LOCAL traders face a ‘perfect storm’ of increasing rates, rents and rising inflation which will leave ‘large holes’ in the high street, the head of Kent’s largest business group has warned.
The ominous prediction by Jo James, Chief Executive of Kent Invicta Chamber of Commerce, comes as some businesses in Tunbridge Wells and the surrounding area have been told their rates will more than double in April.
It is one of four warnings to be issued this week by organisations representing traders in the town, including Royal Tunbridge Wells Together and the Kent branch of the Federation for Small Businesses.
Particularly hard hit are those operating in the hospitality sector, many of which are being urged by The Association of Licensed Multiple Retailers (ALMR) to lobby their local MPs and express their ‘dismay’ at the ‘punitive’ business rate rises.
Kate Nicholls, head of ALMR, said the group is actively seeking case studies of ‘particularly large or unfair’ increases in constituencies whose MPs – such as Business Secretary Greg Clark – are ‘key ministers’.
The Mount Edgcumbe, on Tunbridge Wells Common, is one such establishment that will be particularly hard hit after being told its rateable value will go up from £40000 to £86500 in the next financial year.
Landlord Robert Hogben said the lack of understanding from the Government over what will happen means businesses like his will ‘just close down’.
“Many small businesses are facing a perfect storm that will see many struggle to survive”
He added: “I was first notified that the VOA (Valuation Office Agency) had reassessed our rateable value in October.
“After looking at the details on the VOA website I saw our rateable value had gone from £40000 to £86500. This means with the rates set at 0.49.7p in the pound the £19880 a year we pay at the moment will more than double to around £43000.”
Mr Hogben believes he will have to increase his weekly turnover by eight per cent, or £1,600, to cover this additional tax burden.
He continued: “We have spent a great deal of time and money refurbishing The Mount Edgcumbe since we bought it five years ago to make it what it is today.
“I think that this is very short sighted of the Governments VOA team who don’t really understand the true implications to the high street shops and businesses like ours which will just close down.”
His concerns are far from unique, and have led to a growing backlash against the government’s proposals.
Leading the calls for a government rethink is Mrs James, whose organisation represents 1,200 businesses in Kent – a county which will be particularly hard him by the changers.
She said: “Many small businesses are facing a perfect storm that will see many struggle to survive, leaving large holes in our high streets and business parks.
“They are experiencing increased rents, and rising inflation on the cost of goods they are buying which can’t fully be passed on to the consumer. Many have been hit by the fall in the Pound are now staring down the barrel of a massive hike in rates.
“If the government wants to increase growth and productivity, it needs to keep businesses in business, it’s that simple. This is a way of raising £1bn from business, but at what cost to the overall economy? We would urge a rapid rethink and call on all local authorities to join us in lobbying our local MPs.”
FSB warns of mounting costs
David Milham of the Federation of Small Businesses (FSB) Kent Steering Group said his organisation had received ‘a huge amount’ of correspondence from members about the issue.
He added: “We are in danger of losing micro and small businesses. The average micro business will have to find £17,000 to cover business rates from April this year. But this increase must not be viewed in isolation as small firms will face an extra £2,600 in additional employment costs from Government policy in the 2017/2018 tax year, inflationary increases and a further increase in pensions auto-enrolment costs.
“It is understandably causing a great deal of concern, with some businesses set to see some huge increases in their bills from the 1 April.
“We have long believed that business rates are an unfair tax not based on the firm’s size or ability to pay, and the recent revaluation has made this situation worse for many small firms.”
Why is hospitality hit so hard?
Unlike regular retailers, the rateable value of pubs, restaurants and other hospitality establishments is not based solely on the market’s rental value of the building it occupies but on a concept called ‘fair maintainable trade’.
This is based on the annual level of trade (excluding VAT) that a pub is ‘expected’ to achieve if operated in a reasonably efficient way.
Factors taken into account to work this out include; the type of pub or licensed premises, the area it’s in, the services it offers, eg food, gaming or sports screenings, accommodation – as well as rents and turnovers.
The convoluted nature of ‘fair maintainable trade’ means there are 114 different separate categories for calculating the ‘income streams’ from drink sales alone. This is then combined with 85 separate ways of determining the percentage of food sales used to work out the rate, before adding further things such as receipts from entertainment.
Langton Green resident Brian Whiting, whose business Whiting & Hammond consists of eight gastro pubs in West Kent and surrounding areas, will see £123,100 added on to his rates bill.
He said: “This industry has been massively affected and the way the rates work out is just a way of punishing pubs which are popular.
“The industry is a massive driver of investment and employment but we are getting smashed for it. With rates and VAT at 20 per cent how are we supposed to compete with the supermarkets, which do not get charged VAT on food?
“If the government keeps treating this sector as the goose which lays the golden eggs sooner or later it will implode and the only winners will be the supermarkets. It will very sad for local communities.”
Nicky Blanchard, Chair Person for Royal Tunbridge Wells Together:
“We are firmly against the proposed new business rate structure. At a time when local businesses are under ever increasing pressure any additional increases in costs can often be the difference between remaining open or closing. We fail to understand how the proposed rate structure could have any positives for our town or local business given such a small proportion of revenue raised stays within the town and advise all those concerned to join us in writing to MP Greg Clark urging a Government rethink.”
Communities Secretary Sajid Javid said:
“Our regions have huge economic potential, and can be a catalyst to driving economic growth across the country.
“The revaluation of business rates will help make sure bills are accurate, with nearly three-quarters of businesses seeing a fall, or no change. In fact, the generous reliefs we are introducing mean that 600,000 small businesses are paying no rates at all – something we’re making permanent so they never pay these bills again.
“And across the country, there’s also a £3.6 billion scheme to support companies affected by the business rates revaluation.”