Good news for Business Rates

As reported in the Telegraph this morning, Fashionista is delighted that the government has agreed to stagger increases in business rates on properties over the course of the next two years.

A 5% increase was due to be enforced on 1 April 2009, however due to effective lobbying this will now be introduced as a 2% rise. The remaining 3% will be recouped over the next two years.

Fashionista predicts that there will be a flurry of rate payers contacting their local council's to request revised payment plans to assist with managing the increased costs. Any cost saving are welcomed in the current climate.

Business rates to increase

Give the current economic climate, many retailers were hoping that the government could be persuaded to postpone the planned increase in business rates scheduled for next month. Despite Retail Week's "Rate Rage" campaign and Sir Philip Green's meeting with the Chancellor last week, it seems that the planned rate rises will go ahead.

In a letter sent to Retail Week (dated before Sir Philip Green's meeting), Alastair Darling makes it clear that "there are no plans to amend this system for 2009-10 and freezing rates for 2009-10 would cost almost £1billion in business rates foregone". The Chancellor goes on to say that "the Government recognises the difficulties being experienced across the economy. In response, at the Pre-Budget Report the Governement announced a decisive package of measures to provide an immediate benefit to business, including the cut in the main rate of VAT to 15 per cent, and measures that particularly help small and medium enterprises."

Many retailers believe that the VAT cut has done little to drive sales and criticise the government's decision to increase rates in the current climate. Quoted in the Sunday Times, Phil Wrigley, chairmain of New Look said "We have to make clear the damage [the government] is doing to the economy and to jobs. At best it is opportunistic- at worst it feels like a squeeze which is close to theft".

Fashionista notes that for once, retailers and landlords can be united in their opposition to the Government's tax policy (landlords have long been complaining about the requirement on them to pay rates on empty property), but whether such combined pressure on the goverment can force a review remains to be seen.