Carney joins in the great business rates debate
The big guns are finally joining the debate on business rates with Bank of England Governor Mark Carney commenting on the pain felt by retailers.
He was replying to a direct question asked by MPs on whether the tax on business properties was having a notable effect on UK firms but, rather than hedging his bets, he came back with a direct answer for the Treasury Select Committee.
“The short answer is yes – yes, it’s a real issue,” he replied, and business reporters were then busy scrambling for fresh pages in their notebooks. “It’s one of those issues that is guaranteed to come up in every visit to business regional roundtable(s),” he added.
I’m sure high-profile announcements from the likes of Marks & Spencer on store closures and the sale of Homebase for £1 after a turnaround plan floundered have helped to polarise the business rates issue once more and its impact on retail.
Carney didn’t dwell too long on the negative and talked up the UK retail sector as being one of the most competitive in the world where consumers are “well served” but margins are “very tight” where the inevitable rise and fall of firms – even historic ones such as M&S – are frequent.
He went on to explain that his conversations with retail bosses had revealed recent high street changes that were very much linked to the changing spending habits of British consumers, the growth of online shopping and with it less footfall. This had left some retailers with legacy assets and costs that make them uncompetitive in today’s market.
The more frequent business rate revaluation should help in this respect, allowing for corrections in the market but other elements such as consumer confidence, wage and general inflation are harder to predict; as Mr Carney and his Monetary Policy Committee found out earlier this month when they held interest rates at 0.5% despite near universal expectation of a rise.
So, the debate on business rates continues but substantial reform still seems as remote as ever despite ever more high-profile names weighing in with their opinions.
London Mayor Sadiq Khan is the latest big name to call on the government to extend the business rates holiday beyond April 2021.
The retail and hospitality sectors are mobilising the troops with dire warnings that thousands of business are at risk if the rates holiday isn’t extended beyond April 2021.
The pandemic has led to more than 50,000 extra appeals being lodged against business rates by Scottish firms alone.