Belfast Telegraph

Retail sector has been thrown to the lions by the 'Tesco Tax'

By Colin Mathewson

There have been numerous reports in recent weeks concerning the plight of the retail sector focusing in particular on the rates burden faced by occupiers.

Unfortunately, it appears that our devolved government does not have any genuine interest in this subject, or more importantly, any inclination to try to alleviate the problems surrounding this issue.

The single biggest cost facing any new potential retail occupier in most locations across Northern Ireland is the payment of rates.

The numbers are quite mind-numbing.

For instance, the former Peacocks store in Donegall Place has a rates bill of around £425,000 per annum while the Eason's unit (about to become vacant) faces a rates bill of around £365,000 per annum.

Both units are currently seeking new occupiers and clearly have the potential to remain vacant for a considerable time due to the scale of rates payable.

Furthermore, each unit is likely to be rented at a level significantly below that of the rates payable.

Coincidentally, both units are victims of Finance Minister Sammy Wilson's large store levy or 'Tesco Tax', which significantly compounds their ability to secure new occupiers.

As a result, landlords are forced to reduce rents drastically, which in many cases are now 50% or more lower than their peak.

To put this into context, it is important to note that rates assessments in Northern Ireland are set at levels corresponding to market conditions prevalent in April 2001.

In reality, such has been the extent of the economic downturn that achievable rental levels in Donegall Place, Belfast's prime pitch, now reflect market levels last seen in the early 1990s.

In many instances, retailers simply cannot afford to occupy units even at zero rent due to the cripplingly high level of rates payable, which has a direct impact on vacancy levels and, more importantly, job creation.

Frankly, government needs to act urgently in order to stop the rot.

If not, vacancy levels will continue to rise and, ultimately, landlords will not be able to carry this burden on their own indefinitely.

The major store levy is clearly ill-judged and the token initiatives surrounding small business rates relief are proving ineffective owing to the absence of any significant retailer activity.

The issue of rates poses a major dilemma for the folks up at Stormont.

But surely it is accepted by all concerned that the route out of our current economic problems can best be achieved by supporting growth in the private sector while at the same time reducing our dependency on the public sector.

The retail sector is of vital importance to the Northern Ireland economy.

However, it is being thrown to the lions with shops closing and jobs being lost at a frightening rate.

We understand 26 Birthdays and Clinton Cards shops will close after its parent company went into administration last week.

It is imperative that the finance minister recognises fully the scale of the rates issue and makes decisive moves to support the retail sector.

If not, I sense massive discontent brewing.

It is not beyond the realms of possibility that Northern Ireland's hard-pressed retailers decide enough is enough and take collective action and withhold the payment of rates altogether.

Should such a scenario develop, it is extremely doubtful that we could keep the lights on for long.

Colin Mathewson, the retail director of Osborne King Commercial Property Consultants