Retailers face £175m business rates bill as inflation rises 2.6%

The business rates increase in April is calculated using the RPI rate for September. Although the 2.6% rise is down on August’s 2.9%, last month’s increase will mean retailers will have to fork out an extra £175m on rates, the BRC has forecast.

The burden of higher rates would weigh hard on retailers following two consecutive years of substantial increases. 

Retail Week and the British Retail Consortium (BRC) are urging retailers to sign the petition to support the joint Fair Rates for Retail campaign, which calls on the Government to freeze rates next year. It also calls for a fairer way of calculating rates, by switching from RPI to the Consumer Prices Index.

The petition has almost 600 signatories in support of the freeze. 

The BRC will write to MPs asking for their support and will lobby the Government ahead of the Autumn Statement. A letter from the BRC, Retail Week and a number of high profile retailers including Asda, Morrisons, John Lewis and Alliance Boots was published in the Financial Times yesterday.

The Consumer Prices Index (CPI) annual inflation stood at 2.2% in September 2012, down from 2.5% in August. This is the slowest rate of inflation since November 2009, when it was 1.9%.

British Retail Consortium Director Stephen Robertson said: “This RPI announcement reveals the scale of the potential damage to our high streets that will follow if the Government follows previous practice and translates it directly into next April’s rates increase.

“The retail industry is the UK’s biggest private sector employer, providing crucial first jobs to a million 16-24 -year-olds. Expecting retailers to bear a huge rates hike for the third year running can only lead to fewer chances of work, less investment and more troubled high streets.”

He added: “The Government must recognise that retail has already contributed its fair share to the Exchequer and freeze business rates in 2013. It also needs to reform the mechanism for setting future increases so that it is fairer and less volatile.”

Rochdale’s MP, Simon Danczuk said: “It’s encouraging to see inflation has fallen to a three year low but, after a cumulative rise in business rates of more than half a billion pounds over the last two years, enough is enough and we must support business, particularly retail if we are serious about stemming the decline to this sector.”

The British Property Federation (BPF) also called for business rates to be calculated against CPI rather than RPI.

BPF director Ian Fletcher said: “Today’s lower RPI figure than in previous years shouldn’t detract from the need to reform the way business rates are calculated. 

“Linking business rates to RPI has meant they have doubled over the last 20 years and Government should provide greater certainty for businesses by fixing the business rate uplift each year in line with the 2 per cent inflation target.

“For retail’s sake we’ve got to move away from the annual September RPI lottery. The Government promised to look at the way rates are set at budget time and needs to press ahead with reform.”