Small shops fear becoming the biggest losers as rates rocket

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The tiny crafts shop at the end of Southwold High Street doesn’t have much in common with an Amazon warehouse or flagship store on Regent’s Street. It is mainly run by volunteers, for a start.

Business owner Rebecca Bishop faces a crippling rate rise at her Two Magpies Bakery in Southwold, Suffolk

Their only aim is to break even, passing any profit on to the local artists, whose jewellery, ceramics and quirky cushion covers they have been selling quietly on this part of the Suffolk coast for 30 years. Google HQ, it is not.

Yet, the craftmakers who run the Craftco co-operative have found themselves among the biggest losers, when new business rates come into effect on April Fool’s Day. Craftco now pays £152 a year in rates. Come April, that will increase to £2,000 for the first year, rising to £7,500 by 2022. It will put them out of business. “How can that be fair?” Julie Carpenter, the shop manager, said. “No one here is making a fortune, we’re only just about making a living. It is totally perplexing.”

Craftco is not alone. Its high street neighbours, including a post office, bakery and small art gallery, whose owner began the business with a £500 grant from the Prince’s Trust when she was homeless, are all warning that the new rates could ruin them. Southwold, a quintessential seaside town with that rarest of things — a unique and interesting high street — stands to lose some of its most popular independent businesses. Another high street defeat looms in the battle against the bland.

The government says the new rates will “ensure fairer bills for businesses up and down the country.” Many will see a cut in their rates, for example in places such as Blackburn, Redcar and parts of Wales. Others across the UK face increases of more than 250 per cent. The business rates system, which traces its roots back to 1601, was already unpopular for its focus on bricks and mortar, in the modern retail economy.

Now protests are growing. Critics say the latest revaluation has created too many of the wrong type of loser. Rebecca Bishop, owner of the Two Magpies Bakery, faces a 254 per cent rise in rates, despite the fact that her business fundamentals have not changed since the last review in 2010.

It’s absurd and unjust. Why am I being clobbered more than Costa?

“I’ve got the same turnover, same site, same number of staff,” she says. But instead of paying £4,232, as she does now, and qualifying for relief as a small business, the government has decided that her rateable value should go up from £9,200 to £31,750, bumping the bakery up to the “medium” category and inflating her rates bill to £14,490 by 2022. Her business is now in the same category, and with a similar rateable value, as the Costa a few doors down. It faces a smaller increase of 178 per cent.

“It’s absurd and unjust,” Ms Bishop, 50, said. “Why am I being clobbered more than Costa? Common sense needs to prevail.” Ms Bishop argues that she is at an unfair disadvantage to online rivals and larger companies who do most of their production off the high street. “I can’t do what the chains do. I can’t let customers see the bread in my shop but bake it somewhere else in a cheaper warehouse.”

She has launched a campaign with other independent retailers in Southwold to challenge the workings behind the new business rates. It is based on a complex and opaque calculation, in which the “rateable value” (RV) of a property, as estimated by assessors from the Valuation Office Agency, is multiplied by a figure set by central government. Ms Bishop wants to know why the rateable value of her shop has risen from £240 a square metre, to £700.

Guy Mitchell, 56, who runs the post office and a toy and stationery shop across the road, said: “It is not a case of Southwold being picked on. There is a flaw in the national formula.” His RV has risen from £16,750 to £30,250, increasing the amount that he has to pay on his premises from £7,800 to £14,500 by 2022. “If a minister could come and sit at my kitchen table and explain to me and my family, why that is, they’d be welcome, because I certainly don’t understand it,” he said. “If we aren’t a small business, what is?”

For many bricks and mortar retailers, this is going to be the straw that breaks the camel’s back

Lyn Knights, who faces a 180 per cent increase for her clothes shop, Denny of Southwold, which has been in her family for 165 years, said: “The whole town is in shock. It’s horrendous. This will kill off so many of the independent shops which people come here for.”

The revaluation is throwing up anomalies across the country. Peter Sands, 68, runs a furniture shop in Maidenhead, set up by his grandfather. He said he could see little evidence of the supposed boost in prosperity in the prime minister’s constituency to justify his RV increase from £7,000 to £10,000. “I’m looking down the high street and it doesn’t feel very prosperous. As Theresa May will know, it’s already a struggle getting customers to the town centre. The rates are a blunt and old-fashioned instrument and I worry that for many bricks and mortar retailers, this is going to be the straw that breaks the camel’s back.”

From Colchester to Kirkcaldy, Coventry to Dundee, pubs, shops and cafés are preparing to appeal against the increases. There are anomalies even in central London. For three generations, Alex Pose-Gill’s family has run the Buckingham Coffee Lounge, near Buckingham Palace. Having the Queen as a neighbour does not necessarily mean your business can afford higher taxes, he says. He is finding footfall is down because offices around him are being converted into luxury flats, meaning fewer office workers drinking his coffee. He has put up a sign informing his customers that business rate rises are to blame for an extra 60p on the cost of their full English breakfasts.

“They have to come up with a more intelligent system than this.”

The government insists that three quarters of businesses in England will see no change, or a reduction in rates.

“This revaluation improves the fairness of rate bills by making sure they more closely reflect the property market,” the Department for Communities and Local Government said.

In Southwold, Serena Hall, 43, has no idea how the gallery that she began with a Prince’s Trust grant more than 20 years ago, is going to survive. Property prices have forced Ms Hall to move her home and studio out of town but her business depends on being in Southwold for its survival. Her RV has risen from £7,000 to £20,000. “I built this place from nothing. I don’t know what we’re going to do — we can’t work any harder. They’ll have to drag me out of here kicking and screaming.”