Following detailed research, Avison Young is forecasting that the 2023 revaluation of business rates will deliver the long-awaited rebalancing of the tax base to the benefit of traditional retail, but at a cost for the logistics and industrial sector.
The retail sector, which was comfortably the most dominant sector in the 2017 revaluation at £21.5bn, is now forecast to drop to third, having dropped in value by 26% to £15.9bn, saving the sector £8.5bn over three years. Logistics and industrial takes the top spot, having increased its total rateable value pool from £14.6bn to close to £17.9bn. Offices remain broadly static moving from £15.5bn to just over £16bn.
Whilst the growth in logistics has undoubtedly been a key driver, in the South West there are some notable high performing areas including prime offices in Bristol. Due to supply constraints prime offices in Bristol have performed extremely well and we forecast that their annual liability will increase by 37% compared to the penultimate year of the 2017 revaluation. Whilst prime offices have performed well across all regions, Bristol at 37% will see the largest increase. These strong sectoral performances have helped counterbalance the large falls in rateable values in the retail sector. These were particularly stark in the regional secondary towns and secondary pitches in the larger cities.
Despite this significant rebalancing and the impact of Covid-19, Avison Young predicts that the level of the Uniform Business Rate (UBR) will not rise steeply, increasing by only 1.6% to 51.7p in England.
Key findings from the report include:
- Avison Young is predicting that the total Rateable Value (RV) pool in England will fall 1.2% from £67.5 billion in 2017, to £66.6 billion in 2023.
- Consequently, the English UBR is expected to rise from 50.9p (2022/2023) to 51.7p at the start of the new rating list.
- The industrial/logistics rateable value pool in England & Wales could rise by as much as £3.3 billion in the new rating list. This would result in the rates liability for the sector increasing by £1.86 billion in 2023/24, up 25% from the previous year.
- Retail will see dramatic falls in rateable values, with rateable values predicted to fall by 26% between the 2017 and 2023 rating lists, equating to a loss in rateable value of over £5.6 billion. Retail warehousing is showing the largest fall of any sub-sector at over 29%.
- Overall, the office sector is showing limited growth between the two revaluations. A minimal uplift of 4.3% nationally is expected. Growth was strong until the end of 2019; however, this has fallen back as a consequence of the Covid-19 pandemic.
Leigh Richardson, Principal, Business Rates, Avison Young in Bristol said: “The 2023 rating revaluation will result in a significant rebalancing of the tax take, mirroring the state of the economy. It is certainly good news that despite the impact of Covid-19, our research suggests that the Uniform Business Rate is not going to significantly increase. A steep increase would be detrimental to everyone.
“What is clear is that the 2023 rating revaluation cannot come fast enough for the traditional retail sector. Increasingly over the last six years, the tax has changed from simply being a challenging cost across the retail sector to a significant burden, which in so many cases has become increasingly disproportionate against a backdrop of diminishing margins.
“As a result, we are calling on the Government not to introduce a downwards transition scheme which is penal to struggling businesses. Retailers and other sectors devastated by Covid-19 must receive the full benefit of their business rates reduction from day 1 of the new revaluation. After all, what is the point of more regular revaluations if downwards transition prevents the true savings from being realised?
“Even with a 2023 revaluation, traditional retail will continue to pay the highest proportion of business rates to total overheads. The Government has to put a break on the tax, and we continue to advocate a reduction in the UBR through freezing business rates at 45p and tying in future business rates growth to rental growth, rather than inflation.”
