Retail and Hospitality Face £2.6 Billion Business Rates ‘Cliff Edge’ Ahead of Budget

Campaigners have urged the government to extend the current business rates relief scheme to avoid high street closures and job losses.
Retail and Hospitality Face £2.6 Billion Business Rates ‘Cliff Edge’ Ahead of Budget
Pedestrians walk down the High Street by Westgate shopping centre, in Stevenage, north of London, on June 6, 2024. Justin Tallis/AFP via Getty Images
Evgenia Filimianova
Updated:
0:00

Retail and hospitality businesses could face a £2.6 billion rise in business rates this April, tax analysts have warned.

Eligible shops, pubs, and hotels can receive 75 percent off their business rates bills until March 31.

Announced by the previous Conservative government last year, the business rates relief scheme was estimated to save businesses £2.4 billion in 2024–2025, with a cash cap limit of £110,000 per business.

However, the public finances watchdog, the Office for Budget Responsibility, hasn’t included any future discounts into its fiscal forecasts.

Firms in the industry could face a total bill of £2.66 billion in business rates, if the inflation rate comes in at 1.9 percent, as projected by economists.

According to data firm Altus Group, the retail, hospitality, and leisure sectors face a “cliff edge” moment, unless Labour extends the scheme in the October Budget.

Labour has warned that the upcoming budget will be “painful” and said there was a “£22 billion black hole” in public finances.

While Prime Minister Sir Keir Starmer said that his government will make all decisions with the objective of economic growth in mind, the Treasury is expected to announce a number of tax changes to boost its revenue.

Alex Probyn, president of property tax at Altus Group said, “Despite the £22 billion ‘black hole’ in the nation’s public finances, the Chancellor must now prevent a cliff edge for the retail, hospitality and leisure sectors at her upcoming Budget whilst also delivering upon Labour’s manifesto commitment to lower the undue burden already placed on our high streets.”

Retail

Business rates are charged on most commercial properties such as shops, offices, pubs, warehouses, factories, holiday rental homes, or guest houses. If the property is empty there is still a charge in most cases.

The British Retail Consortium (BRC) has warned that the high burden of business rates limits growth in the retail sector and restricts its investment capacity.

It reported closures of 6,000 UK shops in the past five years, where in two-thirds of these closures, business rates had pushed firms to shut down their business.

The BRC data say that retail pays 7.4 percent of all business taxes (£33 billion), a share 1.5 times greater than its share of the overall economy (5 percent of GDP). Of this total tax bill, 11 percent of profits is made up of business rates, the highest of all business sectors.

BRC Chief Executive Helen Dickinson urged the government to introduce a 20 percent Retail Rates Corrector—an adjustment in business rates paid on retail properties—to help drive investment across the country. Over 70 retail CEOs have written to Chancellor Rachel Reeves, calling for the introduction of the corrector.

Retailers are “holding their breath” ahead of the Autumn Statement, which comes at a crucial “golden quarter” period for the sector, which marks great sales spikes in last few months before Christmas.

Pubs

The British Beer and Pub Association (BBPA), which represents nearly half of the nation’s pubs and breweries, has warned that the sector is disproportionately burdened by business rates.

The BBPA is advocating for an extension of the current 75 percent business rates relief. The group said the scheme saved many pubs from permanent closure.

In a letter signed by 80 senior figures from the brewing and pub sector the BBPA told Reeves: “This is an historic low and the industry simply cannot afford other costs, let alone tax increases. Put plainly, for thousands of pubs and brewers across the country there is nothing left to give.”

With 50 pubs closing each month in England and Wales, the BBPA said failure to act by the government will lead to widespread pub closures and a loss of local jobs.

In its preelection manifesto, Labour said it would reform the business rates system, but hasn’t announced any changes since coming into government.

PA Media contributed to this report. 
Evgenia Filimianova
Evgenia Filimianova
Author
Evgenia Filimianova is a UK-based journalist covering a wide range of national stories, with a particular interest in UK politics, parliamentary proceedings and socioeconomic issues.