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Business rates 'battering' could hit retailers hard

Published: 12 October 2010
September's Retail Price Index (RPI) threatens a business rates shock for retailers next year unless the Government takes action.
Business rates 'battering' could hit retailers hard
Under the current system, September's RPI is used to calculate the annual increase in commercial property taxes for England and Wales that will be introduced the following April.

The figure reported for September 2010 is 4.6% and, unless the Government intervenes, it will produce a business rates increase much higher than expected and, more importantly, higher than most retailers budgeted for in their 2011 plans.

At a time when the public sector is facing substantial cuts, the British Retail Consortium (BRC) believes, these extra costs will undermine retailers' ability to maintain and create jobs.

BRC director general Stephen Robertson has written to the Secretary of State for Communities and Local Government urging the Government to use alternative ways of calculating the next increase.

Mr Robertson said: "No one seriously expected inflation to fall so stubbornly slowly from the highs of January and February. As recently as this spring, most forecasters expected RPI to be significantly lower by now.

"Few retailers have budgeted for the scale of business rates rises that may now result. Paying more tax will mean trimming costs elsewhere. With the Government set to announce big public spending cuts in little more than a week, this business rates battering can only undermine retailers' proven ability to maintain and create alternative jobs."

He concluded: "Basing a whole year's rates bills on one, almost random, month's RPI makes no sense. The Government must switch to another way for next April and beyond. Using the Consumer Price Index (CPI), as it does for pensions is one option. Or using the 12-month average RPI rate from October 2009 to September 2010, which would iron out inflation rate volatility."

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