Preston losing up to £3.2m a year because of empty shops

Empty shops are costing Preston City Council up to £3.2m a year in income.

By David Nowell
Friday, 17th January 2020, 5:00 pm
Updated Saturday, 18th January 2020, 7:56 am
Preston collects millions of pounds a year in business rates
Preston collects millions of pounds a year in business rates

An investigation shows that in 2018/19, the authority lost almost 4.5 per cent of its total income from business rates of £52.5m.

The amount of business rates relief given to empty units represents a huge chunk of income at a time when hard-pressed councils are still making cuts and receiving less cash from central government.

But business chiefs are fully supportive of rates relief – despite the loss to the coffers of local authorities.

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They say Britain’s damaging business rates system has unfairly punished high streets all over the country, including Preston.

Business rates are similar to council tax for business properties.

They are paid by businesses, or landlords if a property is empty.

Councils currently keep around 50 per cent of business rates in their area but are expected to keep 75 per cent from 2021.

But rates do not have to be paid on empty businesses for three months, such as when shops close down or move.

According to the data, Preston lost £2.2m in 2017/18; £3m in 2016/17; £3.2m in 2015/16; and £3m in 2014/15.

In October, a parliamentary select committee urged reform for a “broken” business rates system.

The Lancashire-based Federation of Small Businesses chairman Mike Cherry said: ““As business rates hikes contribute to closures on our high streets in increasing numbers, it would add insult to injury to then remove a relief for empty units.

"Fundamentally, without the current business rates system, we’d have far fewer empty shops on our high streets – and less of a need for empty premises relief."

Babs Murphy, CEO of the North and Western Lancashire Chamber of Commerce, said : “The NWLCC is calling for steps to be introduced which would help alleviate some of the excessive financial pressures put on businesses by rates.

“As it stands, the system creates a number of perverse incentives in relation to business location, property improvement and plant & machinery investment.

“The policy of fiscal neutrality means that there are winners and losers across the country.

“The Government needs to abandon the fiscal neutrality principle in business rates reform which currently acts as an unacceptable barrier to fundamental reform of the system.

“Excluding plant and machinery from valuations would remove a perverse incentive for investment and businesses should be allowed to appeal valuations through simpler and fairer processes.

“Business rates is an up-front cost which businesses pay heavily, before even making a penny profit."

Coun Martyn Rawlinson, Cabinet Member for Resources and Performance at Preston City Council, said: “We’re committed to increasing visitors and investment in Preston and were encouraged by a 3.9 per cent increase in footfall over the festive period compared with a decline both regionally and nationally.

“Business rates are set at a national level and while we aim to support businesses as best we can, the vast majority of shops in the city are privately owned.

“Empty shops blight every high-street, and local businesses need the on-going support of us all. Shops needs customers and the best way to keep them open is to use them.”

Dominic Curran, property advisor at the British Retail Consortium, added: “It has been a challenging year for many retailers, as many shops struggle to adapt to rising cost pressures and changing consumer habits.

"High among the concerns for retail firms is business rates – a tax which disproportionately harms retailers, driving shop closures and job losses, leaving empty shopfronts and harming local communities.

“It is essential that the Government makes good on its pledge to reform this broken tax system.”

A Treasury spokesman said: “Empty property relief strikes a balance between incentivising property owners to put vacant properties to use, while not penalising those who lose a tenant at short notice.”

A He said a review of business rates was being carried out.