A local council has set the ball rolling on a new levy that could leave retailers millions of pounds out of pocket.
Newark and Sherwood District Council in Nottinghamshire this week became the first council to confirm that from December this year it would introduce charges under the Community Infrastructure Levy (CIL).
CIL, which came into force in April, allows local authorities in England and Wales to slap a charge on new developments. The money can be used to improve local infrastructure.
Newark said it would charge large retailers a CIL of £125 per sq m meaning a new 50,000 sq ft supermarket could face a demand of about £500,000.
According to estimates from real estate specialists CB Richard Ellis, the supermarket industry has 41 million sq ft of new development in the pipeline so if Newark's charge was replicated across England and Wales, the bill would exceed half a billion pounds.
However, Adrian Kerison, Newark and Sherwood council's growth point manager, warned the bill could rise even higher. Newark had chosen to charge retailers £125 per sq m, Kerison said, but its CIL calculated by assessing the viability of a new development and the area it is planned for actually allowed for a maximum of £440 per sq m for large retailers. Because the levy was partly calculated by an area's economic performance, Newark's maximum was only around the middle of the scale of what councils could charge.
"Newark is not at the top end of economic prosperity and it's not at the bottom," Kerison said. "Districts at the top, such as the South East, could stand a lot more than £440 per sq m if you did the viability testing."
He also confirmed that an Asda superstore under construction in Newark had narrowly avoided the charge because it already had planning permission.
Other local authorities expected to implement the scheme soon include the Greater London Authority. Based on a preliminary CIL charging table, Croydon would charge a large retail warehouse £431 per sq m.
A spokesman for the British Retail Consortium said it "supported the principle" of the CIL as a source of funding for local communities, but warned "infrastructure improvements must support and benefit the businesses which will be paying for them".
Experts also fear that retailers risk being hit with a double whammy under the very similar Section 106 of the planning act, which compels developers to contribute financially or undertake community works.
"The concern has to be that the CIL will not replace Section 106 but will be charged alongside it," said Glenigan economics director Allan Wilen.
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