Derrick Potter tells UKWA members at AGM.
The UK logistics industry is faced with a number of challenges – not the least of which are the current world financial climate and the escalating price of fuel – but the Government's recent moves to scrap rate relief on empty industrial property and phase out the Industrial Buildings Allowance (IBA) are likely to prove especially damaging to the sector.
That was the message from Derrick Potter, National Chairman of the United Kingdom Warehousing Association (UKWA) in his address to UKWA members at the Association's Annual General Meeting, held recently at the Dorchester Hotel, London.
Derrick Potter said: “The Empty Property Rate Rules which came into effect on 1st April this year, changed the tax position of empty warehouses substantially: empty warehouses are now liable after a six month holiday for empty property rates at the same rate as they would pay if they were occupied.
“Ministers justified this new tax on the grounds that these reforms will provide an incentive for owners to re-use, re-let or re-develop their empty properties and will increase the supply of commercial property available to new and existing businesses, thereby helping to reduce rent levels which burden the competitiveness of the UK.
“The government considers that the reforms will provide a strong incentive for owners to bring empty shops, offices and warehouse buildings back into use, and so improve access to property and reduce rents for businesses.
“One doesn't have to be too cynical to view this as simply another tax raising move.
“On a typical empty 10,000 square metre warehouse, the potential rates bill could reach £1/4m each year. Now, if a third party warehousing company loses a client, it not only has to contend with lost revenue but also from an additional tax burden – a 'double whammy'”.
Derrick Potter added that UKWA members have access to the Association's property advisers who can help reduce the impact of the new rating scheme on their business.
Derrick Potter went on to criticise the Government's decision to remove the Industrial Buildings Allowance. “In his last Budget as Chancellor, Gordon Brown announced a phased removal of the industrial buildings allowance (IBA) from April of this year,” he explained. “Up until this time, anyone building an industrial building such as a warehouse, could get an allowance of four per cent on the cost of construction.”
Derrick Potter continued: “The four per cent allowance is being racheted down by one per cent a year over the next four years.”
“A great many warehouse operators will have factored the IBA into their costings when pitching for contracts and the decision to phase out the allowance will have a direct impact on their bottom line profitability.”
“With the global economic situation and the high price of fuel, these are difficult times for our industry. The Government has only added to our problems with its moves to scrap the IBA and reform the empty property rate rules.”
Derrick Potter is now in his second year as UKWA National Chairman. One of the most influential figures in the UK logistics industry, he is founder and executive chairman of The Potter Group, which provides a complete range of logistics services and solutions. He is also a director of the Rail Freight Association, a Chartered Fellow of the Chartered Institute of Logistics and Transport, an Honorary Fellow of the Institute of Transport Administration and a member of the Advisory Forum of the University of Hull Logistics Institute.
Founded in 1944, UKWA has over 600 members providing storage and third party logistics services, and represents the industry to both commerce and government.