Hard-hit high street retailers ‘subsidising’ Bond Street elite
Rate delay helps the likes of Armani but costs Greater Manchester shops £61.5m
Monday 06 January 2014
Struggling retailers on some of Britain’s most deprived high streets are effectively “subsidising” the likes of Burberry and Chanel following the Government’s two-year delay on business rate revaluation, it has emerged.
The Government was supposed to have revalued all business properties by 2015, a process that takes place every five years. The rental values are used to calculate business rates, but this has been postponed until 2017.
The delay benefits one of the UK’s richest shopping streets, Bond Street in London. Stores will save £66m over two years, according to research by Grimsey Review co-author Paul Turner-Mitchell.
He found that rents on Bond Street have risen on average 72 per cent, from around £5,000 per square metre to £8,611, since the revaluation in 2008. Should rents grow at the current rate several major retailers will make huge savings from an increasingly outdated valuation.
Burberry, which recently reported that sales have broken through the £1bn barrier, is estimated to be saving £2m. Luxury stationery store Smythson, which employs David Cameron’s wife, Samantha, as a creative consultant, will save around £850,000, French fashion house Chanel an estimated £3.5m, and US lingerie firm Victoria’s Secrets more than £2.5m.
By comparison, the economic downturn since 2008 has seen rents in Greater Manchester fall by an average 31 per cent. Retailers there are desperate for a revaluation to reflect that decline.
Stockport has been hit hardest, with rents down 47 per cent, followed by Rochdale by 40 per cent and Oldham at 36 per cent. If the revaluation had not been postponed, businesses in Greater Manchester would have saved £61.5m.
Former Wickes boss and co-author Bill Grimsey points out that Stockport has some of the highest levels of empty shops in the country, and blames the artificially high business rates for the problem. He added: “The principal certainty that this delay delivers is that of excessive business rate bills for struggling businesses and tax breaks for those luxury retailers. Small businesses are in effect going to be subsidising the likes of Emporio Armani and Dolce & Gabbana, which beggars belief.”
Mr Grimsey’s report has called for a freeze on business rates, instead of the current practice of rising in line with inflation. However, the Government recently announced it will cap rises at 2 per cent – a solution favoured by the British Retail Consortium.
The Government has faced heavy criticism over business rates, with high street chains arguing that it gives an unfair advantage to online-only retailers who do not pay the same rates.
Blockbuster, which disappeared from high streets last month, revealed that its own business rates bill was nearly 10 per cent of its turnover and contributed to its failure.
* A single-day record 4.8 million people shopped at Asda’s 573 UK sites on 23 December, chief executive Andy Clarke has announced. He said that over Christmas Asda had stuck with a “simple strategy of no gimmicks, just every day low prices”.
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