Extra support in Budget could smooth business rate rises for multichannel businesses

Multichannel retailers based in high value property areas will be watching the Budget announcement on March 8 with interest after Government minister Sajid Javid promised to look again at the upcoming business rate revaluation that is currently on course to bring rises for some smaller businesses, while rates for some larger and online businesses are cut.

The business rates revaluation is set to come into force on April 1 2017. Ministers have said that the changes are part of a revenue neutral process that will make the system more accurate by ensuring business rates bills reflect the property market. The Department for Communities and Local Government and business minister Sajid Javid say that nearly three-quarters of businesses will either see their bills stay the same or fall – and that 600,000 businesses will pay no business rates at all.

But the reality of individual rate changes has provoked criticism that many small traders – especially in areas of the South East where property values have risen fast – will see their bills rise as well, while large online retailers such as Amazon, with fulfillment centres in lower value parts of the country are set to see their bills fall.

In a statement to the Commons this week, Javid said this week that he was working with Chancellor Philip Hammond to see how best to support businesses faced with steep rate rises, especially independent shops in high value property areas, with an update expected in time for the Budget. Some of these are likely to be multichannel businesses.

He cited his experience growing up above the family shop. “I saw for myself the impact that an increase in rates can have on a small business,” he said. “A rise in costs lowered the mood of the whole family. Even as a child, I knew that it wasn’t good when I found a stack of bright red final reminders hidden away at the back of a drawer.

“And my dad was never shy about sharing what he thought of the out-of-town retail parks that took so many customers away from the high street in Bedminster. If he were alive today I’m sure he’d be first to phone me up and lobby me about the business rate revaluation, in particular I can just imagine him telling me about the treatment of large online retailers and how that compares with traditional shops on the high street.”

Commentators say it is important for businesses to compete on an equal footing. Alex Marsh, managing director at Close Brothers Retail Finance, said: “Support is needed for the UK’s small retailers set to be hit with the highest rate increases. Amid heightened levels of concern for high street retailers, it is promising to see the government confirm that it will address the additional support required for these businesses in the Chancellor’s upcoming Budget.

“The retail industry is already in a state of flux and legislative changes like business rate increases makes it even harder for smaller retailers to compete in today’s tough environment. According to our latest research, more than a quarter of all retail SMEs in the UK cite high business rates as a one of their biggest challenges in competing with larger retailers, a figure which jumps to 38% among London-based retail SMEs.

“If retailers are to compete on an equal footing they need to combat the challenge of business rate rises by using all of the tools at their disposal to understand their customer base and build deep relationships to drive sales. This could mean offering a variety of payment options, including the ability for customers to spread the cost of purchases. Being agile and adapting to challenges will go some way to absorbing the impact of business rate rises and will help specialist retailers to survive and unlock their business potential.”