Getting rid of business rates won’t fix Britain’s high streets
The decline of the UK’s high streets has been well-documented over the past decades, with the finger variously pointed at structural and policy changes.
At the 2025 Labour Party conference, the Prime Minister said that the UK’s high streets are “struggling against the tide of decline”, promising to replace the business rates system and level the playing field between the high street and online giants.
As well as business rates, empty premises and unkempt streets have been blamed on online shopping, a Covid-19 hangover and (other) high taxes – plus a lack of desire from Brits to venture out on the rainy high street.
The levy on shops’ premises has become the focus point of a campaign to lower the amount of tax the retail sector pay, and has invited ire from all corners of the business world.
But a new report from Centre for Cities suggests that the UK’s high streets are in no way doomed by the current business rates system, and that London’s streets, in particular, present cause for optimism.
Income is far more important than business rates
The average city centre has a high street vacancy rate of 13 per cent.
Newport’s city centre had the highest vacancy rate, at just under 20 per cent, while London’s city centre had the lowest vacancy rate in the country at seven per cent, according to Centre for Cities.
The median suburban high street in London, meanwhile, has a vacancy rate of eight to 10 per cent. Just under four in five – 78 per cent – of the capital’s suburban high streets a lower vacancy rate than the UK’s city centre average.
This is despite the capital facing a much higher business rates bill than the rest of the country.
Much has been made of the increase to national insurance contributions (NICs) and business rates, but Selby argues that they “are not the main reason” high streets are struggling.
“Undeniably, business rates… make it harder for high street businesses to make a profit,” Selby said.
“[But] the highest business rates are also the places that have residents who have the highest incomes and the most money to spend… [and] he vast majority of city centres that have really high vacancy rates also tend to have the highest rates of business rate relief.”
‘Taking away business rates doesn’t solve the problem’
Far from tax-led decline or a structural move away from the town square, Centre for Cities suggest that Brits are as happy as ever to go to the high street and spend.
“[The] issues that the high street [faces] don’t necessarily doom the high street… it’s not going to disappear,” Selby said.
“Where the economy is functioning a little bit better, the high street has actually adapted to external shocks much better and hasn’t suffered the same consequences,” Selby said.
The biggest determinants of high street success are incomes, catchment areas and visitor numbers.
Income for most sectors in the UK has been stagnating since 2008, driven by low productivity growth and tax policies like the freezing of income thresholds.
Income growth has more recently been affected by the significant long-term after-effects of Brexit, which is now estimated to have wiped around eight per cent off GDP.
“Even when you consider housing costs… Londoners have a lot more money. They have much higher incomes than every other part of the country, more or less,” Selby said.
“Taking away business rates doesn’t solve the problem… you have to increase disposable income so that people can spend,” he added.