APAM in the news: APAM’s Simon Cooke comments on Budget measures to support the High Street in this article from Property Week: https://www.propertyweek.com/news/chancellor-pledges-15bn-to-back-high-street/5099531.article
Chancellor Philip Hammond has launched a £675m ‘Future High Street Fund’ alongside significant business rates relief for small retailers from April 2019.
In a Budget which Hammond said signalled the “start of the end of austerity”, the Chancellor announced the treasury would provide £675m of ‘co-funding’ over the next four years “to support councils to draw up formal plans for the transformation of their high streets”.
The chancellor said the fund would also “facilitate the redevelopment of underused retail and commercial areas into residential and office properties,” and added that the government would consult on whether changes to use classes and the compulsory purchase order regime could support this.
The remainder of the promised £1.5bn support for the high street came in the form of an estimated £900m in business rates relief for nearly 500,000 small businesses in England that have a rateable value of £51,000 or less.
The one-third cut in business rates will take effect for two years from April 2019 until the next revaluation in 2021. Also, from October 2018, businesses will be able to deduct 2% of the cost of any new non-residential structures and buildings off their profits before they pay tax.
While the chancellor steered clear of an online sales tax, he did introduce a 2% ‘digital services tax’ on large digital firms with a turnover of over £500m. Hammond said he would “introduce a tax on UK generated revenues” starting in 2020. He said this would raise up to £400m by targeting the likes of Amazon, Google and Facebook.
The measures have drawn some support from the sector, Davis Parker, director and head of business rates at Savills said the tax “may not be the solution that bricks and mortar retailers have been looking for”. In terms of the potential impact on online retailers demand for logistics, JLL’s Tessa English said the tax “may create a small impact further down the line for companies but with large corporates needing to meet the demand from customers it is unlikely to hamper demand for logistics floorspace across the UK”.
Rates relief ‘wide of the mark’
Many key analysts also believe the focus on small businesses rates relief was “wide of the mark”.
According to Colliers International’s head of business rates John Webber, the chancellor is “aiming at the wrong target if he wants to stem the massive loss of jobs in the retail sector, which have come mainly from the big struggling store chains”.
“The chancellor’s measures give no concessions to those that have an RV that is higher than £51,000 and that’s where the big retailers lie – and that’s where the pain is at the moment,” he added. “It beggars belief that whilst businesses are set to face a £600m business rates bill rise in 2019, £200m of which will be paid by the retail sector. The chancellor thinks it’s enough to purely offer a giveaway to businesses who in most cases already receive small business relief and to do nothing to help the big retail employers. The high street will still be “hamstrung” by these ineffective measures.”
His comments were echoed by Helen Rainsford, senior development director at Aviva Investors who added that “unless there is a widespread restructuring of rates it is highly unlikely to have a significant positive impact on retailer’s expansion plans, and thus will not have a demonstrable beneficial impact on our current redevelopment or asset management activities”.
Revo chief executive Ed Cooke added that the Chancellor had “failed to be bold yet again when it comes to reforming the outdated business rates system”.
Savills head of business rates Parker said the initial fund size is “likely to fall way short of the mark in terms of the scale of the problem to be tackled”.
Reacting to the wider high street funding, Paul Souber, head of retail agency in London at Colliers International said that in order for the plans to be effective “requires wholesale reform of planning rules to enable this change quickly and the wholesale reform of business rates”.
JLL’s lead director of rating Tim Beattie suggested it would be “interesting to see if the devolved parliaments in Scotland and Wales use this money in the same way as England”.
As a targeted fund for specific cities, the chancellor announced the expansion of the Transforming Cities Fund to £2.4bn including £150m for Tayside, £350m for Belfast and £120m for North Wales.
On the city specific funding, Simon Cooke, co-founder of APAM, said: “Against a backdrop of rising vacancy rates and CVA activity, the UK’s town centres desperately need investment and management to be revitalised for the benefit of local communities. The Transforming Cities Fund being increased to £2.4 billion and an enlarged budget for business development corporations, provides further support for growth in the regions and enhance the compelling case for continued UK and overseas investment.”
Finally, Hammond also announced that while the government would honour existing contracts, private finance initiatives (PFIs) would be abolished. He announced £1.6bn of new investments to support the Industrial Strategy, and said he would provide £200m funding for the British Business Bank to replace funding hole from any lack of access to the European Investment Bank after Brexit, if required.