The Chancellor of the Exchequer has suspended business rates for all hospitality, retail and leisure firms for 12 months as part of an unprecedented £330bn package of measures aimed at helping the public and businesses through the coronavirus pandemic.
In last week’s Budget Rishi Sunak offered a business rates holiday for all firms with a rateable value of less than £51,000.
But after the government yesterday urged the general public to stay away from pubs, restaurants and theatres and following widespread calls from major retailers, leisure operators, real estate experts and businesses Chancellor Rishi Sunak today said the entire retail and leisure sector will not have to pay business rates for a year “irrespective of rateable value”.
Sunak also announced that businesses with a rateable value of less than £51,000 will now be eligible for a £25,000 grant. Sunak also provided some comfort for those concerned that they will not be able to claim insurance cover for enforced closures.
"For those venues which do have a policy that covers pandemics - the government action is sufficient to allow them to make claims," he says.
The moves were lauded across the industry.
Mark Garmon Jones, head of retail investment Savills, described the announcements as a “bold and strong response from the chancellor. This will undoubtedly save many retail and leisure businesses”.
Martin Davenport, Partner and Head of Business Rates at Hartnell Taylor Cook, said: "We are in unprecedented times and the Chancellor has rightly taken equally unprecedented moves to ensure that our businesses get through this crisis. Allowing all hospitality, retail and leisure businesses to pay no business rates for the next 12 months is an excellent measure, and I'm delighted that this 12 month period is more than many expected. This may be a critical lifeline for thousands of businesses.
"For those in offices, there are also steps that you can be taking now to see speedy relief. Should everyone in your office be working from home, apply for empty rate relief now. If accepted by the authorities, your business will benefit, paying no rates for the next three months. Given that this process goes through local councils, rather than the underfunded VOA and cumbersome Check, Challenge, Appeal (CCA) system, you will likely feel the relief sooner. If you have a serviced office and everyone is working from home, seek reduced rent negotiations with your office provider sooner rather than later.
"It should not be forgotten that many landlords will desperately suffer from reduced income in the weeks ahead - some of the country's largest estates are already worried. However, Sunak said the country needs and Government coming together and being flexible. It's about being collegiate rather than conflicting."
That said equities markets are remaining resolutely unimpressed by global government interventions.
Dr Walter Boettcher, head of research and economics at Colliers International, said: “Financial markets are not responding as readily to various stimulus measures as might be expected. This suggests that sentiment is being driven by factors that are not readily addressed by conventional policy tools. Monetary policy in particular has looked relatively ineffective, so far. Fiscal stimulus will help, but the effects of this will be felt over the next few months, rather than in the next few days. As long as panic buying continues, then it is probably safe to assume that investors will remain spooked.”
Morrisons said it was reviewing the impact in a statement but added that it paid business rates in the UK of "£308m for our 2019/20 financial year, of which c.£290m related to stores".
UK Hospitality chief executive Kate Nicholls said: “The chancellor has clearly been listening and these extra measures represent proper progress on last week’s budget. The focus now has to be on making sure that hospitality businesses can draw down the support loans and other funds while they still have businesses to operate, such are the levels of urgency for most businesses.”
Jerry Schurder, head of business rates at Gerald Eve, said: “This is the Chancellor bringing out the big guns and will be hugely welcomed.
“It was always a foolish mistake that larger properties were e,xcluded from previous measures, so it is great to see this corrected, bringing many thousands of businesses precious breathing room.”
John Webber Head of Business Rates at Colliers International, said: “At last some news we have been waiting for. The Government seems to be putting its hands in its pockets and finally delivering what we and our retail and hospitality clients have been calling for – support for all in the sector- not just the smaller players.”
But Webber pointed out that State Aid restrictions might apply to companies receiving the amounts they need. The EU has said that Covid 19 measures should be limited to €500,000 per company, which could prove to be an impediment to the 100% business rates relief extending as far as the Chancellor intends.
Webber suggests that businesses who are worried they might fall into this category simply don’t pay their business rates bills when the bills fall at the beginning of April and deal with any fall out later.
“It’s a matter of survival or breaking point for many companies. We are advising our clients to stop their rates payments now and grasp the offer of a business rates “holiday” with open hands.”
Webber has more concern for those sectors, not mentioned today. “Nothing was said about the manufacturing sector or indeed the office sector either. Many companies lie outside the retail/leisure/ hospitality sectors -those in financial or professional services, media on one hand to estate agents and nurseries on the other. One can only hope the Chancellor has these in sight for the next round of supportive measures he contemplates.”
“And the Chancellor also failed to cover what happens with empty properties. If tenants go bust, landlords not only loose rents, but have to pick up empty rates bills, whilst the property is unoccupied after a few months “rates” holiday. Many landlords cannot afford this, particularly owners of shopping centres or high street shops and there seemed to be no thought about these- or the pension fund monies behind some of them. We would suggest the Government makes some recognition that an empty property is not usually by design, but by negative market conditions and makes some allowances accordingly.”
Savills said the Chancellor has made a "considerable move, but not without restrictions. European State Aid limits have to date capped any assistance which can be received by a single organisation to 200,000 Euros over three years".
It explains: "This means that retail or leisure chains will quickly exhaust that amount of relief, or very large single properties will also reach that limit if they have a rateable value of in excess of circa £320,000. However, in a separate move by the European Commission today, they have released a draft proposal to increase the State Aid limit from 200,000 Euros to 500,000 Euros over a 3 year period. This will unlock some real savings for larger businesses, albeit not quite as spectacular as the Chancellor has claimed."
David Parker, Head of Rating at Savills comments “There is a clear message from the Government that it is trying to support businesses, and this latest announcement is very encouraging to the retail and hospitality sector, although the disappointment continues in the form of the financial cap, albeit higher, on the amount of benefit that can be received. If enforced closure of shops, pubs and restaurants is imposed, not all of those businesses will be able to avoid paying all of their business rates when they are unable to trade. The coming months will be a struggle for many businesses, so it is also a disappointment that other sectors are not being offered any financial support.”
John Keyes, Head of Public Sector at Cushman & Wakefield said: “The Chancellor has announced a significant and very necessary safety net for the economy – albeit with some targeting on the retail, leisure and hospitality sector. Clearly, this can help businesses to continue to operate and meet their fixed costs, including rent. It will be important that the measures are put in place quickly and effectively. We are in unprecedented times and it feels likely that additional measures will be needed. The important message is that the government is committed to give further support as required.”