/ 1 min read / Reed Smith Client Alerts

Closures on the High Street: time for rates reform?

Authors

Katherine A. Campbell

According to The Centre for Retail Research, 17,145 shops closed in the UK in 2022. The figure was nearly 50% higher than the number of closures in 2021. And it wasn’t just the little guys that closed, large retailers such as Joules, M&CO and T M Lewin closed 6,055 shops and a total of around 151,500 retail jobs were lost. About a third of all the closures were due to insolvency, while the remainder were simply axed as part of cost-cutting or rationalisation. The latter looks set to continue in 2023, as retailers are forced to reduce their operating costs across the board.

So, what part do business rates have to play in all of this misery? Altus Group has estimated that retailers and landlords will need to find around £1.07bn to pay for empty property rates in 2023-24. Although there is a rates exemption for empty premises, that only lasts for three months in respect of retail premises and, in the current climate, where re-letting takes time and is more incentive driven, that’s not going to be nearly long enough to make any meaningful difference to landlords. Hence the increasing use over the last few years of the charity exemption. At least if a charity is occupying your property, albeit rent-free, the rates are taken care of.

Now, more than ever, the system of business rates needs to be overhauled and the empty property relief extended, if we are to materially help the high street. It’s all very well for the government to give local authorities powers to force landlords to let high street property, under the Levelling Up legislation, but the reason properties are remaining empty for so long isn’t because greedy landlords are holding out for higher (or in some cases, any) rent, but that tenants simply can’t afford to pay the business rates demanded of the high street.

Client Alert 2023-004

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