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Business rates impacting on UK casual dining scene

19th Feb 18 9:31 am

Rising rate bills adding to difficulties of Restaurateurs 

Restaurant and casual dining chains are joining retailers in their struggles against the onerous business rates regime with some fall out in the high street highly likely, according to Colliers International, the commercial real estate agency and consultancy.

According to John Webber, Head of Business Rates at Colliers, “Casual dining chains are also seeing the negative impact of the 2017 Rating Revaluation, which we believe has substantially added to their already spiralling costs as they grapple with the rate rises this year.”

News over the weekend (in the Daily Telegraph)  that Jamie Oliver’s Barbecoa may be on the brink of collapsing as costs run out of control, leaving management unable to meet liabilities, has followed a month in which  Byrons announced it may close some restaurants as part of its restructuring, and was asking landlords of 20 restaurants to agree to a 55 cut in rent for 6 month and Jamie Oliver announced he may have to close 13 of his restaurants in his Italian Kitchen chain, following a £10 m loss last year.  Prezzo is also looking at restructuring and reducing its outlets.

Analysing some of the chains’ Business Rates Liability, Colliers estimate that Byron’s total rateable value has increased 40 per cent with the 2017 Rating Revaluation, increasing from £7.764million to £10.63 million, with some restaurants, particularly in London seeing some massive rises. The Pavement, SW4 saw an enormous 253 per cent rise in rateable value, from £51,000 in 2010 to £180,000 due to the Revaluation. and the Cut in SE1 saw a crippling 283% rise from £28,500 to £133,000.  Indeed, London and Greater London restaurants seemed to show the biggest rises in RV.

Turning to Jamie Oliver’s Restaurants, the total RV bill appears to have risen 28 per cent, up £5.7 million to £7.3 million with rises highest in Brighton (up 154 per cent from £68,000 to £173,000), Cheltenham (up 80 per cent to from £44,500 to £800,000) and Guildford (up 78 per cent from £79,00 to £141,000).

And Prezzo saw RV up 23 per cent from £12.8 million to £15.9 million, with again London outlets most affected: a 116 per cent rise in RV in North Audley Street (£78,000 to 169,000) and in Northumberland Avenue a 113 per cent rise (from £168,000 to £357,500), and the Haymarket restaurant saw an 80 per cent increase also. 

Any outlet seeing a decrease in its rateable value was very much in the minority following the Revaluation.

And casual dining is not the only sufferer. Last week French chef Raymond Blanc’s restaurant venture Brasserie Bar blamed the business rates hike following the 2017 Revaluation for adding to “an increasingly hostile trading environment.”  The restaurant business had seen a 12 percent spike in its business rates, which alongside higher debt payment pushed it further into the red. 

John Webber, Head of Business Rates at Colliers said, “Several dining chains are now suffering from the same woes as the high street retailers who are also seeing reduced footfall as consumer confidence falls, diners cook at home or have take-aways, whilst inflation rises impact on costs and wages rise.”

 “With the business rate multiplier so high at nearly 50p in the £, property costs are therefore increasingly becoming an important factor as chains decide which outlets to keep open and which to consider closing. Many companies are now asking their landlords for a reduction in rent as the physical costs of running a property become an increasing burden. Business rates are playing their part in the difficulties as some of the massive rises for particular restaurants show, particularly those in London. “

“As for the high street, many former void retail units were taken up by restaurants, and if this sector is now finding the current environment tricky, one wonders about what the high street is going to look like going forward. 

“Moving to three-year business rates revaluations is all well and good, but this won’t impact until after 2022. We could be seeing a significant change on the high street landscape in the meantime if nothing is done to support it. 

The Government must act now- to properly reform the system and bring the multiplier down.”

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