Government ‘handing out matches as UK High St burns’, Colliers

Debenhams is asking 30 local authorities to accept a 50% cut in their business rates bill as part of a proposed CVA due to be voted on by creditors this week, according to media reports.

This is akin to going with a begging bowl to the person who has just robbed you, with such reductions only likely to last for a year. Also, being discretionary relief, they could easily fall foul of State Aid limits, argues John Webber, Head of Business Rates at property agency and consultancy Colliers International.

“What is ridiculous is that a 50% plus business rates tax is part of the reason that Debenhams is going through a CVA. So, in effect they are asking for mercy from the perpetrator of their desperate state,” he says. “The Rateable Values are much too high but the Valuation Office Agency shambolic appeal system means it is practically impossible to do anything about it. Added to that the downward phasing of rates bills means even when a rateable value is reduced the bill hardly changes."

According to Colliers, the rates bill for Debenhams current 166 stores was over £71 million in 2018/9 and this has combined with the additional problem that many of its stores have been paying considerably more in business rates than they should be due to the onerous effects of downward phasing on their rates bills, following the 2017 Rating Revaluation. Colliers analysed the rate bills of 46 of the stores most impacted by downward phasing and found out that these alone, would be paying £6.4 million in business rates than they should have been over the next three years.

Webber adds: “What Debenhams and others are doing through their behind closed doors discussions illustrates how out of step the system is. If the Government really was listening, they would remove downward transition immediately – and by doing that it would save the thousands of jobs that will disappear this year. Surely this would be more beneficial than the "on the quiet" discussions that will be going on with Debenhams backers and others. This Government isn’t ‘fiddling while the High Street burns’- it is handing out matches.”

Closing down

Last month, the GMB union hit out at a series of ‘devastating’ Debenhams store closures. The retailer announced 22 stores that will go early next year, putting 1,200 jobs at risk. It is planning to close a total of 50 but has yet to confirm the locations of the remaining ones