John Webber Head of Business Rates at Colliers International, has suggested that the Government needs to re-think the way in which it hands out support to the retail and leisure sectors, following the pressure mounting for many businesses to hand back the millions of pounds in business rates relief they received in the retail business rates holiday.
Last year, the whole of the retail/ hospitality and leisure sectors were given a blanket business rates holiday in response to the pandemic. Colliers have estimated that the total rates holiday was around £12bn, with around £7.625bn for retail and £4.375 billion for leisure and hospitality businesses.
Mr Webber pointed out that this blanket approach enabled supermarkets who were able to stay open through the national lockdowns also benefitted from the rates holiday- even though many of them made a profit on the year’s trading,
Several supermarkets, including Tesco, Morrison’s, Sainsburys, Asda and Aldi, have committed to paying back more than £1.7bn in business rates relief between them, putting pressure on other companies to follow suit.
Some retailers, including John Lewis, who sell clothing and other non -essential retail, as well as foods, are resisting the pressure due to the challenges their wider business are facing. John Lewis received a business rates holiday of around £50m and Waitrose £120m this current year.
“It’s time for a re-think,” Webber commented. “The Government’s blanket approach last year was in many ways perfectly sensible. We did not know what we were dealing with in the early stages of the pandemic and which companies would be able cope well and which wouldn’t under lockdown – and the overall priority was to preserve jobs and keep the nation fed.”
He said, however, with the benefit of hindsight, rather than giving everyone in these sectors business rates relief and hence a reliance on a voluntary “give back”, he gave a list of suggestions for the Government.
First: ask businesses in these sectors to apply for business rates relief or a rates holiday rather than receiving it automatically.
“Businesses need to show proof of a decline in turn over or profit caused by the pandemic and lockdown to be eligible,” explained Webber. “That way neither the supermarkets nor the on-line retailers who have benefitted from the closure of physical shops would apply unless they had undergone genuine hardship.
“Companies such as Next for example who received a business rates holiday of around £164m this last year, but is forecasting a profit of £670m this year, would not be eligible. Nor would Halfords who doubled its profits to £55m due to the demand for cycling, but still received a business rates holiday of £52m.
Second, extend reliefs to businesses outside the retail/ leisure and hospitality sectors. This includes businesses in the offices sector where many businesses have been prohibited from using their offices during lockdown and workers are told to work from home. The financial implications have been dramatic for many – as we are seeing by the sheer number of companies currently appealing their rates bills via MCC (material change of circumstance)- which in the first six months of lockdown averaged 1000 appeals a day.
Third: allow the names of the businesses that do apply for the rates holiday to be in the public domain, focusing the minds of companies to only apply if they have genuine need
And finally: for those eligible businesses, offer a business rates holiday for the next six months. Webber suggested the government acts quickly on to avoid new bills being sent out to struggling companies as we start the new rating list in April. He said: “The Scottish government has already announced a three-month extension of reliefs for the retail, hospitality, and leisure sectors in Scotland, so what is the UK Government waiting for?”
Mr Webber added that Basing the rates holiday or rates relief on a transparent “needs” basis would save the Government substantial funds compared to a blanket holiday approach and also take away the embarrassment and administrative headache that some companies faced this year who were granted the monies, but felt they should pay it back.
He added: “We estimate a blanket six months rates holiday for retail and hospitality would cost the government around £6 billion, but an application only system with widened usage to other sectors would be no more than £4bn or £5bn.
“We hope the Chancellor says something to this effect and does so quickly and certainly before the March 3rd Budget. We have already stated that suddenly re-introducing business rates to those sectors currently on the rates holiday on April 1st is totally unfeasible for many, given their current financial status. However, a well targeted reliefs programme announced now to businesses genuinely struggling would provide an important buffer so businesses can plan their re-openings and hopefully maintain jobs.”