the decision avoids local firms and shops facing ‘unexpected hikes in their business rates bills over the next five years’.

Jerry Schurder added: “The Government’s reasons for delaying the revaluation are at best naïve and at worst disingenuous and founded in political decisions. The Government claims to support high streets and be actively working to help those that have suffered in the past few years, yet its business rates policy is piling further hurt onto the retailers that are struggling most. If the Government really wants to be pro-business and pro-high street, it needs to urgently re-examine its approach to business rates.”