Opinion: Why the Budget needs to bring action on business rates

In a week’s time, George Osborne will pose for photographs outside 11 Downing Street armed with the Budget speech in his red briefcase.

When the Government’s strategic review on business rates was launched, March 2016 was promised as the date when the troublesome property tax would be fixed. Let’s see what he announces.

Traditionally, retail has been the most real estate intensive sector. With the move from bricks to clicks, the dynamics have changed, raising even more concerns about business rates. The many anomalies within the out-dated system mean that corporate strategies and routes to market taken by retailers have been unduly influenced by the tax, skewing the whole industry.

Regional differences

For example, business rates for prime retail space in Dover Street in London’s West End are expected to rise by more than 400%. Similar space in Newport, South Wales, could decrease by 79%.

Such differences become part of the decision-making process for new stores – or even the retention of existing ones – impacting on customer choice, geographic spread and retail jobs.

In less aspirational areas, landlords are forced to mitigate their empty rate charges on unused space, encouraging short-term pop-ups rather than long-term businesses.

This changes the overall colour of a shopping district, creating a downward spiral and moving the area further away from being a desired destination attracting customers with money to spend. Notably, independent shopkeepers get squeezed out.

Retailers that need physical stores as showrooms, to herald their brand and for personalised customer service in prime locations, are increasingly at a disadvantage against pure play internet retailers whose dark stores can be located anywhere.

Financial health of neighbourhoods

Of course, physical shopping is a social activity. It creates and maintains healthy communities. Research shows that a vigorous and vibrant retail-led town centre enhances the quality of regions. Business rates can unbalance this benefit.

I believe that because jobs and communities rely on the property-intensive nature of retail, a different multiplier in the pound should apply to the sector to address this evolving unfairness of technology, creating healthier neighbourhoods and towns.

I’ll be interested to see what the Chancellor will do in his Budget to address the imbalance in business rates between digital and physical retailing and the effect on customers and communities as a result.

He has promised support for retail – now let’s see some action.

• John Webber is head of rating at Colliers International