Business rates hinder retail investment growth

Recent research from retail law specialists Clarion uncovers notable differences in the rateable values of major department stores throughout England, raising important questions about how fixed rateable values might deter potential investment in prime retail locations. The research indicates that where a retail store is situated greatly influences its valuation for business rates, with London outlets commanding significantly higher values compared to their regional counterparts. A study of the Valuation Office Agency (VOA) data demonstrates a direct correlation between rateable value and location, highlighting that London department stores have values severalfold greater than those in other areas.

For instance, Selfridges on Oxford Street commands an impressive rateable value of £16.82 million, which is more than twelve times the £1.35 million assigned to its Manchester Exchange Square branch. The Birmingham store is valued even lower at £1.28 million, illustrating just how much higher the Oxford Street site is valued in comparison. Similarly, Harrods leads the table with a rateable value of £17.79 million, whereas the historic Kendals building of House of Fraser in Manchester is valued at just £735,000.

These findings emerge amid ongoing discussions about the future of the UK's high streets and the pressing need for greater economic equity between London and regional cities. Prime Minister Andy Burnham has notably advocated for enhanced regional economic fairness. The current business rates system, where values remain unchanged until revaluations occur, necessitates examination in this context, as it can unfairly impact retail investment depending on a store's geographical location.

According to Clarion, while it is expected that rateable values reflect factors like size and rental value, the real concern lies in the inflexibility of the system. Rateable values are set for long periods and do not adapt to fluctuations in the trading environment. Lindsay Texel, Partner and retail expert at Clarion, stated that “A 24-fold gap between Harrods and House of Fraser's Kendals building... isn't surprising... What’s more telling is how the system then treats that value." Texel elaborates on the challenges retailers face in adapting to fixed rates, saying that “If policymakers are serious about revitalising high streets... they must look beyond headline rateable values.”

The data analysis revealed that six of the ten stores examined are situated in London, with all of the top six positions held by the capital. Harrods ranks first, followed by Selfridges and John Lewis, with Selfridges Manchester being the highest ranked regional store at £1.35 million. Clarion suggests a review of the rates system, advocating for a framework that can respond to current trading conditions instead of waiting for the next revaluation, anticipated in 2029. This proposed change could potentially unlock investment opportunities and foster the growth of town and city centres across the UK.