Leading licensed leisure property adviser BNP Paribas Real Estate has warned pubs and restaurant owners and occupiers across the country that, following the 2017 revaluation, the Uniform Business Rate (UBR) in England applied to ratepayers’ rates bills is likely to be set at 50p in the £. This would be the highest level ever, and is equivalent to 50% of the current rental value of a property, so that the Government can collect £26bn in revenue.
With rateable values to be based on current rental/trade levels, the property adviser also named some of the likely winners and losers. The 2015 revaluation was postponed by the Government which had the effect of an extra two years of rental growth and recovery in trade. This means that assessments following the 2017 revaluation will be higher than if it had taken place this year. In predicting 50p in the £ they estimate that the total rateable value across the country will be more or less static unlike past revaluations, which have always seen an overall increase.
Pubs and restaurants risk being ‘losers’ in the revaluation
Unlike other commercial property, the Valuation Office values public houses based on a % of their turnover, meaning that the trade achieved in the last two years will influence the new assessments. With rental values in the relevant sector also being pushed up recently thanks to increased competition for sites in prime locations the rateable values for the pub & restaurant sector will reflect this growth.
BNP Paribas Real Estate’s head of licensed leisure, Nigel Ball, said: “Restaurants and pubs have enjoyed greater growth in the last couple of years but risk being ‘losers’ in the 2017 rating revaluation. This growth together with decisions made with regard to rents paid now will impact upon the rates in 2 years’ time. However, we strongly believe that reform to the valuation process is needed so that successful operators are not penalised for achieving success.”
Most affected: London
Pubs and restaurants most affected by the 2017 rating revaluation will be in London, where West End prime rateable values are forecast to increase by 55%, according to the business rates specialist, and in the City increases of 20% are expected. Manchester is another ‘loser’ with increases of 25% expected and Newcastle, Edinburgh and Glasgow are expected to see increases of 19%, 10% and 10% respectively. There are no real winners but Sheffield, Leeds, Liverpool and Birmingham licensed leisure properties will see little change in what rates they are paying currently.
Predictions for the future of business rates
Following the business rates review announced by Danny Alexander on 16 March, the adviser also made a set of predictions for the future of business rates:
- The removal of transitional relief to follow the lead of Scotland and Wales that has already put this into effect; and
- The shortening of the revaluation cycle to three years in order to prevent the lags seen in this latest cycle.
Toby Root, director of licensed leisure rating at BNP Paribas Real Estate, concludes: “We do not expect any far-reaching reforms in 2016 to the business rates process, rather some short and easily implemented ones such as the removal of caps and transitional relief like we’ve already seen in Scotland, and the shortening of the revaluation cycle. It is because the Government will not have enough time to introduce any radical changes to the current system and risk jeopardising the stable and predictable revenue that is received from business rates. If that is going to happen then it will be in 2020 assuming a change to a 3 year revaluation period.
Use a rating expert to keep rates to a minimum
“Our message is clear: we have had a long and very tempestuous cycle for this revaluation and, while our forecasts give an indication of what to expect generally, each property must be looked at on an individual basis and using a rating expert is important to ensure rates are kept to a minimum.”
Need for reform
Kate Nicholls, Chief Executive of the ALMR, the national trade body representing licensed hospitality in the UK said: “For far too long the business rates system in the UK has failed to take into account the needs of modern licensed hospitality businesses. We are in need of a much more flexible, responsive system that takes into account the changing nature of pub and bar businesses and does not penalise successful employers.
“The ALMR has lobbied vociferously over the past few years and has worked closely with the Valuation Office Agency to ensure that revaluation is based on the best, most up-to-date information possible. The ALMR will be involved in the VOA’s pub rating forum and we will be leading the lobbying on behalf of the sector and producing guidance for over-performing operators.
“We will also be working very closely with BNP Paribas and other partners to ensure that we have the best team in place in order to assess what the findings mean for the pub and bar sector and continue to push for root and branch reform of business rates.”
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