All eyes are on the Chancellor to avoid a cliff-edge through an early announcement on business rates support
All eyes are on the Chancellor to avoid a cliff-edge through an early announcement on business rates support from 1st April to bring certainty to the retail sector writes Robert Hayton.
The acquisition of the Debenhams and Arcadia brands by pure-play online fast fashion retailers Boohoo and ASOS is likely to see 1,389,137 square metre of retail floor space, the equivalent of 194 Premier League football pitches, coming vacant and to-let in the event that no stores are retained.
Landlords will potentially have to face business rates liabilities of around £141 million in annual empty rates, after a short exemption period, unless new tenants can be found once possession is taken back.
The Chancellor, to his credit, has invested more than £280 billion during the last year, including £12 billion on business rates support across the whole of the UK, to try and protect businesses against the economic impact of coronavirus.
Meanwhile Landlords of commercial property have so far been overlooked despite being asked to play a supporting role themselves having been specifically excluded from the scope of the current rates holiday which is due to end on 31st March.
The acceleration of the structural changes taking place across our high street and these seismic changes to the fabric of the retail sector means that empty rates are ripe for modernisation as part of the Treasury’s ‘fundamental review’. Rate free periods need to be extended to reflect the time that it actually takes to re-let vacant properties. Failure to do so will stifle investment in our communities.
Ahead of this, the Chancellor must now as a minimum give business in England the immediate certainty that they need by confirming an extension to business rates holiday ahead of the Spring Budget. Lockdown restrictions and changing consumer habits mean our high streets are far from capable of bearing the burden right now.
The Scottish Government took the lead last week, where business rates are devolved, by confirming an extension to the current 100% rates relief for occupied properties in the retail, hospitality, leisure and aviation sectors for at least the first three months from 1st April.
Despite this continuation, the tax break will no longer be applied automatically and instead will be application based to avoid it going to those businesses who have weathered the pandemic well, a potentially sensible prudent move providing that those who need the support suffer no delays.
Given the hugely impressive vaccination programme, and the speed of the roll-out, it has never been more important than now to ensure that viable businesses are supported adequately during these final months with the end in sight.
We must avoid a cliff-edge through withdrawing reliefs too early, whilst learning from the mistakes of the past where support was arbitrary rather than targeted to those most in need.
Robert Hayton is UK President of Property Tax at the real estate adviser, Altus Group