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The new draft Rating Lists for England and Wales were published on 30 September. These draft lists contain rateable values for all non-domestic properties in England and Wale,s that will take effect from 1 April 2017 when these new lists go live. There will also be new rateable values in Scotland at the same time, but the Valuation Rolls there will not be published until the end of the year.
The new figures cover all 1.9 million non-domestic properties in England and Wales. They take the form of local Rating Lists, one for each billing authority in England and Wales, giving details of new values for all shops, offices, and factories, as well as a wide range of other properties, everything from advertising hoardings to zoos, in the area concerned; and a Central Rating List which gives values for more than 130 undertakings, mainly utilities, which fall across different authority areas – such as Network Rail.
The values in these new lists have been set by the Valuation Office Agency (VOA), a part of HM Revenue and Customs. They are intended to represent the VOA’s opinion of the “annual open market rental value” of the property concerned, on the basis of valuation set out in the Local Government Finance Act 1988. The values are set by the VOA by reference to a fixed valuation date, which is 1 April 2013. When they come into force on 1 April 2017, they will replace the current rateable values which have been in place since 1 April 2010. The current values were set by reference to a valuation date of 1 April 2008, now eight and a half years ago, and a massive amount has changed in the UK economy and UK property market since that date. It is no surprise therefore that some of the new figures show significant changes, both upwards and downwards.
The total rateable value (RV) in local rating lists in England has increased by about 9.1%, whereas total RV in local lists in Wales has fallen by 2.9%. The total RV in the central rating list in England has risen by an amazing 41.9%; and that in the central list in Wales by 29.1%. The effect of all this in England has been to allow a fall of about 3.5% for the UBR multiplier, announced by Minister earlier this week and detailed in our recent news pages. There is no announcement yet about the multiplier for Wales but, with a fall in total RV in local rating lists, even allowing for the significant increase in the central list RV, it is going to be challenging for Welsh Assembly Government to match England and reduce its multiplier.
The different types of non-domestic property have also fared differently. Figures for retail properties across all rating lists across England show a 4.7% increase, which many will find surprising given the struggles of most retailers over the last few years. This overall figure masks some significant regional variations – retail property in London shows an overall increase of 26.2% led by the strength of the retail property market in central London where values are highest. By comparison, retail properties in the North East show an overall fall of 6.8% and in the North West of -5.5%. Many retailers may be surprised that the falls outside London are not greater than this, and the East Midlands even shows a surprising increase of 4.7%.
The total RV for offices across all rating lists in England shows an 11.3% increase, but this is driven almost entirely by upwards movements in values in London and the South East. London shows an overall increase of 21.2%, again led by increases in central London reflecting the relatively strong market there. The South East shows an increase for total office RV of 7.7% and the East Midlands again shows a surprising uplift of 7.8%. By contrast, office properties in Yorkshire and Humberside show an overall fall of 13.0% and in the North East of -12.5%. It is interesting to note that the falls in total value of offices in these regions are greater than the falls for total value of retail.
The market for industrial property has traditionally been much less volatile than that for either retail or offices, and this is mirrored again in the new valuations. Overall RV for industrial properties in England shows an increase of 4%, the lowest of any of the main property sectors. But, yet again, London takes the lead with an overall increase of RV for industrial property of 15.1%, showing how important the capital is to the economy even in the industrial sector, traditionally associated with other parts of the country. There are small increases in the total industrial RV in all other regions except the North East where the total RV for industrials shows no change and in the North West where there is a 3.1% fall. The figures for other regions range from +6.5% in the South East to +0.4% in Yorkshire and Humberside.
Each of the main categories of property (shops, offices and industrials) shows clear patterns. The “all other properties” class is much more difficult to read. This catch-all for the remainder of properties in local lists will include some large classes of property, such as leisure properties including pubs and hotels; educational properties including schools and universities; and healthcare properties such as hospitals and surgeries. But it also includes a mass of miscellaneous properties from the very small, such as lock up garages, to the very large, such as the Houses of Parliament – where all this started. The “other properties” class shows an overall increase in RV of 15.5%. Whilst London still leads the way with an overall increase of 25%, the other regions show more uniformity across this class as all regions show increases, ranging from +17.5% in the South East down to +6.6% in Yorkshire and Humberside. This relative uniformity is probably a result of some parts of this sector, leisure perhaps being an example, that have ridden the recession relatively well, and others, for example healthcare, that are less exposed to a volatile property market.
Looking at the “all properties” figures across England, what is again striking is the difference between London and the rest of the country. London shows an uplift of 22.8% in RV for all properties. All except three other regions also show increases, but none anywhere near that in London. They range from the South East at +8.6% and the East Midlands (again confounding expectations) at +7.2%, to the South West at +3.8% and the West Midlands at +2.9%. The three regions showing overall falls in total RV are the North East with -1.1%, Yorkshire and Humberside with -0.3%, and the North West with -0.2%.
The picture in Wales is of a weaker property market, with retail properties showing an overall fall in total RV of -8.8%, offices an overall fall of -7.0% and industrial property showing an overall fall of -4.0%. Only the “other properties” sector shows an overall increase, of +4.7%, but this is not enough to offset the falls elsewhere and the total RV in all local rating lists in Wales falls by 2.9%. This will present a concern to Welsh Assembly Government in setting its multiplier.
The press will be full, over the coming days and weeks, of examples of striking increases or decreases in RV for particular properties, but here are a three key thoughts from us about the overall position arising from these new lists.
Firstly, London will see significant increases in rate liabilities for all classes of properties, and massive increases for some classes such as central London retail.
Secondly, what have they not told us about the East Midlands! Overall values in the East Midlands have increased by 7.2%, and values in every property sector have risen. By comparison, in the West Midlands, overall values have risen by only 2.9%, and values in two of the four main sectors have fallen.
Finally, the movement in Central List values is astonishing. To see an overall increase of more than 40% across a seven-year period spanning the deepest recession in living memory is truly surprising. Could it be that there was pressure here to show significant uplifts in these values, to enable a reduction in the multiplier at a time when values in many parts of the country were falling. The consumer may say that utilities companies “can afford” increases in business rates, but that is a rather narrow view. For many utilities, with a regulated pricing regime, business rates are a “pass through” cost that regulators will allow to help justify a tariff increase. Who, then, really pays the increase? But at the same time business rates revenues for central and local government rise!
The VOA has published the new values on its website at a time when it is launching a new web platform. It will be interesting to see how that new platform holds up under the onslaught of business ratepayers searching for their new assessments. The figures published are draft ones and can be altered by the VOA at any time before they come into force next April. Ratepayers can draw the attention of the VOA to what they believe are errors in the draft figures, but formal appeals cannot be made until they come into effect on 1 April 2017. An interesting few months lies ahead!
