Business rates entrench regional inequalities, says CBI

The current business rates system is "entrenching regional unfairness", the head of the business lobby group the CBI has warned.

John Allan said long gaps between rate revaluations were punishing areas of the country that were struggling, and hitting those "on the way up".

He said the government needed to live up to its manifesto pledge and review the "broken" system.

The government said it was already making business rates fairer.

Business rates are a tax on property used for business purposes, and calculated based on a property's estimated value on the open market.

Currently, firms can expect rate revaluations every three years, but Mr Allan said that any longer than one year meant rates "lagged far behind economic cycles and property prices".

He said this had hit areas like Redcar, on Teesside, which following the closure of its steelworks four years ago saw a huge rise in unemployment alongside a significant drop in property prices.

"Firms in the area continued to pay business rates at up to 20% above their rateable value," Mr Allan said.

He said the system could also punish fast developing areas like Hackney in East London.

"The lag between the area's boom in property prices and its latest business rates revaluation has seen firms suddenly having to cope with an almost 50% increase in their bill.

"That is a hit that some won't be able to survive."

He also said the system was deterring investment in premises, because even minor upgrades could push up bills.

"Whether it's a large capital investment, or several smaller upgrades to existing property, any real efforts to invest will see your business rates rise."

High business rates have been cited as a factor in the large number of retail failures seen on the High Street in the last few years.

But in his last Budget, Chancellor Philip Hammond promised £1.5bn in rates cuts for UK businesses.

It means that a pub in Sheffield with a rateable value of £37,750 in 2018 will save £6,178 in business rates this year.

Financial Secretary to the Treasury, Mel Stride, said: "Business Rates help fund our vital public services and the local amenities and services that are so important to all of us.

"Following our review of business rates in 2016, we're introducing reforms that will make the business rates system fairer and lower business rates bills by £13bn over the next five years."