Viewpoint - 07/10/2013

Occupiers could face unprecedented rates increase

In December 2008, with the country on the verge of economic collapse, Rating in Brief considered the likely impact of the government’s empty property taxation policy on speculative development and the synchronisation of supply and demand.

Find out more

Five years later

Fast forward five years and our comments stand firm. A quickly improving economy, combined with a lack of Grade A supply, means that rents are rising in high performing locations like Manchester, Cardiff and Central London.

On the surface, this fact may appear unsurprising. However, there is a more troubling implication.

Consider the zero-sum, index-linked nature of the nation’s non-domestic rate liability. Business rate receipts are forecast to reach £30bn in 2015, inflating by an estimated 2.5% per annum thereafter. In an economy emerging from recession, those locations where demand for Grade A office stock outstrips supply are predicted to suffer disproportionate increases in Rateable Value, when compared to locations experiencing more subdued rental increases.

Rates bills could increase by 50%

Given the downward pressure on rents in large parts of the country, in order for the government to achieve its forecast business rates receipts after the 2017 revaluation, a UBR of up to 60p in the pound may become unavoidable.

Occupiers of Grade A office stock, with disproportionately large rateable values, may see rates bills increase by as much as 50%.

Re-think on development incentive overdue

The government’s recent announcement of an 18 month exemption from rates for new build properties which enter the rating list between 1 October 2013 and 30 September 2016 has been roundly criticised as insignificant for the majority of new build developments. An urgent re-think is required to motivate developers, kick-start development and mitigate some of the skewed effects of a supply/demand cycle which is now out of sync.


This article is part of the autumn 2013 edition of Rating in Brief.

Get in touch


Get the latest insight, event invites and commercial properties by email