Is the business rate rise the last straw for the high street?

For years there has been a plethora of proposals on how to save the high street. But no one has had the answer. By 2025, up to 74,000 shops of the 270,000 trading in the UK will close, according to the British Retail Consortium.  This gloomy prediction was made before the new business rates were announced so the figures, it’s fair to say, have just got a whole lot worse for small, independent shops in prosperous areas.

With business rates raising a lucrative £26bn a year for the Treasury, rising to around £31bn by 2018, the government is not about to give it up. Yet right from the start, business rates were unpopular because of the way the tax is calculated which is based on a building’s value as opposed to the income it generates.

This time around the protests are louder and more deeply felt because since the last rate review in 2010, property values have been on a roller coaster. While some areas will see rates will come down, in London and the southeast the average rise is 14 per cent - not too bad, you could argue, after seven years. Yet it is people or businesses in areas that are “on the up” which are seeing their rates increase the most sharply with some seeing a 100 per cent increase.

And this is why they are angry - from Sainsbury’s to the corner shop. But it is especially hard if you took a risk and opened your bike repair shop, café or delicatessen in an area that had been written off, where shops had closed, but having helped to restore its character are now hostage to rocketing property values.

This is not the only reason the tax is grossly unfair and in urgent need of reform. In the on-going gentrification narrative we are in a new chapter that could see the middle class, who have helped make an area desirable being pushed out rather like the original working class occupiers.

Yet behind this there’s something else which is making us uncomfortable and that’s the stark reminder that property, all property, whether shops, workshops, lock-up garages or an allotment shed, are assets whose value lies mainly outside our control.  

Something similar has happened to London’s industrial land, which has disappeared at an alarming rate, not due to a tax but someone with a spreadsheet who has projected that as these types of businesses are in decline, why keep the land?

The planning system has been slow to realise that car repairers, brewers and coffee roasters, specialist trade suppliers and ethnic minority food wholesale operations are more intrinsic to keeping London going than another 2,000 units of residential flats that Londoners cannot actually afford

And land is in demand as never before. It is difficult to argue against the need for housing yet the planning system has been slow to realise that car repairers, brewers and coffee roasters, specialist trade suppliers and ethnic minority food wholesale operations are more intrinsic to keeping London going than another 2,000 units of residential flats that Londoners cannot actually afford.

Mark Brearley, professor of urbanism at London Met’s Cass Cities Department also owns an aluminium tray factory off the Old Kent Road, an area with 800 businesses employing 10,000 people. 

In a recent debate in its Fundamentals series at Central St Martins, Brearley said the GLA’s projection that there will be an 88 per cent loss of manufacturing jobs by 2050 was exaggerated, instead he believes there could be 25% growth. Brearley is concerned the GLA’s obsession with homes above everything else threatens manufacturing jobs including most of the businesses off the Old Kent Road.

And it will happen on the high street. While Amazon and other e-commerce retailers with distribution centres out of London are not affected by the rate rise, many physical shops will be forced to close with no plan about what should take their place. So, what happens when a developer buys an entire high street to turn shops into flats and make huge profits?

Will we shrug and say, “What can else could we have done”? Now is the time to plan because by then it will be too late.