Rochdale businesses pay artificially high business rates

The fish and chip shop forced to close due to high business rates

Plummeting rents in Rochdale have left retailers paying twice as much in business rates as they should.

The Local Data Company and the University of Liverpool have published their findings on the material changes that impact business rates across nine pilot areas, including Rochdale, from 2008-2013.

Rochdale’s overall rental decline is estimated at -40%, if you take clothes and fashion it is -65.3%.

Case study on the ‘Best Cod in Town’ (fish & chip shop) in Rochdale.

The Rateable Value (RV) for this small fish and chip shop is £39,750 (as set by the Valuation Office Agency part of HMRC).

At a Rateable Value of £39,750, the multiplier of 47.1p (set by Government annually and uplifted by September’s RPI indexation) gives annual rates of £18,722.25 to be paid by the chip shop owner.

Whilst the Rateable Value is £39,750, the business is just paying £10,000 rent. Therefore, this year from April 2013 to April 2014, business rates are £18,722.25, nearly double the rent being paid.

The owner of the property is now marketing the property for just £6,000 rent which will be 562% over the Rateable Value.

If the government postponed rates revaluation had gone ahead and the assessment fell to £10,000 (the rent on 1 April 2013) then even if multiplier had to increase to 56.9p (to compensate for a fall in total RVs’ to ensure neutrality), as the Government forecasted, the amount due would be £5,690.

Matthew Hopkinson, director at the Local Data Company commented: "The variance in vacancy rates are already well publicised but now with the Colliers rental data we can now see a 52% variance (+11.1% to -41.2%) in rental values of the pilot areas. The differential in adjusted business rates to the current VOA figures between a fashion shop in Rochdale and a fashion shop in London W12 are over 100% different and hence why one sees the significant acceleration of closures north of the Watford Gap versus London and the South East. The shop in Rochdale would see a 65% reduction in rateable values whilst the one in London a 52% increase."

Bill Grimsey, veteran retailer and author of the Grimsey Review commented: "This research underlines the sharp rental falls that have been seen in high street retail, particularly in towns in the North that have struggled since 2008. Forcing towns like Rochdale to pay artificially high business rates based upon rateable values that are 40% higher than their real value, for an additional two years, is inexcusable. This is no way to reverse a high street decline and will only make a bad situation worse. That is why, within our alternative high street review, we called for the immediate reinstatement of the 2015 revaluations to ensure fairness in tax liabilities."