Chancellor of the Exchequer Alistair Darling recently ruled out any plans to freeze the Government’s controversial 5% increase in business rates at 1 April 2009 which, according to property agency Cluttons, has potentially disastrous implications for many UK retailers.
With the Government’s 2.5% cut in VAT having done little to alleviate the pain felt on Britain’s high streets, with many retailers struggling in the recession, the proposed 5% increase in business rates could be the last straw for many of our shopkeepers.
What made the Chancellor’s decision all the more bizarre, Cluttons said, was that Housing Minister Margaret Beckett had just announced new support to help councils cut their planned rent increases for tenants in the current economic climate.
According the Communities and Local Government the average guideline rent increase for 2009/10 will be halved from 6.2% to 3.1% for local authority tenants, to encourage councils to reduce the amount tenants would have to pay for the coming year.
The changes to the guideline rent increase means tenants should see a marked drop in their proposed average rent increase for the coming year from around £4 per week to approximately just under £2.
Commenting on the planned changes Peter Chapman, head of rating at Cluttons said: "Retail insolvencies and shop closures are an almost everyday occurrence at present but rather than looking at ways to prevent further closures the Government appears hell-bent on adding to retailer’s woes.
"It is hard to see where there is a difference between local authority rents and business rates when both increases for 2009/10 were set last September when RPI inflation was 5% and both may need supporting during the current economic uncertainty. The fact that RPI has now fallen to 0.1% suggests the Government’s criteria for helping those groups struggling in the recession is purely based on potential votes rather than sound economics. The Government is clearly cherry picking who it favours and putting politics before economics."
Although retail generates only 8% of the country’s gross domestic product, this property-reliant sector, accounts for more than 22% of the billions of pounds collected by local authorities for the Exchequer through business rates.
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