High streets and town centres need revitalising

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High streets and town centres need revitalising

More action needs to be taken to help breathe life back into town centres and high streets, according to the British Property Federation (BPF).

The organisation has called for business rates to be capped at 35 per cent of rental levels to save businesses billions of pounds per year in tax and help revitalise shopping areas.

The latest inflationary rise will see business rates rise to 55 per cent of rateable values (a proxy for rental values) for the 2024 to 2025 financial year, adding to the cost pressures facing retail and hospitality businesses in particular.

Business rates is the only tax that increases with inflation and repeated increases has seen the underlying level of the tax, also known as the Uniform Business Rate (UBR), rise from 35 per cent to 55 per cent since it was introduced in 1990.

In the same period the main rate of corporation tax has lowered from 35 per cent to 25 per cent.

This has contributed to an increase in shop vacancy across the UK and the decline of high streets, says the BPF.

This in turn leads to making these areas less desirable places to build, buy or rent homes.

The BPF is calling for a phased decrease from 55 per cent to 35 per cent and for the UBR to then be fixed at that level, like other taxes.

This change will ensure that business rates fluctuate only in line with changes in rental values.

In addition, it has called for government to introduce annual revaluations so that the rates liability for a property reflects current market conditions and adjusts to changes in the economy more quickly.

The BPF is also arguing for an extension to Empty Rates Relief from three months to six months, with a 50 per cent discount thereafter, to enable property owners sufficient time to upgrade properties and attract new tenants.

An analysis of over 124,000 retail units undertaken by the BPF and Local Data Company in 2023 found that 57 per cent of vacant shops that had been reoccupied had remained empty for more than a year before a new tenant was found.

Melanie Leech, chief executive, British Property Federation said: “We have reached the tipping point where the level of business rates is no longer sustainable for businesses, high streets or for the Treasury.

“The steady rise in the underlying rate to 55 per cent is out of step with the wider tax system and ignores the mounting pressure on retail, leisure and hospitality businesses that are the lifeblood of our towns and cities.”