Switch to CPI business rate link vital to keep Wales competitive with England

26 October 2017

Share this

Public and private sector property occupiers are set to see substantial increases in their business rates in the 2018/19 financial year. The Office for National Statistics (ONS) has announced that the Retail Price Index (RPI) hit a five year high of 3.9% in September. Business rates are linked to RPI, which means that commercial property occupiers, shops, factories, leisure outlets and offices will see their rates rise by almost 4% in April 2018. At the same time the ONS confirmed that the Consumer Price Index (CPI) had risen to 3%, triggered partly by the fall in the pound pushing up the prices of imports.

Andrew West, Director of Business Rates at Cooke & Arkwright comments:

The UK Government announced in March 2016 its commitment to switch the RPI link to CPI in England from 2020. However, it is now predicted that in November’s budget the Chancellor will announce that this will be brought forward to April 2018, reducing the increase from 3.9% to 3%. To-date, the Welsh Government has made no such commitment for the devolved tax in Wales. CPI has traditionally almost always been lower than RPI, so is seen as a fairer index. We researched the levels of CPI against RPI over 27 years from 1989 to 2015 and in all but six of those years CPI was lower than RPI, sometimes by as much as two percent. When the switch to CPI takes place in 2020-21, it is estimated to be worth £270m to businesses in England. We would like to see this happen immediately, both in England and in Wales. Struggling retailers already have the prospect of inflation hitting consumers’ pockets. The latest retail sales figures from the ONS already show September sales falling by 0.8pc, a drop from August’s figure of 1pc growth.

The devolution of tax powers to the Welsh Government is an opportunity to put in place measures to make Wales a better, more competitive place to do business. We need to encourage businesses to invest here, to create jobs and grow the economy. If business rates are seen to be rising faster in Wales than in England, then that is a disincentive. Furthermore, the recent Welsh budget included increases in the new land transaction tax and commercial property stamp duty (for transactions above £400k) in Wales, which are added disincentives for businesses considering investing in the Principality.