Policy Explainer Business Improvement Districts

A few weeks ago, businesses in the West Midlands town of Nuneaton voted in favour of setting up their own business improvement district (BID).

Self Improvement

Out of the 80 businesses that took part in the ballot, 69 voted in favour of the BID. There are already BIDs in place in neighbouring Coventry and Hinckley.

In creating the district, businesses in Nuneaton will be asked to pay an extra charge, known as a levy, on top of their usual rates. This money is ring-fenced and cannot be used to fund council services, but will instead be spent on projects chosen by BID members to make the improvements they want to see in the town centre.

One of the BID members is Nuneaton and Bedworth Borough Council as it owns some shops in the town centre.

Tom Shardlow, deputy chief executive at the council, said: “BIDs put more control and influence into the hands of local business owners.”

How Do They Work?

In England and Wales, BIDs were introduced through the Local Government Act 2003. They came into force in Scotland in 2007 as a result of primary legislation in Part 9 of the Planning etc (Scotland) Act 2006.

The first pilot BIDs, five in London, were created following successful ballots in March 2006. There are now more than 330 districts across the UK.

Typically, a BID operates within a local authority boundary but in April 2013 government introduced cross boundary BIDs.

A BID can be set up by the local authority, a business rate payer or a person or company whose purpose is to develop the BID area. The BID proposer is required to develop a proposal and submit this to the local authority, along with a business plan. This should set out the services to be provided and the size and scope of the district. It will also clarify who is liable for the levy, the amount of levy to be collected and how it is calculated.

Usually, BIDs charge a levy rate of between 1% and 4% of rateable value, dependent on local circumstances.

The maximum period that a BID levy can be charged is for 5 years. Once the term is completed the BID will automatically cease. If the BID company wants to continue its activities it must hold a new ballot.

Local Difficulty

Recent research published by the London School of Economics noted that BIDs are quite effective in reducing local crime, but they also increase house prices in BID areas and may lead to gentrification.

In England and Wales, decreases in the rate of crime of around 2% per quarter took place between 2012 and 2017. Despite this, researchers noticed there had been a displacement of criminal activity to neighbouring commercial areas, one to two kilometres away from the BID.

While BIDs have enjoyed mainly favourable reviews, they have also sparked some local issues.

Last year, East Riding Council took a large number of ‘rebels’ to court, accusing them of failing to pay the Yorkshire Coast BID’s ‘tourist tax’.

The BID was set up in 2019 to promote tourism in the region. Around 1,300 businesses must pay the mandatory levy, after a ballot was passed for it with a turnout of just 29%. Nearly 70 votes were given to Scarborough and East Riding councils, which collects the tax for the BID, because their car parks and public toilets were included as ‘businesses’.

East Riding Council obtained court orders to recover more than £16,000 from 27 businesses. By the end of 2021, there were 800 businesses in arrears on the levy.

Many of the businesses affected – including a construction company, golf club and carpet shop – argued that they do not benefit from the tourism industry.

Robert Goodwill, the MP for Scarborough, questioned why a funeral parlour was being made to pay.

A ballot is due in May to ask businesses whether or not they want the Yorkshire Coast BID to continue for another five years. It faces strong opposition from local business owners, who are campaigning against the extension.

In April, the Department for Levelling Up, Housing and Communities established a Business Improvement District Innovation Forum. The aim is to bring together representatives from business, local government, community organisations, as well as high street experts and academics to explore how BIDs can work more innovatively and effectively in their communities.

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