Switching rates calculation to annualised CPI would have saved businesses £161m last year

Retailers make up 26.8% of commercial properties in England and Wales, according to business rates expert Gerald Eve, and many have called for the switch to make the system fairer.

Rates are currently calculated using September’s RPI rate, and retailers believe that basing any increase in business rates on one month causes volatile and unpredictable jumps in the tax.

According to the Grimsey Review of the high street, which is being led by former Focus boss Bill Grimsey, the annualised CPI rate in 2011 was 4.2%. This compared with September 2011’s 5.6% RPI rate, which the April 2012 business rates increase was based on.

Retail Week has been campaigning for the change through its Fair Rates For Retail campaign, to make the business rates increases fairer and more predictable.

But Grimsey said the Government needs to overhaul the business rates system and not just “tinker in the margins” by switching the way they are calculated.

He added: “The retail sector as a whole is paying a disproportionately high share of this tax and within this sector there is an imbalance in that smaller retailers are carrying the highest burden.”

Business rates are a big concern for retailers following more than £500m of rates increases over the past three years, which is putting pressure on trading and restricting investment.

Retail expert Paul Turner-Mitchell, who is working with Grimsey on the high street review, said: “The Business Secretary Vince Cable is on record saying that the Government will review business rates once the UK economy has stabilised but we can’t keep waiting for this magical change of circumstances.

“Business is being held back in this country by an antiquated tax system that’s crying out for reform. There’s a real sense of urgency and ministers have got to grasp the nettle now.”