Rating Manual section 6 part 3: valuation of all property classes

Section 5: abattoirs and slaughter houses

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section of the Rating Manual applies to stand alone purpose built or adapted abattoirs used for the slaughter and or processing of animals into meat products. Because of the nature of abattoirs it is not at all certain that planning consent would always be available for general industrial/warehouse use, particularly for the smaller establishments located in rural areas.

Where the premises are, rebus sic stantibus, suited to no other use, or where planning considerations exclude any other use, these hereditaments are sui generis. However, consistent with recent case law, values should be derived by comparison with abattoirs/slaughterhouses in the locality which in turn are based on comparison with industrial levels.

2. List description and special category code

This is a Specialist Class adopting the description, Abattoir and Premises and the Primary Description Code MX. However the list for this class contains Primary Description Codes IF, IF3, CX, IX and descriptions of Abattoir and Premises, Factory and Premises and Slaughterhouse and Premises. For consistency, Abattoir and Premises and the Primary Description Code MX should be adopted.

Special Category Code 401 should be adopted for hereditaments valued by reference to the rentals comparison method. Exceptionally a SCAT of 400 should be adopted for those valued on the contractor’s basis.

The appropriate suffix letter is (S).

3. Responsible teams

The valuation and referencing of this class of property is the responsibility of the specialist team within the NDR Unit.

4. Co-ordination

The Specialist Industrial classes Co-ordination Team and the Industrial Valuation Panel have responsibility for this class ensuring effective co-ordination across the business units. The team are responsible for the approach to and accuracy and consistency of Abattoir valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating list. Caseworkers have a responsibility to:

  • follow the advice given at all times
  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
  • seek advice from the co-ordination team before starting any new work

The hygiene regulations and the licensing system

The Food Hygiene Regulations (England) came into force on 1 January 2006 and dramatically changed existing requirements within slaughter premises. Similar legislation was brought in, at the same time, for Wales, Scotland and Northern Ireland. The High/Low throughput classifications were removed and replaced by a single set of standards to warrant granting a slaughter licence. In addition, cutting and processing premises, not involved in slaughter, are licensed under the same criteria. In all cases, food-chain slaughter premises continue to require a veterinary presence on all slaughter days.

The result of the new regulations brought significant changes, not only to slaughter premises but also processing including establishments dealing with reconstituted meat products and those processing ‘meat by-products’. The regulations also apply to all retail and catering businesses.

The compliance standards placed many premises outside the criteria for ‘approved’ status and many medium sized food-chain abattoirs were forced to close rather than invest in the very substantial costs of upgrading and modernisation necessary for ‘approved’ status. Improvements required include the provision of air-conditioning and filtering systems, white-wall easy clean panels to walls, ceilings and special floor surfaces. Also required are sophisticated hand and boot washing facilities, and improved drainage and storage for waste products. Separate staff areas including dedicated rest and refreshment rooms have added to the costs, but in larger premises these are more easily created and the costs more easily absorbed.

Full details of current meat hygiene regulations and other relevant information is available on the FSA website: www.foodstandards.gov.uk.

Exemption matters

Agents have been claiming exemption from rating of certain buildings used for lairage purposes and forming part of the hereditament, on the grounds that they are agricultural buildings. These buildings are invariably annexed to the main abattoir building.

Schedule 5 paragraph 1 of the LGFA 1988, states that:-

‘A hereditament is exempt to the extent that it consists of any of the following :-

  1. agricultural land;
  2. agricultural buildings’.

In order for a lairage building to qualify as an agricultural building it must satisfy 5 (1) (a) of the LGFA 1988, that is to say:

’ A building is an agricultural building if ——-

  1. it is used for the keeping or breeding of livestock or, ……..
  2. A building is not an agricultural building, by virtue of paragraph 5 (1)(a)

‘….unless it is surrounded by or contiguous to an area of agricultural land which amounts to not less than 2 hectares.’

Paragraph 5 (1) (a) has caused problems of interpretation. The principal issue is whether the expression ‘ …used for the keeping of livestock ….’ includes the holding of livestock prior to slaughter or alternatively means the rearing of livestock for the production of food or wool for sale (Para.8 (5)). There is no time period within the legislation to assist with the meaning of the word ‘keeping’, but an examination of the function of the lairage will be of assistance.

Lairage buildings provide pens for the temporary holding of livestock before slaughter. Temporary can mean overnight. The purpose of lairage pens is to regulate the flow of livestock through the slaughter hall and to allow the beasts to recover from long journeys by road in order to improve the quality of the meat after slaughter.

There are no elements of ‘rearing’ or ‘husbandry’ - which are considered to be the essential elements of ‘keeping’. Therefore lairage yards forming part of an abattoir or buildings should not be treated as exempt from rating.

Recent litigation

The UT (LC) decision Cheale Meats Ltd v John Philip Ray (VO) clarified the position in that the LC concluded that the lairage buildings are not used for the ‘keeping’ of livestock within the meaning of paragraph 5(1)(a) of Schedule 5 and the buildings are accordingly not agricultural buildings within paragraph 1(b).

The abattoir in that case is used for the slaughter of clean pigs i.e. young pigs not used for the breeding process and sows having reached the end of their breeding life. As far as the clean pigs are concerned the LC determined that function of rearing has been completed when they are sent for slaughter. The care that they receive at the abattoir – resting and watering and, sometimes, feeding – is only made necessary by the fact that they have been transported. It plays no part of the rearing process and it would not be required to any significant extent if the abattoir was sited on the farm where the pigs had been reared.

As far as the sows were concerned, the LC determined that some, possibly most, of them need to be dried off to allow their teats to shrink, thus avoiding or reducing the trimming of the carcass. To that extent they are undergoing conditioning that is not attributable to the journey that they made from the farm. Nevertheless they did not think that this means that they are being kept, within the meaning of the Act, at the abattoir. The time they spend there is short in contrast to the long-term nature of keeping and breeding livestock and the purpose of the drying off is closely associated with the requirements of the slaughterer (to avoid or reduce the amount of carcass trimming) rather than their housing in the lairage constituting ‘keeping’ within the meaning of the Act.

The LC added that if, contrary to the above view, the housing of the sows did amount to their ‘keeping’ for this purpose the buildings would still not be agricultural buildings. That is because under paragraph 5(2) (a) they would only qualify as such if their use was solely for the purpose of the keeping of livestock. The fact that not all the sows need to be dried off and the use of the buildings for the housing of clean pigs as well as sows were matters that are fatal to the contention that the buildings are exempt.

6. Survey requirements

The basis of measurement for this class is Gross Internal Area (GIA). Reference should be made to the Code of Measuring Practice for Rating Purposes in England and Wales for guidance.

Care should be taken to take detailed note of the special finishes, drainage and plant and machinery.

Plant and machinery likely to be encountered would cover compressors, electrics, air conditioning, support steel work and effluent treatment.

7. Survey capture

Rating surveys should be captured on the Rating Support Application (RSA). Plans and surveys should be stored in appropriate folder within the Electronic Document Records Management (EDRM) system.

8. Valuation approach

This will be considered under the following heads:

  1. Basis of Valuation
  2. Overcapacity and non-standard operations
  3. Changes to Hygiene Regulations and the licensing system
  4. Exemption Matters

Basis of valuation

The UT (LC) decision Cheale Meats Ltd v John Philip Ray (VO) clarified that abattoirs are sui generis and the basis of valuation must be by reference to the values of other similar abattoirs. However despite this, some support was given for the VO approach which is by reference to the industrial values of similar properties in the locality. In the absence of rental or other evidence of abattoirs, valuing by reference to industrial values was regarded as ‘understandable’ according to the UT (LC) although it is only a starting point. In accordance with the Cheale Meats decision abattoirs are valued as a sui generis use. They are not in the same mode or category of occupation as an industrial building. Underlying the rebus sic stantibus rule relating to the mode or category of use is the recognition that the basis of value of the subject hereditament is that of the value to the occupier. This may be different from the rent that the hereditament might command if let in the open market for some other purpose.

Under the 2005 / 2010 basis, the scheme of valuation valued abattoirs by reference to local industrial values. The UT (LC) concluded that where rental or other evidence relating specifically to abattoirs is not available then for want of anything better, local industrial values will have to be taken. They should, however, only be the starting point for 2017.

The UT (LC) added that they did not need to use local industrial values because there was substantial evidence relating specifically to abattoirs in the form of comparable assessments. This may not be of assistance however when undertaking a revaluation and settlement evidence is not available. However the factors they considered to be important by reference to any appeal hereditament are as follows.

  1. location: proximity to producers and markets, access and transport communications
  2. size
  3. age, condition and layout
  4. facilities

Within this context the established practice has been to value these hereditaments on the local industrial tone suitably adjusted for finishes and quality. This category of specialist use requires an internal layout which distinguishes it from the simple layout of normal industrial property. Areas for lairage, slaughter, basic cutting and in many cases full processing/packaging to sale standards, require a compartment style layout of several differing grades. Detailed referencing is essential to attribute correct levels of value to each of these areas as part of the hereditament. This is achieved, for the purposes of consistency, by applying relativities within limited ranges, depending on the quality and finish, and guidance on this is set out below. The alternative approach of valuation by contractor’s basis presents problems as little or no recent reliable cost evidence is available.

Rental evidence for abattoir hereditaments is extremely limited and requires close scrutiny. Smaller, older premises are sometimes found to be rented, by the owner, to the occupying company with which he or she may be closely connected.

Lairage

As outlined in the legal framework above, the UT(LC) concluded that the lairage buildings are not used for the ‘keeping’ of livestock within the meaning of paragraph 5(1)(a) of Schedule 5 LGFA 1988 and the buildings are accordingly not agricultural buildings within paragraph 1(b).

Valuation relativities

Valuation relativities for the main component parts are, for consistency, recommended in the following ranges (consistent with the guidance in Cheale Meats):

Abattoir 1.00 (older premises) to 1.15 (modern units)
Cutting rooms 1.15 (older premises) to 1.25 (modern whitewall/ceiling / stainless steel and treated floors)
Chill rooms 1.15 (all classes)
Cold/freezer rooms 1.3 (all classes)
Offices 1.1 ( OWK quality) to 1.2 (modern premises with OFF quality accommodation)
Lairage* 0.5 ( basis / 'Atcost' style) to 0.75 (modern full-height-wall animal pens)

(* see above for circumstances and guidance as to treatment)

Overcapacity and non-standard operations.

In Cheale Meats the operation of slaughter premises was in part inconsistent with scale and size. In such specific cases where processing lines are ‘mothballed’ or underutilised regard should be had to the scale of the hereditament as a whole. A view should be taken as to the optimum use of premises in normal circumstances within the rating hypothesis. If clear evidence of surplusage and imbalance can be seen as a long-term reality, an allowance to reflect the extent of these circumstances may be justified. This was the case in Cheale Meats. However such an allowance should not be granted without very careful consideration and reference to NSU for guidance.

For the avoidance of doubt, small scale rural slaughter operations with a farm shop are typically outside these special cases and as a rule and fall to be treated by reference to combining rural workshop levels and retail values for the shop. In this context local ‘rural workshop’ levels should underpin the slaughter and cutting areas, suitably adjusted for finishes.

9. Valuation support

Valuations for abattoirs are held on RSA. Plans and surveys should be stored in appropriate folder within the Electronic Document Records Management (EDRM) system. Guidance on this class can be obtained by raising a query via the NSU inbox.

Practice note: 2017 - abattoirs

1. Market appraisal

The abattoir market is now relatively stable and the overcapacity in the industry experienced in the 2005 list is probably no longer applicable. There has been no fall-off in the demand for meat and meat products and meat production is relatively constant. The consumer shift to the larger supermarket chains for all manner of meat based goods continues.

Most chains have invested heavily in large, modern, multi-function plants operating on a farm-to-table basis. They have increased their market share of meat sales, which has affected the balance of demand in favour of their own killing/processing plants. The demise of the independent high street butcher who cannot compete in this market continues.

Older abattoirs have tended to suffer particularly where they face the costs of compliance with new regulations without the necessary investment. This has made the closure of some premises a more attractive option in these circumstances.

However some small rural abattoirs, despite these closures seem stable at present catering for more of a niche market than supermarkets provide.

2. Changes from the last practice note

The UT (LC) decision Cheale Meats Ltd v John Philip Ray (VO) clarified that abattoirs are sui generis and the basis of valuation must be by reference to the values of other similar abattoirs. However despite this, some support was given in the decision for the VO approach which is by reference to the industrial values of similar properties in the locality. In the absence of rental or other evidence of abattoirs, valuing by reference to industrial values was regarded as ‘understandable’ according to the UT (LC) although it is only a starting point. The effect upon the valuation scheme is outlined below and the revised Rating Manual entry should be consulted for detailed guidance on valuation issues associated with abattoirs.

Regarding the rateability of the lairage the VO’s position – that they are rateable on all counts - was confirmed to be correct. Detailed guidance on the lairage issues is to be found in the Rating Manual Section 5 Part 1.

3. Ratepayer discussions

There have been no discussions with ratepayers of industry representatives for 2017.

4. Valuation scheme

Sui generis basis

In accordance with the Cheale Meats decision abattoirs are valued as a sui generis use. They are not in the same mode or category of occupation as an industrial building. Underlying the rebus sic stantibus rule relating to the mode or category of use is the recognition that the correct valuation approach to the subject hereditament is that of ‘value to occupier’. This may be different from the rent that the hereditament might command if let in the open market ‘second hand‘or for some other purpose.

Under the 2005 / 2010 basis the scheme of valuation valued abattoirs by reference to local industrial values. The UT (LC) concluded that where rental or other evidence relating specifically to abattoirs is not available then for want of anything better, local industrial values will have to be taken. They should, however, only be the starting point.

The UT (LC) added that in the Cheale Meats case they did not need to use local industrial values because there was substantial evidence relating specifically to abattoirs in the form of comparable assessments. This may not be of assistance however when undertaking a revaluation or where settlement evidence is not available. However for guidance, the factors they considered to be important by reference to the appeal hereditament are as follows.

  1. Location: the proximity of the hereditament to the producers and the market; access and transport communications
  2. Size
  3. Age, condition and layout
  4. Facilities: the quality and breadth

Lairage

As referred to above the UT(LC) concluded that the lairage buildings are not used for the ‘keeping’ of livestock within the meaning of paragraph 5(1)(a) of Schedule 5 LGFA 1988 and the buildings are accordingly not exempt agricultural buildings within paragraph 1(b).

Detailed guidance on the interpretation of the legislation and conclusions drawn from Cheale Meats are to be found in the Rating Manual section 5 part 1.

Practice note: 2010 - abattoirs and slaughter houses

1. Co-ordination

1.1 This is an Specialist Class. Responsibility for implementing the scheme as set out in this Practice note lies with the Specialists within Business Units as does responsibility for ensuring effective co-ordination.

1.2 For further information see Rating Manual -Section 6 part 3 : Section 5 PN 1 : 2005.

1.3 Special Category Code 401 should be adopted for hereditaments appropriate for rental valuations and (exceptionally) 400 for those valued on the contractor’s basis

1.4 The appropriate suffix letter is (S).

2. State of the industry

2.1 Appendix A provides a commentary on the current state of the industry. In addition, to appreciate the many historic problems of the industry, it is recommended that the Practice notes, published for the previous revaluation at 2005 are read.

3. Valuation guidance 2010

3.1 This will be considered under the following heads:

a. Basis of Valuation b. Overcapacity and non-standard operations c. Changes to Hygiene Regulations and the licensing system d. Exemption matters

3.2 a. Basis of valuation

Established practice has been to value these hereditaments on the local industrial tone suitably adjusted for finishes and quality. This category of specialist use requires an internal layout which distinguishes it from the simple layout of normal industrial property. Areas for lairage, slaughter, basic cutting and in many cases full processing/packaging to sale standards, require a compartment style layout of several differing grades. Detailed referencing is essential to attribute correct levels of value to each of these areas as part of the hereditament. This is achieved, for the purposes of consistency, by applying relativities within limited ranges, depending on the quality and finish, and these are set out below. The alternative approach, of valuation by contractor’s basis, presents problems, as little or no recent reliable cost evidence is available.

Rental evidence for abattoir hereditaments is extremely limited and requires close scrutiny. Smaller, older premises are sometimes found to be rented, by the owner, to the occupying company to which he is closely connected. A considerable variation has been found to exist in the course of amassing data for analysis.

It is agreed that, by their nature, this category is sui generis, as most premises are unsuited to any other use without offending the principle of rebus sic stantibus. There has, however, been a general acceptance of the rentals approach to valuation. This has been borne out by general settlements at the 2005 appeal stage, and the extremely limited use of the contractors approach for compilation of this and previous lists. Planning considerations, especially in certain locations, may affect the extent to which alternative uses can be considered. Small rural slaughterhouses, closely linked to the agricultural community, may not find support for an alternative, more general industrial use.

In terms of valuation, there are also consistency implications for considering the approach to stand-alone cutting plants, which since 1 January 2006, are subject to the same basic hygiene and regulation standards as abattoirs.

As the numbers of abattoirs has continued to fall, it has become less likely that a locality will have more than one for tonal comparison purposes. Values adopted will clearly depend upon the local market but will probably be underpinned by reference to the local industrial rental levels.

Valuation relativities for the main component parts are, for consistency, recommended in the following ranges:

Abattoir

1.00 (older premises)

to 1.15 (modern post 1980 units)

Cutting rooms

1.15 (older premises)

to 1.25 (modern whitewall/ceiling and treated floors)

Chill rooms

1.3 (all classes)

Cold/freezer rooms

1.5 (all classes)

Offices

1.1 ( OWK quality)

to 1.2 (modern premises with OFF quality accom.)

Lairage*

0.5 ( 'Atcost' style)

to 0.75 (modern full-height-wall animal pens)

( * see exemption section for circumstances and guidance as to treatment)

This property is valued using the non-bulk server. The manual can be accessed here.

3.3 b. Overcapacity and non-standard operations.

Certain cases have arisen where the operation of slaughter premises has been inconsistent with scale and size. In specific cases such as (for instance) where a retail butcher has a slaughter and processing unit at the rear of the shop, which may include lairage, and all are assessed together, special regard should be had to the scale of the hereditament as a whole. A view should be taken as to the optimum use of premises in normal circumstances within the rating hypothesis. If clear evidence of surplusage and imbalance can be seen as a long-term reality, an allowance to reflect the extent of these circumstances may be justified. However such an allowance should not be granted without very careful consideration and reference to CEO. For the avoidance of doubt, small scale rural slaughter operations with a farm shop are typically outside these special cases and as a rule, fall in line to combine retail values at an ‘overall’ price for the shop. Local ‘rural workshop’ levels should underpin the slaughter and cutting areas, suitably adjusted for finishes.

3.4 c. Changes to hygiene regulations and the licensing system

The Food Hygiene Regulations(England) came into force on 1 January 2006 and dramatically changed existing requirements within slaughter premises. Similar legislation was brought in, at the same time, for Wales, Scotland and Northern Ireland. The High/Low throughput classifications were removed and replaced by a single set of standards to warrant granting a slaughter licence. In addition, cutting and processing premises, not involved in slaughter, are licensed under the same criteria. The OTM (Over Thirty Months) system for BSE in cattle, was reviewed and replaced, in November 2005, by an approved testing scheme. This meant that BSE-free cattle over thirty months old were again allowed to enter the food chain. Cases of BSE confirmed in the UK have steadily declined, year-on-year from 611 in 2003 to just 67 in 2007, the last year for which figures are available. In all cases, food-chain slaughter premises continue to require a veterinary presence on all slaughter days.

The result of the new regulations and OTM review brought significant changes, not only to slaughter premises but also processing including establishments dealing with reconstituted meat products and those processing ‘meat by-products’. The regulations also apply to all retail and catering businesses.

The compliance standards placed many premises outside the criteria for ‘approved’ status and many medium sized food-chain abattoirs were forced to close rather than invest in the very substantial costs of upgrading and modernisation necessary for ‘approved’ status. Improvements required include the provision of air-conditioning and filtering systems, white-wall easy clean panels to walls, and ceilings and special floor surfaces. Also required, are sophisticated hand and boot washing facilities, and improved drainage and storage for waste products. Separate staff areas including dedicated rest and refreshment rooms all have added to the costs, but in larger premises these are more easily created and the costs more easily absorbed.

Those premises previously dealing exclusively with OTM cattle also found a much reduced level of activity and had to make the same decisions as to whether to invest in upgrading. More comment is included in the State of Industry report at Appendix A. In valuation terms, it has caused required accurate re-referencing of some abattoir premises to record the changes, many of which are value significant.

Full details of current meat hygiene regulations and other relevant information is available on the FSA website: www.foodstandards.gov.uk

3.5 d. Exemption matters

Agents have been claiming exemption from rating of certain buildings used for lairage purposes and forming part of the hereditament, on the grounds that they are agricultural buildings. These buildings are invariably annexed to the main abattoir building.

Schedule 5 paragraph 1 of the LGFA 1988, states that:-

‘A hereditament is exempt to the extent that it consists of any of the following :-

a. agricultural land; b. agricultural buildings’.

In order for a lairage building to qualify as an agricultural building it must satisfy 5 (1) (a) of the LGFA 1988, that is to say:

’ A building is an agricultural building if ——-

a. it is used for the keeping or breeding of livestock or, …….. b. A building is not an agricultural building, by virtue of paragraph 5 (1)(a)

‘….unless it is surrounded by or contiguous to an area of agricultural land which amounts to not less than 2 hectares.’

Paragraph 5 (1) (a) has caused problems of interpretation. The principal issue is whether the expression ‘ …used for the keeping of livestock ….’ includes the holding of livestock prior to slaughter or alternatively means the rearing of livestock for the production of food or wool for sale ( Para.8 ( 5) ). There is no time period within the legislation to assist with the meaning of the word ‘keeping’, but an examination of the function of the lairage may be of assistance:

Lairage buildings provide pens for the temporary holding of livestock before slaughter. Temporary can mean overnight.

Pens contained within the abattoir, which invariably function in the same way, are accepted by some agents as being rateable.

The purpose of lairage pens is to regulate the flow of livestock through the slaughter hall and to allow the beasts to recover from long journeys by road in order to improve the quality of the meat after slaughter.

There are no elements of rearing or husbandry which are considered to be the essential elements of ‘keeping’ and therefore lairage yards forming part of an abattoir or buildings should not be treated as exempt from rating.

Appendix A

State of the industry report relevant to reval 2010

The appendix to the 2005 Practice note describes in detail, the problems of the BSE restrictions, the 2001 Foot and Mouth outbreak and the incidence of Bovine TB.

In terms of commercial problems, it is apparent that, following the 2001 FMD outbreak, the culling of stock, and subsequent compensation scheme, did not fully meet expectations on restocking. In some areas, it is clear that farming diversification took place and funds were used to convert farm buildings into holiday cottages, rural workshops and other enterprises not directly connected with agriculture. This resulted in increased imports to boost a reduced level of home production.

A further, less extensive and briefer outbreak of FMD occurred in August 2007. This was combined with a notified outbreak of Blue Tongue Disease and stock movements nationally were severely controlled. The FMD outbreak was eradicated quickly and notified cases ceased within a matter of weeks. Blue tongue restrictions however, are still in force in some areas, requiring licences to move stock. This disease is a virus, affecting only ruminants, and is no risk to humans. It is controlled by vaccination, and vaccinated animals may be moved under licence, in and out of designated ‘Blue Tongue Protection Zones’ and this includes movement to slaughter. The disease is still present in the UK although numbers of cases are small.

Avian flu has also provided a further period of alarm in relation to poultry with cases occurring both in wild birds and in commercial poultry houses. It still occurs in small pockets with the latest outbreak confirmed eradicated as late as July 2008. It rarely affects humans, and the risk is extremely small. It does however require the slaughter of large numbers of potentially affected birds where the disease is detected within a farmed flock.

The general effects of these outbreaks have not caused serious disruption to the slaughter industry since the cessation of the 2001 FMD outbreak in 2002.. However significant polarisation of the industry has taken place in the intervening period to date. Many more medium sized abattoirs have closed and there are several factors involved:

  • overcapacity in the industry, despite there being no fall-off in the demand for meat and meat products.
  • increasing consumer shift to the larger supermarket chains for all manner of goods, where they are perceived as a one-stop-shop. Most chains have invested heavily in large, modern, multi-function plants operating on a farm-to-table basis. They have increased their market share of meat sales, which has affected the balance of demand in favour of their own killing/processing plants.
  • demise of the independent high street butcher who as a result of 2. above cannot compete in the market.
  • older abattoirs were sited close to residential locations and unable to expand, while at the same time, sitting on valuable sites, suitable for redevelopment. Public and environmentalist pressure has encouraged planning authorities to consider these sites, in many instances, as more appropriate for housing, or light industrial use. The costs of compliance with the new regulations has made the closure of some premises a more attractive option in these circumstances.

Despite these closures, there are, by contrast, a number of small rural abattoirs, supplying niche markets for quality butchery products, speciality pies/sausage and barbecue cuts to farm shops, gourmet outlets and the hotel and restaurant industries. Their market seems stable at present and justifies the required new investment, even though they may kill on a reduced basis and on certain days of the week only. Notably they still require the fixed overheads of a veterinary presence and inspection of all live animals prior to slaughter, both adding disproportionately to their product cost.

The overall picture up to AVD (1 April 2008) is fairly stable but the industry was still vulnerable. Much information on closures has only come to light following the ‘Empty Property Rate’ legislation effective from 1 April 2008, as prior to that date, any vacant slaughter premises were not liable to business rates and therefore, appeals were rarely submitted for vacant premises. As some of these closures occurred months and even years earlier, the transfer of demand is likely to have taken place shortly afterwards, and mainly in favour of the supermarket chains.

Practice note: 2005 - abattoirs and slaughter houses

1. Co-ordination arrangements

This is an SRU/National Scheme Class. Responsibility for implementing the scheme as set out in this Practice note lies with the SRU as does responsibility for ensuring effective co-ordination.

For further information see Rating Manual - section 6 part 1 - PN 1 : 2005. Special Category Code 401 should be adopted for hereditaments appropriate for rental valuations and (exceptionally) 400 for those valued on the contractor’s basis. As an SRU class the appropriate suffix letter should be (S).

2. State of the industry

Appendix A provides a commentary on the current state of the industry.

3. Valuation guidance 2005

This will be considered under the following heads:

a. Basis of valuation

b. Overcapacity

c. Low throughput abattoirs and ‘rear of shop’ hereditaments

d. Exemption matters

e. Basis of valuation

There has in the past been a tendency to value these hereditaments on the industrial tone suitably adjusted. The alternative is to value them on the contractor’s basis. This presents problems of identification especially on the borderline between those that are suitable for valuing on the contractors basis and those that are not. If the abattoirs incorporate structural elements not found in normal industrial type hereditaments, then Tribunals might suggest that the comparative approach is not appropriate. It is essential therefore that the inspection and referencing of these hereditaments establishes the degree of specialisation.

Additionally there may well be planning issues that need to be resolved. It is not at all certain that planning consent would always be available for general industrial/warehouse use, particularly perhaps for the smaller establishments located in rural areas. Where the premises are rebus sic stantibus suited to no other use, or where planning considerations exclude any other use, we must acknowledge that these hereditaments are sui generis and may be valued on the Contractor’s Basis.

However, if there is an established tone for abattoirs/slaughterhouses in the locality, based on comparison with industrial tone, then it may be relied upon, especially if it is supported by rental evidence.

The valuation relativities that should be adopted for the sake of consistency, are as set out in the scales : VFABAGIAVI and VFABANIAVI.

Values adopted will clearly depend upon the local market but these values should be underpinned by reference to the local rental level for grain stores and agricultural machinery workshops unless there is clear and unambiguous evidence to the contrary.

Regarding finishes, cost advice can be taken from the VO Cost Guide 2005.

b. overcapacity

Reference to overcapacity has been made by agents in negotiations and in the presentation of cases at VT. However the point does not appear to have been as forcefully argued as the figures might suggest. However such an allowance should not be granted without very careful consideration and reference to CEO.

Where the abattoir has been valued by reference to comparison with other classes of use, and is available for that other use without hindrance either from the rebus sic stantibus rule, nor from planning policy in force at the AVD, neither original structural overcapacity, nor the effects of the BSE crisis can be permitted to affect the valuation as clearly alternatives to the current use will be available.

c. Low throughput abattoirs and ‘rear of shop’ hereditaments

The issue here is what value is appropriate for the smaller abattoirs at the rear of butchers shops and on farms. These, by their very nature, are low throughput abattoirs, and suffer the impact of 1995 Hygiene Regulations. ‘Low throughput’ is defined in the 1995 Regulations as:-

‘(b) in relation to a slaughterhouse, means a throughput of animals whose meat is intended for human consumption of not more than 1000 livestock units each year at a rate not exceeding 20 each week; ‘

Nearly all the properties are valued on a comparable unit price basis either as a shop or, in a rural location, by reference to the ‘rural workshop tone’. Under RSA the abattoir element has often been valued at a low relativity compared to Zone A price. Where the butchers shop is located in a low Zone A area this has meant the value actually added for the abattoir is very small. The abattoirs in these circumstances should be valued at a level appropriate for small and rural (if this is the case) workshops. This is particularly so if it can clearly be demonstrated that there are competing alternative uses in the locality.

d. Exemption matters

Agents have been claiming exemption from rating of certain buildings used for lairage purposes and forming part of the hereditament, on the grounds that they are agricultural buildings. These buildings are invariably annexed to the main abattoir building.

Schedule 5 paragraph 1 of the LGFA 1988, states that:-

‘A hereditament is exempt to the extent that it consists of any of the following :-

(a) agricultural land;

(b) agricultural buildings’.

In order for a lairage building to qualify as an agricultural building it must satisfy 5 (1) (a) of the LGFA 1988, that is to say:

’ A building is an agricultural building if ——-

(a) it is used for the keeping or breeding of livestock or, ……..

(b) A building is not an agricultural building, by virtue of paragraph 5 (1)(a)

‘….unless it is surrounded by or contiguous to an area of agricultural land which amounts to not less than 2 hectares.’

Paragraph 5 (1) (a) has caused problems of interpretation. The principal issue is whether the expression ‘ …used for the keeping of livestock ….’ includes the holding of livestock prior to slaughter or alternatively means the rearing of livestock for the production of food or wool for sale ( Para.8 ( 5) ). There is no time period within the legislation to assist with the meaning of the word ‘keeping’, but an examination of the function of the lairage may be of assistance:

  • Lairage buildings provide pens for the temporary holding of livestock before slaughter. Temporary can mean overnight
  • Pens contained within the abattoir, which invariably function in the same way, are accepted by some agents as being rateable
  • The purpose of lairage pens is to regulate the flow of livestock through the slaughter hall and to allow the beasts to recover from long journeys by road in order to improve the quality of the meat after slaughter
  • There are no elements of rearing or husbandry which are considered to be the essential elements of ‘keeping’ and therefore lairage yards forming part of an abattoir or buildings should not be treated as exempt from rating

Practice note: 2005 - appendix A - state of industry report - abattoirs

1. Livestock and meat production - general

1.1 The Livestock sector of the Agricultural Industry has been beset by difficulties for many years. In particular, the widespread outbreak of Foot and Mouth Disease (FMD) which was identified in mid February 2001 caused havoc in an industry that was only just beginning to see an improvement after many years of depression. The industry had been more than usually beset by problems since those started by the BSE crisis in 1996. The problems associated with BSE, such as the loss of home and export markets, were increased by external economic pressures in the late 1990’s, in particular the high value of the £ and its effect on trade and market prices; the economic problems in other parts of the world, especially in south east Asia and the former eastern block and an over supplied European food market for meat and diary products. Indeed, in the 12 months prior to the FMD outbreak any slight increases in cattle and pig output in the previous 12 months were counterbalanced by the reductions in finished sheep and lamb production.

1.2 The discovery of Foot and Mouth Disease at an abattoir (Cheale Meats) in Chelmsford, in February 2001, had a major impact on the meat industry. The government introduced drastic measures to control and confine the disease, not only destroying animals which were affected but also culling out adjoining farms to prevent the disease spreading. The effect on those farmers subject to a cull were clearly economic but many chose not to restock opting instead to take early retirement or alternatively to leave the industry. In areas where intensive culling took place no livestock remained and restocking has only occurred where farmers have been prepared to pay premium prices. This is evidenced by the prices now being paid for stock at those Livestock Marts located in traditional stock rearing areas.

2. Difficulties faced by the abattoir industry

The abattoir industry has since 1996 faced two major animal disease and food safety concerns, namely BSE and more recently FMD. In addition, the continuing publicity relating to problems faced by pig producers suffering deaths from pig wasting diseases and restrictions on some cattle and dairy farmers due to the incidence of Bovine TB, give the industry further cause for concern about the future.

2.1 BSE Uncertainty about the spread of BSE still remains and in particular whether the disease has spread from cattle to the national sheep herd.

The Food Standards Agency (FSA) is currently recommending the phasing out of the over 30 months scheme (OTMS) in relation to cattle and replacing this with testing. The current OTMS, which was introduced to remove older cattle (which are more prone to incubate and pass on the disease) from the food chain, costs the FSA approximately £300m a year, a sum which can no longer be justified as infected cattle numbers reduce. However, there are practical problems to be solved before the switch to testing takes place, including further culling of BSE infected animals in order to satisfy European rules.

The ending of the OTMS scheme could force the closure of those abattoirs that are primarily operating the scheme, unless considerable investment takes place to bring them up to full license standards. When the change to testing takes place, which appears to be inevitable, it is expected that the Meat Hygiene Service (MHS) will have to undertake additional veterinary checks in the abattoirs. The industry is currently lobbying the FSA to fund this additional cost. Concerns have also been expressed that a change to testing will undermine consumer confidence but the message from the industry is that sufficient safeguards will remain. Currently there is great uncertainty in the industry because of these proposals including the affect it will have on cattle and meat prices during the transitional period.

One of the principal legacies of BSE is the additional regulatory framework and cost implication placed upon abattoir operators in relation to the removal and disposal of Specified Risk Material (SRM). The removal of spinal cords and other offal material from cattle and sheep carcases and its safe disposal has had considerable cost implications for an industry noted for its low profitability. See section 6 below.

2.2 Foot & Mouth Disease Following identification of the outbreak of FMD in February 2001, (except for an initial two week phase), the flow of livestock into the abattoirs was not totally disrupted. Restrictions prohibited the transport of animals either from an infected area or through an infected area and this caused a few abattoirs to be affected by a lack of animals for slaughter. The closure of the livestock marts also meant that abattoirs either had to deal directly with the farmers or entered into supply contracts with middle men (mostly livestock auctioneers) who prior to the setting up of Cattle Collection Centres (CCC’s) sought sufficient numbers of livestock for the abattoir operators to continue in operation. The setting up of the first of the CCC’s from June 2001 greatly assisted the assembly of sufficient numbers of livestock and assisted the operation of the abattoirs. It is relevant that during this time the additional costs which the abattoir operators faced in relation to bio-security and transportation was, in the main, passed on to farmers in the lower prices they obtained for their finished stock. The abattoir operators at this time enjoyed the considerable advantage that they could set up direct links with their suppliers and many entered into long term supply contracts (particularly in relation to cattle) with individual farmers. Similar contracts already existed and had done so for more than a decade between pork processors and pig producers.

It was reported that during the outbreak, that UK abattoir turnover was running at 25-65% of pre outbreak rates and the prices paid to farmers were down as much as 10%, the latter partly due to the abattoir operators passing on increased costs but also from competition from deadweight imports and stock piling, in anticipation of meat shortages, such as that which occurred with the importation and storage of New Zealand Lamb. However, by AVD the turnover difficulties caused by the FMD outbreak had largely been resolved by the industry although a number of abattoirs were still reporting supply problems caused by the nationwide demise of many stock-rearing farms. The marts were also reporting high prices being paid for fatstock, only slightly down on those seen pre-BSE.

2.3 Bovine TB The rapid increase in the instances of Bovine TB is causing considerable concern for farmers particularly in dairy herds. Meat from cattle infected by TB may currently be sold for human consumption providing that there is no more than one localised lesion, which is removed from the carcase at the abattoir.

The perception of the consumer to Bovine TB is all-important as historically the consumer still associates the disease to the pre pasteurisation period when 40% of the national herd were infected and approximately 2,500 people a year died from the disease. There are as yet no reports of consumer resistance to the consumption of beef and whether this position changes in the future will be depend in particular on the scale of any media coverage into the disease and its links with beef consumption.

At the present time the abattoir industry does not regard TB as a factor affecting the meat business but the position could change quickly in the event of any TB scare and in these circumstances, the biggest impact would be felt by those single specie abattoirs serving areas in the country where prime beef cattle are raised ie the North, Midlands and South West. This could lead to further bankruptcies, loss of abattoir premises and stem further investment.

3. Post FMD

3.1 The value of production of cattle and calves had risen by 14% in 2002 to £2 billion, which reflected the recovery in the production of beef and veal after the outbreak of FMD in 2001. Again, in 2002 the value of production of sheep and lambs rose by 34% to £840 million reflecting the recovery following the outbreak. The increases in the production of cattle and sheep were linked with the rise in direct support payments. By April 2003, the climate was far more upbeat, the European Union ban on imports of cattle and beef products into mainland Europe has generally been lifted, with only France continuing to be obstructive. Reports of attempts to market ‘Welsh Beef’ (slaughtered by St Merryn Group) into the country remain mixed. Sheep live and deadweight exports into Europe have also recommenced with the fall in sterling against the euro.

3.2 The decline of the pig industry, which continues to experience desperate trading conditions was felt by an 8.3% fall in production of £687 million, this reflected weaker prices and a decline in clean pig marketing. The pig industry (mainly located in the North East and East of the Country) was also affected by reports of Swine Fever and pig wasting diseases (Post Weaning Multi-Systemic Wasting Syndrome and Porcine Dermatitis Nephropathy Syndrome). The eradication of these diseases has resulted in a number of older abattoirs remaining in use in these areas to cull out infected herds. In relation to pig wasting diseases, a lack of response to medication has seen an increase in culling. However, the bulk of pig slaughtering facilities remains bound up like the poultry industry in modern single specie integrated processing factories.

3.3 The poultry industry has been badly affected by the loss of one of the sectors largest poultry processing companies, following its acquisition and break up by a venture capital company. This removed from the industry one of the most fully integrated suppliers of whole and jointed poultry, who had been able to offer the economies of scale and facilities that were required in order to compete with the increase in cheap imports from other countries in the EU. The disposal of its assets via management buy-outs and to other poultry producers/agricultural companies has led to a disruptive re–structuring of the industry which has led to one notable bankruptcy in recent months. This disruption has allowed foreign competitors to gain an even stronger foothold and flood the market with cheap imports including ‘tumbled’ meat, which is increased in bulk by adding water and other meat product such as pork. The result is the fall in the value of the production of poultry meat in 2002 by 7.9% to £1.2 billion is indicative.

4. Demands for meat products

4.1 Central to the demand for meat products and shaping the future of the abattoir industry are the needs of the consumer. The factors considered to be of utmost importance to the consumer in this respect are:-

a) Animal welfare/production methods

b) Food safety

c) Environmental impact (including sustainable agriculture)

d) Use of subsidies

4.2 The industry is still susceptible to fast moving changes and developments which have affected both the domestic and international food markets in recent years. Changes in consumer tastes and preferences, very often interpreted by the large supermarket chains have sent out multiple messages to the industry. Suppliers have had to cope with the demands for more convenience and variety in food products and both offerings in the value for money and the quality markets, have had to be delivered to higher standards of safety against greater levels of compliance.

4.3 The total meat consumption in the UK continues to increase (by over 15% in the 20 years prior to 2002). The percentage sold through supermarkets 75.8% in 2002, again shows an increase over the previous year. It should be noted that the overall total in the volume of consumption between meats has varied with red meat (beef, lamb and some pig products) being in gradual long-term decline over the past 30 years, whilst white meat (poultry and some pig products) has increased its share of the market. These changes in consumption have chiefly been driven by social changes such as the increase in the number of small family units and changes in work patterns and lifestyles, reflecting the demand for more convenience style foods. All have been affected by consumer concerns over food and these have been reflected in issues such as diet and health, tastes, eating and cooking habits.

5. The abattoir industry

5.1 The UK abattoir sector has a number of long-term underlying problems (many of which were identified in the 2000 Revaluation Practice note) and these continue to affect its operating capabilities.

5.2 These problems are :-

5.2.1 The increased regulatory and operational cost. A number of these costs are :-

a) The requirement for increased environmental and hygiene standards within plants

b) Increased inspection costs

c) Waste disposal and water treatment

d) Bio-security measures following FMD

5.2.2 Over capacity – this is still a factor affecting medium and large-scale plants (see paragraph 5.6 below).

5.2.3 Low margins – these continue to be around 2½% return on capital, most operators/plants existing on the basis of volume. This factor is a major contributor to the continuing number of bankruptcies in the industry (and lack of investment in new plants see 5).

5.2.4 Falling livestock availability – this was a serious factor following FMD where some areas of the country were completely culled out. There is also the long-term decline of the national herd as farmers move away from livestock production.

5.2.5 Low investment (see paragraph 5.8 below).

5.3 Slaughtering has concentrated into fewer units in all species sectors as the number of slaughterings continues to fall. The total throughput (approximately 10.5 million cattle units) of meat for human consumption continues to be affected by the cull of older cattle under the OTMS scheme. The last available figures show that there were approximately 400 operational abattoirs in the UK at AVD plus a number of stand-alone cutting plants where no slaughtering takes place. The number of operational abattoirs has declined in the country as a whole from about 850, 10 years ago. Significantly, in England the number has more than halved over the last 10 years. In the cattle sector 52% of throughput is in the hands of large plants (20), 46% in the small and medium sized units (116) and the remaining 154 plants kill just 2%.

5.4 In the sheep sector, which has seen the growth of large often specialist sheep plants, 76% of slaughter (the top ten companies nationally account for nearly 50% of this total) takes place in 37 plants but this trend is particularly so in the pig sector where approximately 84% of total slaughter is in fewer than 26 plants.

5.5 The industry continues to concentrate into fewer larger companies operating larger plants. The major companies are :- Midland Meat Packers, Grampian Country Foods, Lloyd Maunder and the four Irish companies Dawn, ABP, Kepak and Dungannon.

5.6 It seems probable that a decline in abattoir numbers will continue especially as there is little likelihood of any reduction in operating costs and the availability of livestock for slaughter is expected to continue to decline. The industry has seen the increasing concentration on the largest abattoirs, which are primarily supplying products to the major supermarket chains and the main ‘cash and carry’ wholesalers; thus emphasising the significance that a relatively small number of participant customers can have on the overall meat market. It is the supermarkets that have rationalised their supply base to a few large abattoirs each.

This has increasingly restricted the growth of the medium sized abattoirs wishing to gain access into this ‘mainstream market’, which is dominated by the large abattoir companies referred to above. Strategic supply chain partnerships that tie a particular abattoir to a supermarket chain are common, examples being Premier Foods PLC and the St Merryn Group with Tesco. These arrangements work on a ‘just in time’ computer stocktaking basis and rarely involve a formal contract – the supermarket order being received at the abattoir by a direct computer link from the supermarket. The supermarket chain advises the abattoir operator each week of the prices they are prepared to pay. These stated prices are highly competitive and are based upon an understanding reached each year between the abattoir operator and the supermarket chain.

The polarisation of the industry is readily apparent with medium sized operators continuing to be squeezed out of the ‘mainstream market’ by the larger operators anxious to retain their supermarket customers. It is the demands of the major supermarket chains, which are seen as the single most important factor driving change in the industry. This factor governs not only the abattoir industry, but also the decreasing number of small retail butchers who tend to obtain their meat from the medium and small abattoirs and face severe competition from the supermarkets. This has a cyclical effect in that many of the medium and smaller plants are reliant upon the small retailer/caterer for their own survival.

5.7 Indeed, in order to survive the medium and small abattoirs have had to continue to supply the ‘alternative’ market i.e. independent butchers, caterers and secondary processors. In particular, they have had to identify some form of competitive advantage, such as a niche market and their continual operation will depend very much on their success in exploiting local opportunities i.e. farmer’s markets, internet sales, speciality retailers and caterers etc. The survival of these abattoirs, particularly in remote areas of the country i.e. South West, Wales and the North West, has raised concern, if the cost, logistical and welfare difficulties associated with moving livestock long distances to slaughter are to be avoided.

5.8 Moreover, to ensure the continuance of their businesses local small and medium sized abattoirs have taken to working more closely with farmers in order to offer more differentiated/regionally branded meats and meat products. The adoption of quality assurance schemes is also crucial and the movement down this route along with viable product differentiation schemes is being encouraged, particularly by food and farmers organisations. However, there is, amongst medium sized abattoir operators, the major difficulty of raising the necessary capital to diverge into these areas and to modernise plants to the increasing meat hygiene standards.

Moreover, the land/site area needed to expand processes to include greater cutting and mass packing facilities isn’t always available on the same site. This factor prevents growth even where the funding could be available, because plant viability seems to depend on the capability to put the animal in at one end of the factory and produce a priced and labeled pack for the shelf, at the other. Furthermore, sensitive planning issues and a bias against what is seen as an ‘offensive trade’ does not help to facilitate practical relocation sites, preferably close to a motorway link.

Specialist abattoirs exist for religious killing i.e. Hal al and specific species like ostriches, water buffalo and bison etc

Abattoirs with a weekly throughput of below 20 cattle units may be licensed as Low Throughput Premises. This enables them to benefit from less onerous MHS requirements in relation to structure and layout of the premises as well as from lighter veterinary inspection/supervision. However, they may not export their meat. These abattoirs often survive by being owned and jointly run in connection with an independent butcher. Even so, despite the lower hygiene standards, these abattoirs are under increasing pressure from higher overheads.

Undoubtedly, further rationalisation in the abattoir sector is inevitable, particularly in the older urbanised areas of the Midlands and North, where the predominance of small to medium abattoirs still exists. However, large abattoirs are also under threat and there have been a number of notable closures in past years. In 2003, Penrith Farmers& Kidd (PFK) placed their large Blackpool abattoir into voluntary liquidation with the hope that a buyer/new operator could be found. Spiralling overhead costs and the required investment for upgrading insulation and white wall finishes are reported to be the main reason for this decision. Small and medium sized plants are appearing extremely vulnerable to bankruptcy and closure. Often larger companies have bought smaller companies out, as they seek to ensure nationwide coverage or alternatively to remove competition and the optimum use of their own plants.

The last new large abattoir built was at Merthyr Tydfil in South Wales for the St Merryn Group and this was largely funded by a significant (Assisted Status) grant from the Welsh Assembly Government.

5.9 Many large-scale abattoirs are looking to expand secondary stage primary processing (i.e. cutting, boning, mincing, dicing), retail packaging and the production of value added products, where larger returns on capital are possible. In effect they are becoming more in the nature of food processing factories. It is this sector of the market, which continues to develop apace providing the production can be developed into supplying the operator’s major supermarket client(s). These operations can also be carried out in stand alone cutting plants (Dawn Pac is an example) and here deadstock is imported from Ireland and other EU countries to be cut up, jointed and packaged without the need for an abattoir.

6. Meat hygiene regulations and waste disposal costs

6.1 The changes to the Meat Hygiene Regulations (MHR) have been partly driven by the need to assure consumers of food safety. This has resulted in the introduction of greater statutory inspection and food safety requirements and the need for livestock producers to maintain quality assurance schemes and traceability.

The original MHR in the mid 1990’s focused upon the need to bringing UK plants up to European standards as far as lay-out and wipe clean finishes were concerned but they also had the effect of closing and removing many of the older and smaller less viable plants from the market. Subsequent MHR detail further hygiene and inspection requirements including the removal and safe disposal of offal and parts of the carcase.

The need to introduce such schemes has increased the cost base of the industry and this in turn has eroded already low margins in both livestock markets and abattoirs/meat companies. Apart from veterinary costs the next major cost headache for the abattoir operator is the increasing costs concerned with the disposal of Specified Risk Material (SRM) and offal such as blood etc. Prior to BSE the abattoir operator could sell or rely upon the Renderer to remove free of charge these items. Apart from the cost to the operator in investing in and maintaining an efficient effluent plant he now has to pay for the removal of SRM, offal and blood. The decline in the market for hides has also meant that these are often disposed of at a cost to the operator.

Additional bio-security measures coupled with FMD have also had to be introduced including permanent lorry washes at plants and SRM disposal costs.