Sky high rents = sky high business rates – well that seems fair, then.
Recently the Federation of Small Businesses conducted a survey in which they discovered that three-quarters of small businesses were more concerned about the introduction of new business rates than anything else – any yes, that includes Brexit.
Why the kerfuffle? In an attempt by the government to be fair (set your alarm bells ringing right now!) it was decided that the value of business rates enterprises must pay will be determined by the value of the property the business operates out of.
Now, whilst this is great news for struggling small businesses, many of them based in the North, where property values have plummeted in recent years, it’s not so good for startups in London say, where property prices have gone bananas in recent years, thanks largely to wealthy foreign buyers.
So, on top of paying big rents to property owners, business rates are going to increase too – by a lot.
The rates are calculated on the estimated underlying value of the properties they are housed in, which are recalculated every five years.
The values used are supposed to be based on what the property was worth 2 years previously, but that didn’t happen last time around because the government, realising that prices had surged in some parts of Britain post the global financial collapse of 2008, decided to take a rain check.
Which was great, but now they are factoring in the price hikes – and price drops – in different parts of the country – and for many business in the South East it makes for uncomfortable reading.
Whilst Colliers International have estimated that around 324 retail centres around Britain will see a decrease, this is a bad time to be a boutique in Dover Street, Soho for example, where rates are set to be hiked by as much as 415%!
Ouch. Brixton could experience rises of 128%, and the Westfield in Shepherd Bush 102%.
In other words, if your business has been thriving because you have been based in a popular, prosperous area, expect to be hit hard where it hurts – in the pocket; but if your business was based in a failing retail centre, expect your fortunes to reverse quicker than a politician’s promise.
The government says it will cushion the blow by making incremental hikes until the full rates are introduced around 2021, but it is not saying it is not going to make the hikes.
And people aren’t happy. A newsagent in Southwold, for example, will see its rates rise to £4,831, from £2,280, meaning it may have to start charging the price of a Wham bar for its penny sweets, just to make ends meet.
It seems like the bean-counters in Westminster have got this one badly wrong. Business rates are the third biggest expense many startups’ must pay. There is some relief available depending on your circumstances – it will all be dealt with more and more by local authorities, as part of the government’s continued devolution efforts.
Revolution, devolution, but not much sign of evolution. Unless you are George Osborne, who argues that it is “the biggest transfer of power to our local government in living memory.
Or the biggest stitch up?