Freeze business rates to help retailers, BRC tells the Government

The proposal is one of the main recommendations made by the British Retail Consortium (BRC) in its pre-Budget submission (12-page / 569KB PDF) to the Chancellor of the Exchequer. The industry body also calls for changes to the method of uprating in future years, to produce increases that are "more affordable and predictable" for struggling retailers.

According to an independent study produced on behalf of the BRC, the cost of doing business for retailers has risen from £96 billion to £116bn since 2006. The figures show that costs have risen by 21% against an increase in sales of 12%; a difference that the BRC said is "forcing store closures and curtailing job creation".

"Retail is a major force for good," said Helen Dickinson, director-general of the BRC. "It's the UK's largest private sector jobs provider and has been a powerhouse for investment and growth, even during the relentlessly tough times of the last few years. There were welcome measures in the Autumn Statement and the Chancellor has it within his gift to do a great deal more. Our figures show dramatic increases in operating costs, often as a direct result of Government decisions."

Last week fashion retailer Republic became the latest high street name to fall into administration. Chains including HMV, Jessops and Comet have collapsed in recent months.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories and form the third biggest outgoing for small businesses after rent and staff costs. Premises are assigned a rateable value by the Valuation Office, which is then used by the local authority to calculate how much the occupier of that property should pay. Rates are subject to an annual inflation-linked increase.

The Local Government Finance Act, which comes into force in April, will create a direct link between increases in business rates and the amount of money local authorities receive to spend on services. Councils will be able to keep some business rates revenue, as well as revenue growth generated in their area.

According to the BRC's research, market sensitive costs such as property rents have been forced down recently in response to "economic realities". However centrally driven costs, including rates and utility bills, have "gone up sharply", it said.

Commercial property law expert Suzanne Gill of Pinsent Masons, the law firm behind Out-Law.com, said that static or increased business rates combined with falling rents meant that for some retailers, rates were almost as much as annual rents.

"Rents in the UK are notoriously 'sticky' and rarely fall, but we've seen many landlords cut rents on new lettings to reflect the impact of the recession and the structural changes to the retail market following the growth of e-commerce," she said. "By contrast rates have stayed constant or increased, and can amount to as much as the annual rent in some cases. The explosion of charity shops on our high streets is a direct result of their preferential business rates position."

"It's right that retailers pay a fair share of the services provided by local councils. However they shouldn't be the ones who pick up the shortfall imposed by government caps on council tax and cuts in government funding," she said.

The BRC has also called on the Government to change the method of inflation used to calculate annual business rate increases as part of its Budget submission. Currently, rate rises are determined using September's retail price index (RPI) inflation figure. The BRC suggests that the Government instead move to a measure of inflation based on the consumer prices index (CPI), over a longer time period.

The submission also calls on the Government to consider a broad review of business taxes and consider the introduction of generous capital allowances to encourage high street investment.