Thursday 12 March 2020 4:37 am

DEBATE: Will the business rates reform package be effective enough to react to the coronavirus crisis?

Lauren McEvatt is managing director of Morpeth Consulting, and a former government adviser.
and Jo Michell
Jo Michell is associate professor of economics at UWE.

Will the chancellor’s business rates reform package be effective enough to react to the coronavirus crisis?

Lauren McEvatt, managing director of Morpeth Consulting and former government adviser, says YES.

This business rates package as a whole, when coupled with the decisive action taken by Bank of England on Wednesday morning and considered alongside other support measures for sick pay cover and business interruption loans, has provided a more significant safety net to the UK economy than we’ve seen so far in any other country impacted by Covid-19.

Small businesses are the bedrock of the tourism and hospitality industries, the sectors most likely to take the most sizeable hit for the next two quarters. Rate cancellation for the most vulnerably-sized businesses in this sector, therefore, should help to stave off too many companies going to the wall.

This, alongside the cash support for the very smallest companies which are rates-exempt, should help the economy weather the coronavirus impact.

Business rates are devolved, though, and vary between the nations. It will
now be important for the Devolved Administrations across the UK to act
with decisiveness that matches the chancellor’s.

Read more: Budget 2020: Business rates cut for more small leisure and retail firms

Jo Michell, associate professor of economics at UWE, says NO.

The sad answer is probably not.

The package suspends rates for businesses occupying property with a rateable value of less than £51,000. This will bring welcome relief for small retailers, cafes and hotels. But high street shops represent a small proportion of total UK business: the retail sector as a whole is about five per cent of GDP, and includes both big brands and online retailers, neither of which will benefit from this announcement.

The hit will be felt much more widely than the local retail sector if strong social distancing measures are introduced — and experts are clear that they should be.

Despite other substantial measures, including refunding statutory sick pay and cash grants for some small businesses, it seems likely that more will be needed to stop businesses going under.

Credit availability is likely to be the crucial factor. State guarantees for bank loans to business are therefore welcome. But again, these may fall short if — as seems likely — large businesses face severe cash flow issues.

More direct action from the Treasury and the Bank of England is likely to be inevitable.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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