Chancellor Philip Hammond has announced a £1.5bn package of measures to aid the UK’s high streets, including £900m in business rates relief to small high-street retailers, aimed at helping smaller retailers compete against online competition. A further £675m will be available over the next four years to local councils as part of Future High Streets Fund to improve infrastructure, under-used property and transport links in town centre shopping areas in order to increase high street footfall and allow for the regeneration of abandoned properties into housing.

Starting from next year, almost half a million small retailers will experience a 33% reduction to business rates.

However, the measures are aimed at businesses with a rateable value (RV) of up to £51,000 and do not include those of a higher rate. It is these stores, which are usually owned or leased by established high street names, that are currently struggling with the combination of high running costs and business rates.

Business rates were set at 47.9% in 2017, based on the revalued stock of properties. Prior to this it had been set at 41.4%, and this 6.5% rise has significantly affected those businesses which require property to operate, such as manufacturing and high street retail. In 2018, business rates raised £30.2bn, just over 4% of the government’s total revenue for the year.

The cuts to business rates will generate a decrease in revenue of £490m in 2019-2020 and £450m in 2020-21, according to the budget Red Book.

An increase in business rates last year meant significantly increased pressure on businesses already dealing with the economic uncertainty posed by Brexit and slowing sales on the high street. The 2017 business rates revaluation is linked to the 30-odd UK retail businesses that have sought a company voluntary arrangement (CVA) in the last year, which have included House of Fraser and Regis UK.

Phil Vernon, head of rating at PwC, said: ‘The Chancellor's decision to focus his attention on small business will be welcomed by many. But it doesn't address the fundamental issue of the current business rates system - the high main tax rate, which will be 50p in the pound for many businesses from 1 April 2019.

‘By announcing a cut in business rates by a third for all retailers in England with a rateable value of £51,000 or less, the Chancellor has again tinkered around the edges of the system without addressing the need for a reform of the system to make it a suitable local tax for modern business. 

‘Many smaller and medium sized businesses have rateable values in excess of £51,000 and so this change will either not help them, or will present a barrier to expansion as they consider moving into larger premises if they want their business to grow.

The announcement also totally overlooks larger businesses, which are repeatedly highlighting business rates as a high stress area affecting the high street, and will do nothing to stem the closures of larger high street stores. Long term reform is crucial, not just for business but for local government who rely on a consistent revenue stream to provide high quality local services.’

Jacqueline Windsor, retail partner at PwC, added:

‘Retailers face more structural industry challenges, with the ever-growing shift to online shopping having severe implications for retailers’ delivery and returns services, and their legacy stores on the high streets. Today’s announcement will give some breathing space for retailers to reflect on how to evolve, innovate and indeed transform themselves to be fit for the future.’

Report by James Bunney