10427 The Retailer Autumn 2018_Final Draft Pages

NEWS FROM THE BRC

Risk of a wrong turn on rates

David lonsdale Director scottish Retail Consortium

Business rates are a perennial concern for retailers. Scottish shops pay 22% of the rates bill, with larger and town centre stores being especially hard hit. That pressure is being felt across the industry. Latest figures from the Office for National Statistics show that the number of shops in Scotland dropped 4% over the past four years, and at a faster pace than in every other part of the UK. With SRC- Springboard data showing the vacancy rate in our town centres stuck at over 10%, it’s clear that the retail industry in Scotland is undergoing the same profound transition as it faces elsewhere, driven by changes in shopping habits, stiff competition and burgeoning costs. I would argue the growing cumulative burden of tax and regulatory costs is contributing to an acceleration in the pace of that change. Much of our focus at the Scottish Retail Consortium (SRC) has been on seeking to convince policy makers to reform an out-dated business rates system and to keep down the cost of doing business and cost of living. Encouragingly, progress is being made. The Scottish Government has listened and early in 2019 it has promised to publish a Non-Domestic Rates Bill. The SRC has argued for a rates system that better flexes with economic and trading conditions, and the Bill is set to do that by legislating for more frequent commercial property revaluations every three years. The lengthy period between valuations and them coming into force will be halved. These changes should provide a more effective shock absorber against any future economic bumps in the road. It will mean each property pays a fairer share of the rates burden relative to other properties and a more accurate one. It should also have the positive effect of decreasing the likelihood of major

fluctuations in commercial property values and contribute to a reduction in the volume of appeals. The Bill will also include welcome measures to streamline the administrative complexity around the rates system and improve transparency. The Scottish Government is heading in the right direction with these changes and we will be urging MSPs to back them. There is one exception however. With their draft proposals to allow councils to introduce a new business rates levy on “out of town and online ratepayers”, Ministers are at serious risk of taking a wrong turn. The proposal is anomalous with the thrust of the rates reform agenda. Details are scant right now, but SRC is clear that the prospect of this new levy is alarming at a time when retailers are focused on reinventing themselves and using precious resources to invest in digital platforms, higher skills, and improved logistics capabilities. Unfortunately, there is a paucity of detail about the levy at this time. We simply don’t know which firms will be liable for the levy, how much the tax rate would be, how long the levy would apply for, and what the revenues will be used for. Despite the welcome proposed structural reforms to rates, the fact is the rates burden remains onerous. The higher Large Business Rates Supplement which applies in Scotland compared to elsewhere in the UK, which costs retailers alone £14.1 million a year more, is a case in point. We’ve made clear to Scottish Ministers that this proposed levy looks decidedly rusty, and that it ought to put right back into the policy garage and quietly forgotten about.

Shop

5,128 shops pay the large business rates supplement, costing £14.1m

8 | autumn 2018 | the retailer