Reform to the business rates system “cannot come soon enough” for British business, said CBI (www.cbi.org.uk
) president John Allan when addressing business leaders in central London on 8 May.
He said: “The business rates system has become uneconomical, unsustainable and — frankly — unintelligible.
In short, it’s a system in need of reform. “Part of this problem is the uncertainty around when the next rates revaluation will occur.
The last revaluation period was extended from five years to seven, and we can now expect revaluations every three years, but any longer than one year means that business rates lag far behind economic cycles and — over the years — the significant rises in UK property costs.
"The result is a system that rewards those places already on their way up in the short term but eventually pulls the rug from under them; it also punishes the areas that are already struggling, with boarded-up shops an all too common sight.
“Take Hackney, for example. Almost a decade ago, the borough was known as the centre of the London riots; today, it is a vibrant vessel of investment and part of London’s ‘Silicon Roundabout’, which last year attracted almost 20,000 new start-ups.
“However, the lag between the area’s boom in property prices and its latest business rates revaluation has seen firms suddenly having to cope with an almost 50% increase in their bill.
“We can compare this to somewhere like Redcar, which saw a huge rise in unemployment and a significant drop in property prices after the closure of its steelworks four years ago.
“Meanwhile, firms in the area continued to pay business rates at up to 20% above their rateable value.”
“This situation is clearly counter-intuitive; it is also the inevitable result of a system unable to account for the rapid change — whether growth or decline — that we have witnessed across the UK.
“It can mean local authorities being underfunded in areas where businesses are on the rise, or companies going under, creating a vicious cycle of decline and dependence.”
“In its current form, the business rates system disincentivises investment, with the way property is assessed at the heart of the problem.
“Whether it’s a large capital investment, or several smaller upgrades to existing property, any real efforts to invest will see your business rates rise.
“It certainly doesn’t give businesses a strong reason to invest in the UK, let alone in areas where capital is most sorely needed.”