As part of his response to Coronavirus, the Chancellor announced last week that small businesses in retail, leisure and hospitality will be exempted from business rates this year. But how will this play out across the country?
The first thing to note is that a lot of properties are already exempted from business rates. If the Valuations Office Agency rates a property as having an annual rent of £12,000 or less, no rates are due. This means that a lot of properties don’t pay any rates. So despite the continued stories that business rates ‘kill the high street’, the chances are that your favourite independent shop doesn’t actually pay any business rates.
There is a clear geography to these exemptions. As the map below shows, cities in the North and Midlands have the highest shares of properties that fall below this £12,000 threshold. In Burnley, Blackburn and Blackpool, more than four in five of the properties that have their rateable values available are exempted. Meanwhile in Slough, Oxford and Cambridge it is two in five.
Figure 1: Share of eligible properties with rateable value under £12,000 (%), 2020
But the geography looks very different for the properties affected by the rates holiday announcements. As the map shows, it is businesses in cities in the Greater South East that are overwhelmingly likely to benefit from the pause in business rates. In Oxford, Centre for Cities estimates show that around 26 per cent of properties qualify, followed by 20 per cent in London and 19 per cent in Cambridge. York is the only city in the top 10 that isn’t in the South – 18 per cent of properties will be exempt.
Figure 2: Share of eligible properties with rateable value between £12,000 and £51,000 (%), 2020
These patterns result because of the varying cost of commercial property across the country. In many northern cities, space is cheaper, and so a greater share of properties fall under the £12,000 threshold.
What this means is that very few businesses further north will benefit from this part of the Chancellor’s support package as they are already exempt. Given this, the announcement of grants and loans for businesses made on Tuesday will no doubt come as a relief to many small businesses in northern cities in particular, who didn’t get much extra breathing space from the Chancellor’s original Budget response.
*Note that not all properties will qualify for the discount because chain businesses are not eligible. This is unlikely to significantly change the results though, or the geography of pattern shown.