Business rates to more than double in ‘final blow’ to UK retailers
Business rates are set to rise more than 140 per cent for thousands of high street businesses across the UK in yet another cost pressure for brick-and-mortar businesses.
Business rates, which are levied on all commercial properties, were cut by 75 per cent in 2022 as high street stores found themselves unable to cope during the pandemic, but this relief is set to fall to 40 per cent in April.
Retailers currently benefiting from the relief will see their business rates bills increase in April on average from £3,751 a year to £9,003, and restaurants will see a rise of £5,563 to £13,351 a year, according to Colliers.
The average pub will also see its rates bill go up from £4,017 to £9,642 a year, Colliers found, while nightclubs – already under significant pressure – will see their annual bills rise from £7,479 to £18,245.
A survey from the Night Time Industries Association (NTIA) earlier this month found that the “unsustainable” costs pressures and the resulting uncertainty was “more concerning than anything we saw during the pandemic”.
“The Labour Government’s business rates policies will soon put even further pressure on the high street as bills for the new rating year start to drop through the letterbox next month” John Webber, head of business rates at Colliers, said.
Some businesses ‘won’t survive’
Business rates are controversial because they place brick-and-mortar stores at a disadvantage to online stores, which pay a reduced form of business rates applicable to warehouses.
In retail, business rates already make up more than five per cent of pre-tax profit, according to the British Retail Consortium (BRC), who have been calling for rates reform for years.
The Government has pledged to reform business rates in a bid to level the playing field, but no plan will be implemented until April 2026 at the earliest, to coincide with the 2026 revaluation of rates.
“The retail, hospitality and leisure sector has already been hit for six with the increases in employer national insurance contributions, increases in the minimum wage and increased inflation,” Webber said. “Many businesses are now considering their options, and some won’t survive.”
The agency went on to say that business rates have been cited as the “final blow” by many firms in the retail sector.
An HM Treasury spokesperson said: “Without our action, business rates relief for retail, hospitality and leisure would have ended completely in April this year.
“Instead, we are protecting one in three businesses from paying business rates, extending 40 per cent relief for 250,000 properties in retail, hospitality and leisure and introducing a new permanently lower business rate in 2026, while more than half of employers will either see a cut or no change in their National Insurance bills.
“Our Plan for Change will also get Britain building, unlock investment, and support business so we can make all parts of the country better off.”
Retail’s ‘permacrisis’
The Centre for Retail Research (CRR) has already predicted that over 200,000 retail jobs are set to disappear next year, along with over 17,000 stores, as a ‘permacrisis’ take hold in the sector.
However, many of the contributing factors to the crisis, like online shopping and the pivot in consumer behaviour from buying goods to buying experiences, are structural problems which have been ongoing since the 2008 financial crisis.
In a House of Lords report into the decline of the British High Street, Peers suggested that simplifying business rates, extending relief introducing a dedicated hospitality sector multiplier would all reduce pressure on high street businesses.
However, Lord Moylan, chairman of the built environment committee, also suggested that the turning high streets from shopping destinations into broader community centres may encourage Brits back to brick-and-mortar.
“Local high streets are places where generations have shopped, socialised and worked… to reverse [decline] they need to look beyond being simply a destination for shoppers,” Moylan said.