There are good reasons to reform the business rates system – but it won't save the high street

Sad! Boarded up shops. Image: Getty.

Business rates were top of the news agenda again recently after Tesco’s Chief Executive Dave Lewis claimed in a BBC interview that the tax was playing a major role in the ongoing woes of the retail industry. He also argued that the business rates system creates an “uneven playing field” between high street shops and online retailers based in out-of-town warehouses,

These views echoed similar comments made by Sainsbury’s chief executive last year. They also reflect wider discontent with the business rates system, especially following the revaluation of the rates that took place last April – which saw rates go up for some firms and fall for others.

But at the Centre for Cities, our research suggests that these two concerns about the business rates system — that small and medium-sized firms (SMEs) on the high street are unduly penalised, and that online retailers unfairly benefit — are being overstated by business leaders.

On the first issue, our analysis last year suggested that many SMEs would benefit from the revaluation of business rates — especially in northern cities. Average rates would rise in only two cities — London and Reading, the UK’s most prosperous cities in terms of average wages. In contrast, firms in all other cities in England and Wales benefitted on average from a decrease in rates, with the biggest decreases to be found in Blackburn, Blackpool and Newport. Firms in these places had been overpaying on rates for years, and so the revaluation of their rates was long overdue.

Indeed, the real problem is that revaluations don’t take place regularly enough. Last year’s was the first in seven years — which is why businesses in the South East faced such a hike in their bills. The gGovernment has moved to address this problem by announcing at the last Budget that revaluations will take place every three years. This was a welcome move, though these revaluations would ideally take place annually to offer businesses and cities greater certainty and stability.

In terms of the second concern raised by business chiefs — that the business rates system creates an unfair playing field that benefits online retailers – these criticisms are wide of the mark for a number of reasons (outlined in detail in a previous blog by my colleague Paul Swinney).

Yes, Amazon sites have benefitted from decreases in business rates after the revaluation in April 2017 — but the scale of these decrease have on average been smaller than those enjoyed by high street retailers.


More significantly, however, the arguments made by Tesco’s boss and others overlook the fact that business rates is not a tax on retail — it is a tax on land use. As such, business based in the centre of bustling cities are charged more because land is at a premium in these places, but those in out-of-town locations – where land is abundantly available and less in demand — pay less.

Indeed, this is why businesses in these places choose to locate where they do — those based in out-of-town areas do so because they don’t want to pay high rents and rates, while those in central London show they are prepared to pay high prices for the benefits that the location brings to their business.

Nobody would argue that the business rates system is perfect. As we set out in our briefing Business rates: maximising the growth incentive across the country, reforms are needed to ensure that the system incentivises long-term growth in a greater number of cities and better rewards places for their contribution.

However, it is wrong to blame the rates system for the travails of high street shops. The causes of the decline in high street chains are complex and many – and thinking that changing the business rates system will solve these problems is misguided.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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Coming soon: CityMetric will relaunch as City Monitor, a new publication dedicated to the future of cities

Coming soon!

Later this month, CityMetric will be relaunching with an entirely new look and identity, as well as an expanded editorial mission. We’ll become City Monitor, a name that reflects both a ramping up of our ambitions as well as our membership in a network of like-minded publications coming soon from New Statesman Media Group. We can’t wait to share the new website with you, but in the meantime, here’s what CityMetric readers should know about what to expect from this exciting transition.  

Regular CityMetric readers may have already noticed a few changes around here since the spring. CityMetric’s beloved founding editor, Jonn Elledge, has moved on to some new adventures, and a new team has formed to take the site into the future. It’s led by yours truly – I’m Sommer Mathis, the editor-in-chief of City Monitor. Hello!

My background includes having served as the founding editor of CityLab, editor-in-chief of Atlas Obscura, and editor-in-chief of DCist, a local news publication in the District of Columbia. I’ve been reporting on and writing about cities in one way or another for the past 15 years. To me, there is no more important story in the world right now than how cities are changing and adapting to an increasingly challenging global landscape. The majority of the world’s population lives in cities, and if we’re ever going to be able to tackle the most pressing issues currently facing our planet – the climate emergency, rising inequality, the Covid-19 pandemic ­­­– cities are going to have to lead the way.

That’s why City Monitor is going to be a global publication dedicated to the future of cities everywhere – not just in the UK (nor for that matter just in the US, where I live). Our mission will be to help our readers, many of whom are in leadership positions around the globe, navigate how cities are changing and discover what’s next in the world of urban policy. We’ll do that through original reporting, expert opinion and most crucially, a data-driven approach that emphasises evidence and rigorous analysis. We want to arm local decision-makers and those they work in concert with – whether that’s elected officials, bureaucratic leaders, policy advocates, neighbourhood activists, academics and researchers, entrepreneurs, or plain-old engaged citizens – with real insights and potential answers to tough problems. Subjects we’ll cover include transportation, infrastructure, housing, urban design, public safety, the environment, the economy, and much more.

The City Monitor team is made up of some of the most experienced urban policy journalists in the world. Our managing editor is Adam Sneed, also a CityLab alum where he served as a senior associate editor. Before that he was a technology reporter at Politico. Allison Arieff is City Monitor’s senior editor. She was previously editorial director of the urban planning and policy think tank SPUR, as well as a contributing columnist for The New York Times. Staff writer Jake Blumgart most recently covered development, housing, and politics for WHYY, the local public radio station in Philadelphia. And our data reporter is Alexandra Kanik, whose previous roles include data reporting for Louisville Public Media in Kentucky and PublicSource in Pittsburgh, Pennsylvania.

Our team will continue to grow in the coming weeks, and we’ll also be collaborating closely with our editorial colleagues across New Statesman Media Group. In fact, we’re launching a whole network of new publications this fall, covering topics such as the clean energy transition, foreign direct investment, technology, banks and more. Many of these sectors will frequently overlap with our cities coverage, and a key part of our plan is make the most of the expertise that all of these newsrooms combined will bring to bear on our journalism.

City Monitor will go live later this month. In the meantime, please visit citymonitor.ai to sign up for our forthcoming email newsletter.


As for CityMetric, some of its archives have already been moved over to the new website, and the rest will follow not long after. If you’re looking for a favourite piece from CityMetric’s past, for a time you’ll still be able to find it here, but before long the whole archive will move over to City Monitor.

On behalf of the City Monitor team, I’m thrilled to invite you to come along for the ride at our forthcoming digs. You can already follow City Monitor on LinkedIn, and on Twitter, sign up or keep following our existing account, which will switch over to our new name shortly. If you’re interested in learning more about the potential for a commercial partnership with City Monitor, please get in touch with our director of partnerships, Joe Maughan.

I want to thank and congratulate Jonn Elledge on a brilliant run. Everything we do from here on out will be building on the legacy of his work, and the community that he built here at CityMetric. Cheers, Jonn!

In the meantime, stay tuned, and thank you from all of us for being a loyal CityMetric reader. We couldn’t have done any of this without you.

Sommer Mathis is editor-in-chief of City Monitor.