Northern retailers paying twice as much as they should in business rates

Research by the University of Liverpool and The Local Data Company shows how far removed business rates bills have become from rental value since the last revaluation in 2008 at the start of the economic downturn.

Business rates are based on a property’s rent or rateable value, which is usually reviewed by the Government every five years to take into account changes in the property market.

The reseach paper showed that a revaluation on today’s property prices would rebalance rates across the UK, meaning that a shop in Rochdale would pay 65% less in the ratable value of its property, while a London store’s ratable value would surge 52%.

However, the revaluation planned for 2015 has been delayed by the Government for two years, so retailers will continue to pay business rates based on pre-recession rents until 2017.

Local Data Company director Matthew Hopkinson told the Financial Times the research explained the “significant acceleration of shop closures north of the Watford gap versus London and the southeast”.

The delayed revaluation has created a big divide between the north and south as one in six shops stand vacant in the North West against one in 12 in Greater London.

Business rates are traditionally estimated to be 35-50% of a shop’s annual rental value but some retailers are now paying more in business rates than rent.

This week Labour leader Ed Miliband revealed that if Labour were to come into power in 2015 it would cut business rates to 2014 levels and freeze this until 2016 for those businesses with a ratable value up to £50,000.

But Colliers International head of rating John Webber said Labour should prioritise putting an earlier revaluation in place.