Looming September CPI figures spell trouble for struggling firms

Stuart Hicks, Manchester Office, Director - Dunlop HeywoodBy Stuart Hicks, Director

It’s the silly season as far as general news is concerned this time of the year, but the stories continuing to come out about the impact of business rates are far from funny.

I keep thinking that we may have reached saturation point when it comes to another sector or industry calling out for reform of business rates but, no, they just keep on coming.

This week I saw it was the catering and hospitality industry estimating its members will be paying an extra £50m next financial year, ahead of next month’s release of the September Consumer Price Index figure which determines future business rate rises. Hotels would be hit hardest according to analysis with an increase of £19.8m closely followed by pubs contributing an extra £18.7m and restaurants with £12.7m.

Sticking with stats to illustrate the point, those figures pale in comparison to retailers who are expected to be paying an extra £194.2m in BR bills next April, despite the obvious crisis hitting the high street at the moment. The list of retailers entering into administration or CVAs is growing at an alarming rate. The latest big name, House of Fraser, was apparently paying more in business rates across its stores that online behemoth Amazon paid in corporation tax last year.

Chancellor Phillip Hammond has already used one ace in his pack when he switched away from using the Retail Price Index (RPI) model to the Consumer Price Index (CPI) which saved businesses an estimated £2.3bn overall, but there is nothing forecast to take the sting out of the tail for 2019/20 bills.

If the headline rate of inflation of the CPI remains unchanged at 2.5 per cent in September then it’s estimated the Exchequer will receive an extra £758.6m in business rates for 2019/20 – a nice boost to Government coffers when it has public sector pay rises to fund over the next few years, but at what cost to the businesses already struggling?
Some are calling for a business rates’ freeze for one, even two years, whether Phillip Hammond heeds the calls fresh from the summer recess remains to be seen.