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UK: Discounters to be hit with higher business rates

Food stores of the size favoured by Lidl and Aldi are set to pay more in business rates while large supermarkets save nearly £700m following a government revaluation.

As reported by The Grocer earlier this week, supermarkets over 27,000 sq ft in England and Wales will save £687m over the next three years as a result of the revaluation, say real estate advisors Altus Group, as their rateable value – which is set to form the basis of the tax from 1 April – falls 15%, from £2.86bn to £2.43bn in total.

Meanwhile, additional data has revealed the business rates bill for stores between 8,000 sq ft and 27,000 sq ft – the category into which Lidl and Aldi sites fall – will rise by £88m over three years, including an inflationary forecast. It’s the result of the rateable value of those stores increasing by 8.4%, from £651.01m to £705.5m. They are set to pay £28m extra tax in the first year alone, taking the annual bill to £362.1m.

According to Altus Group, which provided the additional data for The Grocer, 2,950 stores fall into the category in England and Wales, the majority of which will be Lidl or Aldi stores.

Separate analysis by property consultancy Colliers, exclusively for The Grocer, found supermarkets over 35,000 sq ft would pay significantly less tax, with hypermarkets over 70,000 sq ft on course for the biggest saving, at 19%.

Meanwhile, “the rates payable on stores of a size suitable for the discounters, Aldi and Lidl, of between 15,000 and 22,000 sq ft, will increase significantly, up 6% to 7%”, Colliers said.

The revaluation is based on open market rent values on 1 April 2021. The last revaluation came into effect in 2017 and was based on 2015 rents, meaning the new rates reflect falling property values over six years.

Matthew Hobbs, Colliers head of retail lease advisory, said changes in rental values were a “direct reflection of shopping patterns since the previous rating list came into effect”.

“The sweet spot in property terms remains the discount sector, and stores suitable for their occupation continue to go from strength to strength, a trend we are expecting to continue in 2023 and beyond.”

Meanwhile, “the growth in online shopping has reduced demand for the weekly trolley shop and shaved margins on non-food items, making large areas of the largest supermarkets surplus to requirements". Examples include an 111,000 sq ft Asda in Great Barr, Birmingham, which is set to have its annual bill cut by 20% to £1.03m. In contrast, the 16,000 sq ft Aldi on Bristol Road South in Birmingham will see its annual bill rise 6.4% to £121,000, said Colliers. Both analyses also found convenience stores would pay more, with their rateable value rising 12.4%, according to Altus Group. Hobbs added: “Little and often shopping has increased demand for convenience stores.”

Altus Group puts the net saving across all grocery retailers at £546m over three years.

Source: The Grocer

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