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How could new business rates affect your pharmacy?


21 Apr 2017

Pharmacists were dealt a potential knock-out blow this April in the form of business rate increases. How are they going to cope, asks Radhika Holmstrom

There are no two ways about it; the increase in business rates means a significant increase on the bottom line,’ says Sanjay Ganvir, superintendent pharmacist and professional services director at Green Light Pharmacy in north London and honorary lecturer at University College London.

‘It’s absolutely appalling timing. If the Government is saying that wellness is really important and the NHS should be there not just to treat people when they are ill but to have a holistic view, I’d argue that one of the best tools is community pharmacy.

‘These are the best walk-in centres that the NHS already has – why go building new ones at huge expense, when you’ve already got a huge estate available where the population needs it?’

Mr Ganvir is not talking about the millions of pounds worth of cuts in government funding for English pharmacies – or at least, not about those on their own. The rise in business rates this April will kick many community pharmacies when they’re already down.

And to add further insult to that (considerable) injury, it seems that pubs are being put at a higher priority for financial relief than pharmacies – a high-street service that provides a genuine community function.

An ongoing concern

The rise in business rates has been a high-level concern for some time now.

They were last assessed in 2008 and the current rating list came into force two years later. Rates are usually revalued every five years but this was postponed; so the new assessment only starts taking hold after
a period when the housing market has changed almost beyond recognition (especially since the 2010 list is widely considered to be conservative in its estimations).

Today, property values in London and south-east England have soared, with knock-on effects for rents. Conversely, rents in much of the rest of the UK remain at the same level or have dropped. As a result, around a third of businesses have been expecting their business rates to soar – some by over 40%.

For pharmacists, as Mr Ganvir points out, this comes hard on the heels of the funding cuts they’ve already been expected to absorb in England.

The Pharmaceutical Services Negotiating Committee (PSNC) expects to investigate it further as the impact on businesses becomes more apparent.

However, the National Pharmacy Association (NPA) has written to Savid Javid, Secretary of State for Local Government and Communities, to ask for his assurance that his department has consulted with the Department of Health (DH) to assess the impact of business rate rises on community pharmacy and primary care more broadly, with a view to setting up remedial measures to protect vital services in areas affected by the steepest increases.

‘Our preliminary assessment suggests that more of our members are losing than winning,’ says the NPA’s head of corporate affairs, Gareth Jones. ‘They’re seeing a significant increase in the amount they’re expected to pay.

‘At the same time, a number of members are saying their income has gone down by 18% as a result of the NHS funding cuts. The business rate cuts are hitting pharmacies in London the hardest, and because London has had the least protection in terms of funding cuts, that will hit them [even] harder.’

Mr Jones continues: ‘However, that’s not the only area that will be affected. We’re seeing, for example, other significant increases in South Wales.’

Anil Sharma, who runs a small group of pharmacies in Cambridge and is PSNC’s East Anglia regional representative, is certainly expecting business rates in his area to rise.

‘Cambridgeshire is quite an affluent area and by April 2017, the rateable value of all our properties should have increased by around 20% on average,’ he says. ‘Of course, it will be different in different areas, but round here, rates always go up and with the impact of the funding cuts, it’s going to have huge financial repercussions.’

So what measures does the NPA want to see implemented to alleviate the worst effects? ‘We think both the DH and the Department for Communities and Local Government should be looking at what they can do. It’s really for the DH to try to find a solution, Mr Jones says.

‘The pharmacy access scheme only protects a handful of pharmacies across the whole of London, where there are some very deprived areas. There is a particular risk in some areas. That provision may be cut back and people will get out of pharmacy as a result, so the DH needs to look at the impact of business rates and put measures in place.’

Disjointed thinking

In his March 2017 budget a few weeks before the business rate increase came into force, Chancellor of the Exchequer Philip Hammond announced a few measures that might make things easier for small businesses. One is an extra cap for those that are no longer eligible for small business rate relief (though this only applies to single-property businesses).

Another is £300m for local authorities, which they can use to provide ‘discretionary business rates relief’ to individual businesses that seem to be hit hardest. The last is a £1,000 discount on business rates bills in 2017 for one sort of business that apparently fulfils a valuable community role – pubs.

The chancellor argues that these measures amount to a further £435m cut in business rates. Certainly, the Federation of Small Businesses (FSB) and the Local Government Association (LGA) gave the new rates
a qualified welcome.

There’s a possibility that the discretion to single out specific small businesses for support may help community pharmacies: the LGA has, after all, pointed out as recently as October 2016 that pharmacies are ‘vital to ensuring diverse and vibrant high streets, which can otherwise be dominated by betting shops, fast-food outlets and payday lenders’.

At the moment, though, there seems to be no joined-up thinking, as Mr Ganvir points out. ‘If the logic of the argument for pubs is a sound one based on the idea of community cohesion, then there’s an even stronger one for community pharmacy – linking in with the wellness agenda and the belief in bringing care closer to home, and indeed into the GP workforce crisis,’ he says. ‘The business rates rise has happened in silo.’

Beyond economies

So the stark task for many pharmacists is to work out how they’re going to shoulder the costs.

‘I’m looking at all aspects of my business to see where I can cut costs and make efficiencies. But frankly, we’ve been doing this every year since 2005 and there’s not much more to streamline,’ says Mr Sharma. ‘We’re doing an audit to see how much we’ll save or how much income we’ll generate.  We’ve already not replaced staff or replaced full-timers with part-timers where it’s feasible.’

Pupinder Ghatora, who owns a pharmacy in Oxford, agrees. ‘We don’t have the buying power of the big boys. I only have one store – and we’re down to the bone already. We run on minimal manpower and we are working crazy hours to cover that.

‘That’s the only thing you can cut – and we can’t cut to a service level that I’d class as dangerous. So we’re being backed in to a corner.’

Given the constraints on staffing, the suggestion that pharmacies take on new services to boost their bottom lines is not particularly welcome, either.

‘We are having to audit our free services, like deliveries, to see if we’ll have to consider charging for them,’ says Mr Sharma. ‘There are lots of things we already do, like a full travel clinic and a phlebotomy treatment and testing onsite for HIV and chlamydia. We are looking at services like coeliac testing and streptococcus A testing.

‘There are other things we possibly may consider, like onsite fertility testing. But all of these take time for staff training and require investment. And essentially, with all these constraints, we haven’t got that leeway to take a risk and say, “I’ll give this a go and if it doesn’t make a profit it doesn’t matter”. ’

Mr Ghatora goes further. ‘I would love the people who think up all these brilliant ideas to come and do them in my pharmacy, and see how they manage it,’ he says.

‘They need to come down to the ground level and see what we do to manage patients. Most of the services that are being suggested, like medication reviews, we do anyway. But in any case, our income’s now being cut by a ludicrous amount in return for a small amount to do these services. The cash they’re offering won’t even cover an additional member of staff.’

Both Mr Sharma and Mr Ghatora are distinctly pessimistic about the future for independent pharmacy as a result.

‘I don’t see independent pharmacists surviving, to be honest. Even using all the skills you have, battling against machines this big, you haven’t got a chance,’ says Mr Ghatora. ‘The rates are another nail in
the coffin; the Government’s really messed this one up.’

Mr Sharma agrees. ‘We’ll have fewer people in pharmacy,’ he says.

‘If a pharmacy’s going to be a sustainable part of the NHS, there is a limit and the other cuts have already taken us beyond what is doable,’ Mr Ganvir concludes. ‘And any business cannot, fundamentally, continue if its bottom line is being eroded.’

Check, challenge, appeal

You can appeal against your business rates as soon as the 2017 list is out, but the process in England has changed this year to a three-stage process. It’s hoped that most disagreements will be resolved before they reach the appeal stage.

Check Check and confirm all the facts on which the rating list entry is based.

Challenge Give legal details of the grounds for challenging the entry and propose an alternative rateable value, with evidence and analysis to support this.

Appeal Appeal if your dispute has not been settled in the previous stages.


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