Business Rates Revaluation Affecting Restaurants and Retailers

The most recent revaluation of business rates has had the same effect on retailers and restaurant groups as the global financial crash of 2008/9, according to specialists in commercial real estate Colliers International. Since April 2017 when the latest revaluation came into effect, it has been reported that 15 major retailers and restaurant groups have either sought a CVA (Company Voluntary Arrangement) or gone into administration.

Head of business rates at Collins International John Webber pointed out that the financial crash saw 16 major companies go into administration over the course of two years, while these figures only relate to one year after the revaluation, meaning this has the potential to be worse. While it has been noted that business rates are not the sole cause of restaurants and retailers struggling, it is clearly playing a key role in the financial difficulties of many.

For businesses and individuals struggling to pay increased business rates, a specialist business rates company like RVA Surveyors – which has helped its clients for over 10 years – can help.


Revaluation Analysis

In an analysis of the effects of the revaluation, Collins found that many major retailers and restaurant groups had seen significant increases in the amount they are now liable to pay. For example, Jamie’s Italian restaurant chain saw an increase of £100,000, from £3.5 million to £3.6 million; Byron saw a rates increase of £400,000 from £4.9 million to £5.3 million; and the rates for Prezzo increased by £600,000, from £7.2 million to £7.8 million. Other factors affecting the financial success of retailers and restaurants include inflation, the apprenticeship levy, the increased national minimum wage, and a reduction in the number of people choosing to eat out. The infographic attachment looks at how business rates are calculated for each individual property.

Company Voluntary Arrangement

A Company Voluntary Arrangement is a composition under UK law which allows a business that is insolvent or has issues with debt to come to a voluntary agreement with all of its creditors, working to repay part or all of company debt over a set period of time. In order to apply for a CVA, all the company directors must agree that this should happen, as well as the appointed company liquidator or the legal administrators. An insolvency practitioner must draft the proposal and implement the agreement should the creditors accept. A minimum of 75% of the creditors, in terms of debt value, must agree before a CVA can be actioned. During the period of the CVA, the company pays all its debts each month to the insolvency practitioner, who will then deduct their own fees before distributing. As long as the company adheres to the terms of the CVA, the creditors have no more legal recourse to take further debt recovery action.

Call for Business Rates Review

John Webber of Colliers International has joined with other affected groups and individuals, including UKHospitality, in calling for the government to review the current system of business rates and the impact the revaluation has had on restaurants and retailers. Webber pointed out that the figures quoted by Collins about the number of businesses going into administration or CVA did not even begin to touch the surface, as they focused only on large companies and not on the many independent businesses also affected. Webber admitted that a reform of the system would not be a one-stop quick fix for all businesses but stated that it would show that the government was starting to be supportive.