Welsh Government urged to review ‘cliff edge’ business rates

A business development group has issued an open letter to the Welsh Government calling for an urgent review of planned cuts to business rates relief and greater support for Wales’ high streets.

The coming of the new financial year in April marks the point at which relief on business rates, introduced during lockdown for retail and hospitality operators, shrinks from 75% to 40%.

Pressure

The move is expected to increase financial pressure on shops, cafes, pubs, and bars at a time when many are already counting the mounting costs across the whole supply chain.

This issue is particularly pressing in Cardiff, according to FOR Cardiff, who are concerned that rateable values, and therefore business rates bills, are higher than elsewhere in Wales.

FOR Cardiff, Cardiff’s business development service, say that there is no clearer marker of the everyday economy than the state of our high streets.

Capital fund

The Welsh Government recently announced a £20million capital fund to support the futureproofing of these high street businesses, but For Cardiff say that the stark reality is that without support on business rates these businesses simply cease to exist.

In an open letter addressed to Cabinet Secretary for Finance, Constitution & Cabinet Office – Rebecca Evans MS, FOR Cardiff is urging the Welsh Government in its new format to reconsider what they term a “cliff-edge” approach to business rates relief and to ensure stronger futures for our high streets in general.

The letter

Dear Ms Evans

Congratulations on your return to the cabinet and your expanded remit in the new government. The formation of the new cabinet provides a key opportunity to press the Welsh Government to reconsider its position on cutting business rates relief for retail and hospitality operators.

As you will be aware, this relief is scheduled to be cut from 75% to 40% in the new tax year, a decision which is at odds with the position in England where operators will continue to benefit from relief. Welsh Government have instead developed a £20million future-proofing fund for businesses in this sector to secure their futures with capital investment.

Whilst this is a welcome investment, capital improvements offer long-term advantages that are difficult to realise for businesses under such enormous short-term pressures. It is our belief that part of this funding should be diverted to local authorities who will be able to use their local knowledge and discretion to divert further business rates support to the areas of greatest need.

Whilst we appreciate the enormous financial pressures the Welsh Government currently faces, the decision to cut the existing relief so drastically is already resulting in business closures and further damage to already-suffering high streets. This damage will only be exacerbated when the cut in relief comes into force and will have further ramifications across the foundational economy.

This decision is likely to disproportionately impact businesses in Cardiff Central, the constituency broadly aligned to the FOR Cardiff BID area. The nature of business rates means these operators are less likely to qualify for more generalized small business rates relief than their counterparts in other areas of Wales.

The response from Welsh Government on this issue is that due to the system of reliefs in place ‘almost half of ratepayers…do not pay rates at all’. This may be true across Wales as a whole and is symptomatic of wider issues with business rates – which we appreciate Welsh Government are working to address – but it is certainly not true in Cardiff Central, where rateable values are higher.

The decision to cut business rates relief has come from a sensible position of attempting to ensure that the businesses who can now afford to pay their full liability do start to do so once again.

Unfortunately, the knock-on impacts for small businesses, operating on smaller margins and with the disproportionate costs associated with the outdated format of business rates, are significant.

We have already lost many much-loved Cardiff businesses in the first quarter of 2024 alone in association with this relief cut, and it is our firm belief that if the cut goes ahead we will lose more.

As we are sure you are aware our beliefs on this issue are mirrored across the retail, leisure, and hospitality sectors and we would urge you to please reconsider this approach.

Yours faithfully

Carolyn Brownell

FOR Cardiff Executive Director

Welsh Government response

A Welsh Government spokesperson said: “We are doing all we can, with the resources and powers available to us, to provide support to households, businesses, and communities in these difficult times.

“We provide a range of permanent non-domestic rates reliefs for businesses, worth £250m a year and fully funded by the Welsh Government.

“This includes Small Business Rates Relief, which supports ratepayers for around 70,000 properties across Wales, and means that more than two thirds pay nothing at all.

“Only one in five businesses are liable for their full bill.

“We are also providing a fifth successive year of support for retail, leisure and hospitality businesses with their rates bills, at a cost of £78m.

“This builds on the almost £1bn of support provided in rates relief schemes to these sectors since 2020-21.”