There’s too much confusion, I can’t get no relief

WHAT CHANGED

The Business Rate exemption threshold rising from £12k to £18k to benefit small businesses, funded by the exclusion of gambling and vaping shops from the RHL multiplier. But potential increases in relief for Pubs and Nightclubs and extension of relief to other Hospitality operators was not forthcoming. Business Rate receipts to be redistributed locally, as opposed to pooled centrally.

WHAT THIS MEANS

Sole traders and small businesses are more likely to be raising a glass in celebration than publicans and restauranteurs. And bookies and vaping shop owners pondering why they are the fall guys in a thinly shrouded moral crusade.  

From a Business Rates perspective, the Budget was somewhat underwhelming, but this was always going to be the case given that it didn’t tie in with a Business Rates Revaluation (the next one is not until 2029). Bandings and multipliers (base or otherwise) were unlikely to be changed or modified at this juncture and CPI was already a known quantity. The only levers at the Chancellor’s disposal lay in the relief department. Pubs, Nightclubs and Music Venues were already singled out for special dispensations in Andy Burnham’s first week in office – hopes of further increases did not materialise. But other Hospitality operators, who are subject to many of the same economic, financial and operational pressures, will continue to feel aggrieved at not being afforded any tangible relief benefits. 

This will see an estimated additional 70,000 Retail & Hospitality premises freed from Business Rate obligations, welcome respite for large numbers of small operators and sole traders. But a move that is unlikely to have either a positive or tangible impact on the high street in the widest sense (i.e. the whole retail market), where multiples and major chains are the dominant force in terms of share of retail sales, employment and footfall-drivers. Gambling and vaping shops will not be exempt, a slightly curious morality-based judgement which seems predicated on the misplaced notion that these are blighting communities rather than occupying premises for which there is limited demand from other operators and would otherwise be vacant.  

Limited movement on collection, but significant shift in allocation. Currently, local authorities retain 50% of Business Rates locally, while the remaining 50% goes to central government for redistribution via grants, tariffs and top-ups. From April 2027, Mayoral Strategic Authorities (MSAs) will receive a 20% share of business rates, towards a wider aim of making business rates a 100% locally-retained tax by the end of the decade, with local authorities' share increasing to at least 70%, mayors retaining 20% and the remaining 10% to be determined through upcoming local government finance settlements. 

Sound in principle, but likely to have unwanted, unintended consequences. Properties with the highest RVs are heavily concentrated in London and the South East, by extension these areas are likely to have the highest Business Rates receipts. At the other end of the spectrum, the most deprived areas of the country are likely to have the lowest Business Rates receipts due to low RV properties and a growing exemption base. Unless there is intervention, the areas that need investment most are to receive the least, surely the very antithesis of wider devolutionary designs?

BOTTOM LINE 

The changes to Business Rates in the latest Autumn Budget fall short of the deep-seated reform that is needed to alleviate pressure, particularly among national High Street operators. Business Rates remain a key cause of consternation for both Retailers and Hospitality businesses alike – the Chancellor may have initially scored some consumer PR points on Pubs, but provided little respite (or ‘breathing space’) for the operators themselves.