Companies in england will have to pay an additional 6bn in business rates over the next five years, according to a report that calls for urgent reform of an archaic and unsustainable system that threatens the recovery from the pandemic.
The cbi business group urged the government on tuesday to freeze rates for the next two years and then lower bills by 2023 to realign them with rental values that have been hit by the economic lockdown, rather than increase as planned in line with inflation.
Unless the system is changed, business rates in england will continue to climb and cost companies at least an extra 6bn before 2026, the group said in its study. business rates are currently set at nearly 50p in every pound of rateable value, which represents the annual rental value of a commercial property.
Rain newton-smith, cbi chief economist, said this rise would sink many investment plans, hitting bottom lines and inadvertently growing inequality between englands richest and poorest areas.
She said that business rates had put companies across retail, manufacturing and distribution under serious strain at a time when many were suffering particularly badly in the pandemic. its no secret that the business rates system in england is archaic and unsustainable.
The government has launched a review of business rates, although previous assessments have fallen short of the reforms that companies have demanded. the consultation closes at the end of october.
Company bosses argue that business rates reform will determine how many high streets recover from covid-19. the government has offered a holiday on rates until april, but businesses have warned that they need an extension or a further reduction as they struggle to survive the next year and the threat of more covid-19 restrictions.
Mark gifford, executive chairman of department store chain debenhams, told a conference last week that hundreds of jobs were dependent on business rate reform, which would decide whether or not stores were viable. he said that central london department stores would normally be among the most profitable, but since the pandemic were the most loss making.
The cbi study, carried out with property firm avison young, identified a number of policy reforms that would save businesses 21.8bn over five years. this includes the initial freeze, followed by a lowering of the rate from 49.9p to 44p, an estimated saving of 17.7bn.
The report said that 44p was still well above the original rate of 35p when the tax was introduced in the 1990s and higher than in many other countries.
The cbi said the government should delay the next valuation date to october 2021, and shorten the valuation period to 18 months to ensure bills reflect the economic situation and the property market in the post covid-19 era.