Pub closures predicted as business rates 'set to soar'

26-Jun-2017 - Last updated on 27-Jun-2017 at 09:36 GMT

Tsunami of closures: experts predict pub closures as business rates set to soar

There will be a tsunami of pub closures if a promised rates discount payments scheme to protect them isn't extended, a leading specialist company predicts.

The dire warning comes from business rent and rates specialists CVS, which adds that pubs face paying almost £28m more in rates due to inflation, predicted to hit 4% in September – the highest level since December 2011.

To make matters even worse, the £1,000 business rates discount promised by Chancellor Philip Hammond in his spring Budget, will end next year.

Rates are therefore set to rise with their biggest increase in six years.

How much more can businesses take?

CVS chief executive Mark Rigby warned: "Increases to business rates bills next year, at the level reported for May or higher, could lead to a tsunami of pub closures if the pub discount isn't extended."

He has urged the Secretary of State for Communities and Local Government, Sajid Javid, to accelerate a planned change in the way inflation increases on business rates are worked out by switching from a higher Retail Prices Index (RPI) calculation to using a lower Consumer Prices Index (CPI).

He added “With higher operational costs through increases to both the national and minimum living wages, the introduction of the apprenticeship levy, and higher business rates bills as a result of the revaluation, it does beg the question how much more are businesses expected to take?”

Backlash against inequalities

CVS said pubs, which accounted for £1.49bn of overall rateable values in England when the uniform business rate was set, would face a £27.86m increase in bills through inflation.

Chancellor Philip Hammond, at the spring Budget, vowed to protect local pubs and the “valuable work they do” by giving 90% of them a £1,000 business rate discount worth £25m.

CVS said a common theme running through the political parties' manifestos – published ahead of the general election – was the need to reform business rates with the promise to review the tax payable on properties by all main parties, following a backlash against its inequalities.

However, despite this consensus, last week's Queen Speech made no reference to the promised review, effectively kicking out potential reform given that the Government is embarking on a two-year legislative programme.

Inflation is a major concern. Tax bills next year (2018-19) for business rates could increase by £1.2bn as a result of higher than forecasted inflation. Economists at Capital Economics last night warned that RPI inflation could hit 4% in September.

A revaluation of rates came into effect in April.