Análisis situacional

The Framework with Hypotheses Chapter (Section 4.7.2) suggested that recent evidence points out to a small number of firms outperforming others. Thus, following the OECD (2007:61) definition, HGFs are those firms that had average annualised growth by employment greater than 20% per annum, over a three-year period for firms with more than ten employees. A dummy variable was created taking the value of 1 if a firm experienced employment growth higher than 20% per annum, over a three-year period between 2003 and 2016 and had at least ten employees, and 0 otherwise.

6.2.2.6.5 SBRR

The variables were derived according to rules imposed by English, Scottish and Welsh governments that are reviewed in the Introduction and Background Chapter (Section 1.4.3).

6.2.2.6.5.1 SBRR in England

ARDx provides neither rateable value nor SBRR. ARDx includes the amount paid on BRs. The reported BRs figure was combined with the descriptions in Non-Domestic Rating (Small Business Rate Relief) Orders issued by the Scottish, Welsh and British governments

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and its multiple amended versions that were detailed in the Introduction Chapter. BRs are estimated by multiplying rateable value (RV) with the multiplier. If a property is eligible, then, reliefs should be deducted from the BRs bill:

𝐵𝑅 = 𝑅𝑉 × 𝑚 × (1 − 𝑆𝐵𝑅𝑅),

where BR is business rates paid, RV is rateable value and m is a multiplier

It is coplex to estimate SBRR from BRs since the relief is shifting according to RV. The first step is to deduct a possible interval, which is the range over which the relief is paid (either £5,000 or £6,000), from RV. The result is then divided by the decrease of relief related to an increase in RV. This number is estimated by dividing interval value by maximum relief available in a percentage form ( 𝑖𝑛𝑡

𝑚𝑎𝑥×100):

1 − 𝑆𝐵𝑅𝑅 = (1 − (max − 𝑅𝑉 − 𝑖𝑛𝑡_𝑖𝑛𝑡 𝑚𝑎𝑥

) ) = 1 − 2 × 𝑚𝑎𝑥 +𝑅𝑉 × 𝑚𝑎𝑥 𝑖𝑛𝑡

𝑖𝑓 𝐵𝑅 > £0 & 𝑅𝑉 ≤ £12,000 and where max is a maximal relief available and the int is the range over which the relief is paid (either £5,000 or £6,000).

Combining both equations yields: 𝑅𝑉2+ 𝑅𝑉 ×𝑖𝑛𝑡(1−2×max)

𝑚𝑎𝑥 −

𝐵𝑅×𝑖𝑛𝑡 𝑚𝑎𝑥×𝑚= 0

Given that maximal relief during 2005-2010 in England is equal to 0.5 (𝑠𝑜 1 − 2 × 𝑚𝑎𝑥 = 0), the equation becomes relatively straightforward to estimate:

𝑅𝑉 = √𝐵𝑅×𝑖𝑛𝑡_0.5×𝑚

By combining the first and last equations, SBRR in England between 2005 and 2010 can be estimated by solving the following function:

𝑆𝐵𝑅𝑅 = 1 − 𝐵𝑅 𝑚×√𝐵𝑅×𝑖𝑛𝑡

𝑚𝑎𝑥×𝑚

During 2010-2014, there were further changes and maximum relief was increased up to 1, so another quadratic equation for this period has to be expressed:

0 = 𝑅𝑉2+ 𝑅𝑉 ×𝑖𝑛𝑡(1−2×max) 𝑚𝑎𝑥 − 𝐵𝑅×𝑖𝑛𝑡 𝑚𝑎𝑥×𝑚= 𝑅𝑉 2_{− 𝑅𝑉 × 𝑖𝑛𝑡 −}𝐵𝑅×𝑖𝑛𝑡 𝑚

151 The solution to this quadratic function is:

𝑅𝑉 = 𝑖𝑛𝑡 ∓ √𝑖𝑛𝑡

2_+4×𝐵𝑅×𝑖𝑛𝑡 𝑚

2

Given that the minus provides a negative result, there is only one solution for this function. This combined with the first equation, results in the following function:

𝑆𝐵𝑅𝑅 = 1 − 2×𝐵𝑅

𝑚×(𝑖𝑛𝑡+ √𝑖𝑛𝑡2_+4×𝐵𝑅×𝑖𝑛𝑡 𝑚 )

Given the reforms discussed in the Introduction and Background Chapter (Section 1.4.3), Table 5:3 was established to show how SBRR was estimated from BRs. The small business multiplier was created to cover SBRR costs. Therefore, the difference between these two was not regarded as a relief. The questionnaires were asked to be returned either by May or within two months of business year end. Thus, it seems reasonable that relief that took place, for instance, the period between April 2005 and March 2006 would be recorded in the 2005 survey.

Table 6:2 (p. 152) summarises how the SBRR has been estimated for each year in the UK and Wales after 2010. Between 2005 and 2010, properties with RV of £5,000 or less were able to claim 50% (or 0.5 in Table 6:2) reduction. Properties with RV of between £5,001 and £10,000 were subject to a tapering discount ranging from 0% to 49.99%, on the basis of 1% relief for every £100 of RV. The following formula was derived at the beginning of this section to estimate the relief: 1 − 𝐵𝑅

𝑚×√𝐵𝑅×𝑖𝑛𝑡

𝑚𝑎𝑥×𝑚

. More recently (between 2010 and 2015), properties with RV up to 6,000 were entitled to 100% (or 1 in Table 6:2) reliefs. Properties with RV of between £6,001 and £12,000 were subject to a tapering discount ranging from 0% to 100%, on the basis of 1% relief for every £60 of RV. The following formula was derived in the beginning of this section to estimate the relief 1 −

2×𝐵𝑅

𝑚×(𝑖𝑛𝑡+ √𝑖𝑛𝑡2_+4×𝐵𝑅×𝑖𝑛𝑡 𝑚 )

152 Year RV 2005-2009 2010-2015 RV≤5,000 0.5 1 5,000<RV≤6,000 1 − 𝐵𝑅 𝑚 × √_{𝑚𝑎𝑥 × 𝑚}𝐵𝑅 × 𝑖𝑛𝑡 6,000<RV≤10,000 1 − 2 × 𝐵𝑅 𝑚 × (𝑖𝑛𝑡 + √𝑖𝑛𝑡2_{+ 4 ×}𝐵𝑅 × 𝑖𝑛𝑡 𝑚 ) 10,000<RV≤12,000 12,000<RV

Table 6:2 Summary of the SBRR estimation. Values are in a numeric expression,

e.g. 0.5 corresponds to 50%. Source: Non-Domestic Rating (Small Business Rate

Relief) Orders

6.2.2.6.5.2 SBRR in Scotland and Wales

SBBR for other years and countries of the UK were far easier to estimate as reliefs were fixed for some groups of rateable values. In Wales (up to 2010), the reliefs were retrieved in straightforward steps (see Table 6:3). For instance, properties for which the RV is lower than 6,500 but higher than 5000, would not receive any relief in 2007 and then 25% (or 0.25 in the Table 6:2) SBRR in 2008-2009.

Year RV 2007 2008-2009 RV≤2,000 0.5 0.5 RV≤5,000 0.25 0.25 RV≤6,500 RV>5,000

Table 6:3 SBRR in Wales before 2010. Values are in a numeric expression, e.g. 0.5

corresponds to 50%. Source: Non-Domestic Rating (Small Business Relief)

(Wales) Orders.

Scotland applied a similar approach to Wales (up to 2010) as illustrated in Table 6:4 (p. 153). However, Scottish reliefs were far higher than in the rest of the UK and were introduced in 2003.

153 Year RV 2003- 2004 2005 – 2007 2008 2009 2010- 2014 0≤RV≤3,000 0.5 0.5 0.8 1 1 3,000<RV≤3,500 0.4 3,500<RV≤4,000 0.4 4,000<RV≤4,500 0.3 4,500<RV≤5,000 0.3 5,000<RV≤5,750 0.2 5,750<RV≤6,000 0.2 6,000<RV≤7,000 0.1 7,000<RV≤8,000 0.05 0.1 8,000<RV≤10,000 0.05 0.4 0.5 10,00<RV≤11,500 0.2 0.25 0.5 10,000<RV≤12,000 12,000<RV≤15,000 0.25 15,000<RV≤18,000 18,000<RV

Table 6:4 SBRR in Scotland. Values are in numeric expression, e.g. 0.5

corresponds to 50%. Source: Non-Domestic Rate (Scotland) Orders.

6.2.2.6.5.3 SBRR Dummy - First Recipients

The Framework with Hypotheses emphasised the need to introduce a dummy variable to isolate firms that were the first recipients of the enhanced or introduced relief. This should help to isolate the short-term effects with no capitalisation. It takes the value of 1 when a firm was the first recipient of the relief and it continued being in the same premises (excluding new enterprises and those that relocated). The relief became available in 2003 in Scotland, 2005 in England and 2007 in Wales.

Furthermore, another dummy variable was introduced, taking the value of 1 when a firm was the first recipient of the enhanced relief and it continued being in the same premises (excluding new enterprises and those that relocated). Thus, as according to the Introduction and Background Chapter, 2010 in England and Wales, 2008 in Wales and 2003, 2005, 2008, 2009, and 2010 in Scotland.

6.2.2.6.5.3.1 SBRR Dummy - Matching

For CEM matching, described in Section 6.2.3, a new variable was created. This dummy variable is equal to 1 when a firm received the relief at least twice between 2005 and 2015 and 0 otherwise. Firms had to receive SBRR at least two years as several issues were identified with firms receiving the relief only for one year. Companies that were suddenly receiving the relief just for one year between 2005 and 2015 were perceived

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likely to misreport their BRs. Usually, a single zero was reported in one year, but in the year before and after substantial BR expenses were reported.

After a more careful investigation, an exemption from this rule was introduced for the firms reporting different postcodes before and after the year they received the relief, providing they received the relief once. This applied to 15 firms and were also included in the recipients' group during matching.