Rates burden fuels fears of ghost town UK after Covid

Britain’s broken business rates system needs an urgent overhaul to stop the High Street from becoming littered with empty shops after the pandemic, it has been warned. 

Eye-watering rates bills are now deterring retailers from leasing vacant units, and are seen as a bigger problem than rents in some cases, according to property agent Colliers. 

In one of the worst examples, a prospective tenant agreed to rent an old Debenhams department store in Blackburn for £100,000 a year, but pulled out when it emerged the rates bill was £350,000. Colliers said rates were now ‘ridiculously high and totally out of touch with the market’. 

The sky-high taxes are piling further costs on struggling shops and hospitality firms at a time when the pandemic has already pushed them to the brink of ruin through repeated shutdowns. 

That has raised fears that more businesses could follow the likes of Gap, Debenhams and Thorntons in closing UK stores. 

John Webber, head of business rates at Colliers, said: ‘Unless the Government gets its business rates strategy right, space will not be re-occupied. 

‘We’ve been calling for an extension to the business rates holiday for the retail and hospitality sectors by at least three months and for proper reform of the antiquated rates system.’ 

The business rates holiday – introduced in March 2020 – ended on June 30, with companies having to start paying a third of their rates bill in July even if they are unable to open. Many High Street firms are furious about the Government’s refusal to extend Covid support measures after postponing the end of restrictions to July 19. 

Alongside rates, industry groups have warned that these firms are also facing pressure from unpaid rent debts and increased contributions to the furlough scheme. 

The British Retail Consortium said the rates system is ‘intrinsically broken’ and would hammer firms when they are most vulnerable. The crisis has been repeatedly highlighted by the Mail’s Save Our High Street campaign, which calls for a revamp of the business rates system. 

And Colliers yesterday warned that without urgent action from ministers, many businesses would struggle to ‘limp through’. 

Marks & Spencer has said it will close a quarter of its stores within the next decade after coronavirus lockdowns drove it to its first ever loss and Thorntons is to shut all of its directly managed stores. US giant Gap confirmed this week it will close all 81 of its UK and Ireland stores. Two of the stores, in Canary Wharf and Westfield in London, both pay rates of more than £500,000 per year. 

Robert Hayton, UK president of property taxes at Altus Group, said: ‘With rates relief tapering off, it is perverse for the Government to be simultaneously legislating against the impact of the pandemic on property values by retrospectively denying firms the ordinary right of appeal to lower their rates bills.’ 

Last night a Treasury spokesman said the Government was carrying out a review of rates, including proposals to ensure ‘bills more quickly reflect changes in the economy’.