Winners and losers from the Government’s rates bills revaluation
The Government’s draft rating list for the 2023 revaluation, published following the Autumn Statement, reveals that UK retailers are the biggest winners from the new list.
However, operators of large warehouses and logistic/distribution space will see the biggest jump in their rates bills when the new revaluation comes into force next April.
The retail sector, on average, has seen a 10% decrease in rateable value (RV) in the next list- the only sector to show a decrease. Together with the decision to freeze the multiplier at 51.2 p for large businesses and 49.9p for smaller businesses, this is good news for retailers who will be seeing a reduction in their rates bills in April.
This news has been enhanced by the removal of downwards transition, as announced in the Autumn Statement, since it means retail occupiers will pay the true lower rates payable for their stores immediately the new list starts.
According to John Webber, head of business rates at Colliers, said: “We are expecting to see substantial business rates bills reductions across England and Wales, not just on high street locations but in retail parks and shopping centres and other out of town locations.”
The 10% decrease in RVs is an average – in some locations, RV reductions of 30 or 40% are expected.
Large department stores and hypermarkets are among the biggest winners of the revaluation, for example in Oxford Street in London, RVs have fallen by approximately 30%, but some stores, such as Selfridges has seen its RV drop 45% from £30.5m to £16.8m with the new list.
In Manchester, the Manchester Arndale shopping centre, will see a 34% decrease in its business rates next April
Webber said: “Rates bills are not the only economic pressure on retailers, particularly with the energy crisis, rising service charges and staffing costs, but by freezing the multiplier and removing downwards transition allowing rates bills to fairly reflect rents, if a retail business fails in 2023 or beyond, it is unlikely to be because of business rates.”
The industrial and logistic sector has certainly been hit the hardest in this new revaluation, says Colliers, reflecting the higher rents at the time of the antecedent valuation date in April 2021, as industrial take up figures rose across large areas across the country.
As a result of this, there has been an increase in the rateable values for many industrial properties, with the VOA confirming the industrial sector showed an average 27.1% increase in rateable value, the largest increase out of all of the sectors.
Earlier in the year, Colliers predicted a rise across the full sector averaging between 20% and 30% and the most prime stock even higher, rising to 50%. It looks as though the predictions have come true.
The rateable value of Amazon’s warehouse at Tilbury in Essex, for example, has risen by 74% to £12.3m. Trafford Park, in Manchester, has experiences a 30% increase.
However, it’s not all doom and gloom for the logistics sector. In the Autumn Statement the Chancellor announced upward transitional relief caps to support ratepayers facing large bill increases following the revaluation, with £1.6bn of support funded by the Exchequer. This will spread out the increases for the big logistics facilities.
The introduction of upward caps of five per cent,15% and 30% for small, medium and large properties in 2023-24, will also reduce the pain and will be applied before any other reliefs or supplement.
Occupiers of industrial and logistics properties will, therefore, receive some sort of cushion. As Webber says: “Many occupiers of these properties were aware they had been paying too little for too long in terms of business rates, particularly given the extension of the list to six years and have been preparing to see substantial rises. Now businesses in the sector have certainty to plan for the year ahead.”
In the office sector, in general, rateable values have risen but not to the same extent as the industrial sector.
RVs adopted on city centre offices have, in the main, increased across the country, with the levels of increase varying depending on the location – with prime offices showing the greatest rises. For some more secondary, Grade B offices, RVs will have remained the same. For example, Manchester’s St Peter’s Square will see a five per cent increase.
Looking forward, headline figures revealed are obviously averages and there still is a lot of discrepancy in the list. Fortnum and Masons in Piccadilly, for example, has only seen a five per cent reduction in its RV, which seems suspiciously low.
John Webber added: “What is becoming obvious is that those occupiers and owners of properties that either themselves or via agents made representation to the VOA during the assessment process appear to have been more successful in negotiating their bills down. Given the VOA was assessing properties in the midst of COVID when many properties were temporarily closed, or deals were being struck with landlords, a proper assessment was something of a minefield.
“We, therefore, urge anyone who is unhappy about their RVs to consider making representation to the VOA now if the figures look significantly wrong and consider the appeal process when the list becomes live next April. We believe this will lead to even further reductions in RVs, particularly in the retail sector and could provide some respite in offices, too.”