Written by: Keith Tully
Reviewed: Friday 10th May, 2019
The UK’s business rates system is hurting companies and the wider economy, and is in urgent need of reform, according to the president of the Confederation of British Industry (CBI) John Allan.
Speaking at a conference convened to look specifically at the issue of business rates, Mr Allan described the current tax system as being “uneconomical, unsustainable, and frankly, unintelligible”.
Among the main problems with the current business rates system is the length of time between revaluations, which Mr Allan says means rates very often don’t reflect property values accurately at all.
The long periods between revaluations also means businesses in certain areas of the country are unfairly punished from a business rates perspective, according to the CBI president.
“At the heart of the problem is uncertainty around when the next rates revaluation will occur,” Mr Allan told his audience.
“The last revaluation period was extended from five years to seven. But in practice, any longer than one year means business rates lag far behind economic cycles. And - over the years - significant rises in property costs.”
According to Mr Allan, the current business rates system also has the effect of discouraging long-term investments among businesses, who might hold off from upgrading commercial premises because they’re concerned that their rates will rise.
Indeed, holding back property-related investments as a result of the potential effects on business rates is described by the CBI president as being a “pattern we’ve seen time and time again”.
Mr Allan went on to say that problems associated with business rates have played a significant role in adding to the financial challenges faced by UK retailers, many of which have entered Company Voluntary Arrangements (CVAs) or headed into administration in recent years.
“Debenhams, once a stronghold of the British high street, has fallen into administration,” he said.
“Exactly ‘why’ is a complicated question but I’ve yet to read an explanation that doesn’t cite business rates as at least part of the cause. And the same has been true of countless firms over the years. Woolworths, Maplin, House of Fraser.”