Budget 2017: BRC slams rates relief as ‘a drop in the ocean’

Chancellor Philip Hammond has delivered his first Budget, pledging a £435 million relief package for firms affected by the increases in business rates.

This includes a £300m discretionary hardship fund for councils to use to help the firms worst hit by business rates increases.

The Chancellor (pictured) also announced that increases for businesses losing existing relief would be capped at £50 a month.

Reacting to the Budget speech, the British Retail Consortium (BRC) slammed the Chancellor’s attempts to soften the impact of business rates increases as ‘a drop in the ocean’.

BRC chief executive Helen Dickinson said: “We agree with the Chancellor that we need to have a business tax system that is fit for purpose in the 21st century. Any review needs to incorporate business tax in its entirety.

“We hope that the relief measures will help some of those businesses hardest hit by the revaluation, albeit only temporarily. However, more short-term relief measures continue to add complexity to an already impenetrable system. £435 million is a drop in the ocean compared with the £25 billion a year that the tax raises. This is yet another sticking plaster on a chronically ill patient – an unsustainable property tax, higher here than anywhere in the developed world.”

The new Budget will also make £270m available for new technologies, such as robots and driverless vehicles.

However, Mr Hammond revealed a clampdown on tax avoidance, totalling £820m, which will include action to stop businesses converting capital losses into trading losses, as well as tackling the abuse of foreign pension schemes and the introduction of UK VAT on roaming telecoms services outside the EU.

Alex Marsh, managing director at Close Brothers Retail Finance, claimed the new cap and discretionary relief through a local authority is a step in the right direction in supporting small- and medium-sized enterprises (SMEs), but said that more still needed to be done.

“With more than a quarter of all retail SMEs in the UK citing high business rates as a one of their biggest challenges in competing with larger retailers – a figure that jumps to 38 per cent among London-based retail SMEs – SMEs need to use all of the tools at their disposal to offset the cost of increases,” he said.

“On top of business rate increases, inflation is creeping back up and is adding a further challenge for retailers. Using customer data to increase loyalty and better tailor products and services to consumer needs has never been so critical and UK retailers must respond to this if they want to survive, let alone thrive.”

Phil Mullis, head of retail and wholesale and partner at chartered accountants Wilkins Kennedy, added: “Business rates have been a sore point for a long time. The Chancellor has admitted that there is no appetite to abolish business rates, particularly when they make around £25bn for the Treasury every year. However, the Chancellor did say there is scope to review the revaluation process and consult on this before the next revaluation is due. Then again, saying is one thing, doing is another. There is still a long way to go.

“It was disappointing to see that there was absolutely no reference to how the Government plans to bring business rates in line with the discrepancy between those charged to bricks-and-mortar retailers and those to online. This is a major area in need of addressing, but first there needs to be an urgent overhaul throughout.”

David Jinks, head of consumer research at logistics specialist ParcelHero, agreed with the need to bring bricks-and-mortar and online business rates more in line to help create a more level playing field, and ultimately prevent the death of the high street.

“Our latest industry report, 2030: Death of the High Street, warns that the impact of e-commerce could mean our high streets reach a dead end by 2030, with nothing but nail bars and charity shops in some town centres,” said Mr Jinks. “The planned changes to business rates threaten many high-street retailers with significant rate rises just as they are battling to take on online retailers. The cap of £50 per month for this year for businesses coming out of small business rate relief is welcome. But what happens to those businesses in two years’ time?

“Some city centres are saying their business rates are rising by around 50 per cent while e-tailers such as Amazon may even see their rates fall on out-of-town distribution centres. More needs to be done to save the high street and look at the disparity of taxes and rates between online and brick-and-mortar retailers.”

In terms of the economy, Mr Hammond claimed that the UK had the second-fastest growing economy last year of all the G7 countries – USA, Canada, France, Germany, Italy and Japan.

Economic growth forecast for 2017 was upgraded from 1.4 per cent to two per cent. However, GDP was downgraded to 1.6 per cent, 1.7 per cent and 1.9 per cent in subsequent years, reaching two per cent in 2021-22.

Inflation is forecast to rise to 2.4 per cent in 2017-18, before falling to 2.3 per cent and two per cent in subsequent years.