Win, lose, or draw? We assess the impact of the 2021 rating revaluation
Win, lose, or draw? We assess the impact of the 2021 rating revaluation19 Nov 2019
Analysis of the key sectors clearly demonstrates retail as a winner, logistics as the loser and offices relatively stable in the upcoming revaluation.
Avison Young’s new report ‘Win, lose, or draw’ takes a look at how different sectors and geographies across the UK will be affected by the 2021 revaluation. The firm’s research predicts that growth in the total rateable value (RV) pools for England and Wales will result in a fall in the Uniform Business Rate (UBR) in England from 49.9p to 47.7p at the start of the new rating list, and from 53.5p to 52.3p in Wales.
The biggest increases in rateable values will be in the industrial/logistics sector, rising by 17.2% across England & Wales. The report predicts that as a result, the industrial sector will see an increase in rates liability of £876m in 2021/22. In contrast, retail will see some dramatic falls in rateable values, although there will be strong variations by sub-sector and location. Changing consumer habits and the increase in online retail have been major contributory factors to the decline in traditional retail, but conversely have led to very strong growth in logistics and distribution warehousing. Consequently retail occupiers across the regions are expected to benefit from an overall reduction in their rates bills of around £3.7bn over the 3 years of the 2021 rating period. However, these savings can only be realized if the Government scraps downwards transition, a scheme which marginally phases in decreases in rates liabilities arising from a new revaluation. We estimate a reintroduction of the same scheme in 2021 would cost the retail sector between £1.5 to £2 billion over 3 years. We call on the government to end the controversial scheme from next April.
The office sector is expected to pay an additional £406m in rates liability in the first year of the new list. Growth has been comparatively consistent across the regions, with an estimated 10% increase in the RV pool in England & Wales, although more notable uplifts are expected in the Eastern and South West. Whilst London overall is not showing the strongest office growth, it still dominates the rates pool for offices, with Inner London making up 53% of the total rateable value for offices in England & Wales.
The 2021 revaluation will continue to highlight the strength of the London economy which is on track to increase its proportion of the total RV pool from 25% in 2005, to a predicted 32% by 2021. 9% overall growth in London’s RV pool is estimated, compared with just 4% across the rest of England & Wales, underlining the growing economic imbalances across the UK. Avison Young estimates London’s rates liability will increase by £453m to almost £11bn in the first year of the new rating list, while there will be no overall change in regional rates liabilities.
David Jones, Principal, London, said:
“In light of the findings in our report, there are areas we want to draw the Government’s attention to. Firstly, scrapping downwards transition is fundamental to ensure that rates liabilities are as consistent as possible with rents being paid. The scheme is particularly punitive to the struggling retail sector and we estimate it will remove £2 billion of the £4 billion benefit the sector should receive over the 3 years of the 2021 revaluation.
Furthermore, the inherent problems with implementing Check, Challenge & Appeal have been unfair on rate payers. The current system is not allowing excessive rates to be challenged efficiently and within an appropriate time frame. We recommend the Government reviews the CCA system urgently. The delays in implementation for larger businesses need addressing and we call on the Government to extend the ability to check a valuation by a further year to April 2022. We are 2.5 years into the 4 year life of the 2017 revaluation and to date only two of four hundred shopping centers have been settled. These delays are exacerbating the frustration felt from the retail sector with the business rates system.
Finally, we believe all forthcoming revaluations require an antecedent valuation date of one year rather than two years prior to the start of the new list, so values align more closely with market conditions.”
Tony Baldwin, Managing Director, Head of Business Rates, said:
“We are very much in favour of the new shorter revaluation period of 4 years, and then 3 years thereafter, which enables the opportunity to rebalance the inequity of the tax base and should offer much needed relief to sectors that are being hardest hit. However, shorter revaluations can only work if the government overhauls the new check challenge and appeal system which is failing both ratepayers and local authorities.”
You can download our latest report, Win, lose or draw here.