Many of you may remember this famous 1980 Queen Hit, a song about dying in a gunfight, but in 2015 could be equally interpreted as a commentary on the death of retail and commercial businesses located in all the Town and City Centres of Northern Ireland.
Many commentators have given their opinions as to the demise of the traditional high street and suggested that it is due to changes in shopping habits, the growth of the internet, the growth of out of town retailing and parking charges. Whilst each of these issues has undoubtedly had an a negative effect on the traditional ‘high street’ businesses, there is one factor in Northern Ireland above all others which is putting local businesses under which is unaffordable ‘Business Rates’.
Our high streets are now starting to resemble ‘ghetto’ areas with their boarded up shop fronts and high proliferation of charity shops all caused by the ‘ridiculous’ levels of business rates demanded from our local businesses by Stormont. This situation which has gotten markedly worse following the recent REVAL2015 which we were told was a revenue neutral revaluation, but has been turned out to be one of the largest tax ‘smash and grabs’ unleashed by the NI Assembly in its short history.
The non- domestic rates REVAL2015 has become a tipping point for many of our ‘locally owned’ businesses. In my home town of Newry last week alone, three retail businesses pulled down their roller shutters in the City Centre for the very last time and it is unlikely that any business will be opening in their place anytime soon due the unaffordability of business rates. Land and Property Services (LPS) now typically demands anywhere from £5,000 and £10,000 in rates to trade in an average sized shop / office located in any Town / City Centre location in Northern Ireland regardless of the trade or profitability of the business activity undertaken.
Unless you have a very high margin business or have been trading for over 10 – 20 Years with an established customer base, you are going to struggle to survive and you can forget about start-ups opening unless they already have funding behind them. In addition alongside the boarded up shop fronts, charity shops continue to open new shops at an alarming rate as they have the competitive advantage of not having to pay any business rates. To put this in context, Newry now has 26 Charity Shops which has resulted in an even poorer retail mix putting further pressure on the retailers who remain as the city becomes an less attractive retail destination for the customer to visit.
Many readers, politicians and civil servants do not seem to understand the trading activity that has to happen to generate the level of rates LPS demands. In Newry for example they expect the owners of our only City Centre Hotel, a locally family owned business to now pay business rates of £255,692 per annum, which is just short of £5,000 per week, considering Newry is one of the most socially disadvantaged Cities not only in the UK but in Europe, this level of taxation on a locally owned business is lunacy.
One does not need the detective skills of Hercule Poirot to work out that these retail units / offices will never be let until our politicians change business rates policy. This position is not unique to the likes of Newry, it is happening in every town and city in Northern Ireland, in some towns like Coleraine the position is much worse and I would advise all readers to check out the REVAL2015 NAV’s on the Land and Property Services website ( http://www.dfpni.gov.uk/lps/reval2015ni )for your local high streets to allow you to understand the levels of business rates demanded by the NI Assembly..
The rest of the UK and ROI are looking at ways to attract business start-up’s and SME’s into their Town and City centres to create vibrant successful communities, our politicians and their agencies are the only politicians in Europe other than Greece, delivering strategies to drive the few businesses that remain out of our town centres. The phrase ‘you couldn’t make it up’ springs to mind. The NI Assembly has also decided to focus its efforts since 2010 to securing 12.5% Corporation Tax for businesses that don’t even exist whilst completely ignoring the immediate needs of the ‘here and now’ SME sector in Northern Ireland in particular Business Rates reform.
What makes the position even more frustrating for the local business community, is all of our politicians are well aware of the problems the business ratepayers are facing, all MLA’s and MP’s have represented or been asked to represent local constituents and many have lobbied Land and Property Services on their behalf for business rates reductions but they have done nothing to change policy or the legislation. I regularly have been passed correspondence written by local MLA’s and MP’s referring to the range of support measures in place to help rate payers for example the 20% small business rates discount, but unfortunately the politicians fail to grasp that these reliefs are not enough as the NAV’s have been set far too high by Land and Property Services in the first instance which in turn means that the reliefs are far less generous than the business rates relief enjoyed by Scottish, English and Welsh rate payers.
The damage caused by high business rates also goes beyond pulling down the shutters of a retail shop or closing an office, they cause unemployment as jobs are lost, they prevent wage growth as ratepayers struggle with high overheads, they stifle business investment and expansion and destroy the value of assets as owning commercial property is now looked up as being a financial liability by most local Banks.. High business rates also destroy communities as the city and town centres deteriorate and Councils have to pick up the tab for vandalism, anti-social behaviour, street regeneration etc. which …you’ve guessed it requires even more rates to repair, reinstate and enhance our town and city centres.
Economic Parity with the rest of the UK?
The Northern Ireland politicians are constantly banging on about achieving economic parity with the rest of the UK and ROI and their lobbying for 12.5% Corporation Tax is well documented. The one thing you never hear them talk about is how much more expensive it is for a commercial businesses to trade in Northern Ireland compared with the rest of the UK. Northern Ireland businesses have to pay depending upon the Council catchment area anywhere from between 51.66 and 59.5 pence in the pound compared with 48.2 pence in the England. What this actually means is some Northern Ireland commercial businesses can pay paying up to 20% more business rates than a comparable business in England located in exactly the same premises, and this before even taking into account all the other factors that add to the costs of doing business in NI (and would require another 10,000 words to document).
For me what puts it all in perspective, is that it is now possible to rent a shop in the East End of London, with significantly lower business rates than similar business premises located in Northern Ireland.
So what can be done to fix the problem?
Our politicians need to understand that the businesses of Northern Ireland are happy to pay rates, but our politicians and civil servants also have to acknowledge and accept that the business rates payable have to be fair and reasonable and linked to profitability of the individual businesses. The following proposed solutions could make a real difference to the recovery of our City, Town and Village centres:-
- Land and Property Services could be directed to be less aggressive in their NAV assessments and revise the majority of NAV’s to the rents actually payable on the property rather than selectively choosing over rented deals that were struck at the top of the property boom as their supporting evidence.
- The ‘rates’ poundages set by the various councils means we have 11 different levels of business rates across Northern Ireland. Simply put there should be only ‘poundage’ for the whole of NI and it should be capped at the level it is England and Wales.
- Charity shops should pay 50% business rates as unpalatable this may sound to many of you.
- Consideration should be given to extending some form of business rates to the agriculture sector who on the whole are exempt from business rates.
- A small business rates relief scheme should be introduced which as a minimum requirement, should be as competitive as any of the schemes in the rest of the UK.
- The occupancy levels of all high streets for actual ‘business rate payers’ should be measured for every city, town and village in Northern Ireland and any streets with occupancy levels of less than 50%, should be rates exempt for new businesses starting up on these high streets for the next three years and a 50% immediate reduction given to the other ratepayers located on these streets.
- There should be mechanisms put in place to give certain loss making business a ‘rates holiday’ and ‘business rates discounts’ to enable their business to financially recover.
- Business Rates for empty premises should be abolished were the owner has made reasonable efforts to market and lease the premises at below market rental levels but has been unable to do so.
Business rates reform is at least five years overdue and is easily the single greatest decision of economic policy that needs addressed by the Northern Ireland Assembly. Back in the 1970’s and 1980’s we watched our towns being destroyed by bombs and bullets and we eventually made peace. In 2015 our towns are now being destroyed by politics. Our politicians might well pat themselves at a job well done in bringing in a plastic bag tax and banning prostitution, but they have done literally nothing to support the local business community and they should be held to account for this failure.
Our politicians need to act urgently to deliver policies that will act as a catalyst to kick start economic activity in our City and Town Centres.