Jump in business rates could be ‘final nail in coffin’ for many pubs and shops, sector warns
Sector heads in the UK’s retail and leisure industry have urged the government to freeze business rates after new research found companies will have to find an extra £1.7bn next year as rates bills are set to rise in line with the latest inflation figures.
Figures from the Office for National Statistics (ONS) showed the consumer price index (CPI) came in at a flat 6.7 per cent in September, higher than the 6.6 per cent expected by most economists.
Simon Green, head of rates at property experts Gerald Eve, calculated that businesses will pay collectively an extra £1.7bn from next year.
“This could lead to a slower recovery and, potentially, more inflation as businesses pass on costs,” he said.
Business rates are a tax on property used for business purposes such as pubs and shops. The government has frozen the increase for the past three years in light of the pandemic and subsequent economic fall out.
Kate Nicholls, UKHospitality chief executive said the latest inflation reading will cost hospitality businesses an additional £234m and could be a “final nail” in the coffin for many businesses.
“Those in leisure, hospitality and retail are potentially facing a double hit, with a 75 per cent rates relief package worth up to £110,000 per business due to come to an end next year too,” said Green.
“Chancellor Jeremy Hunt should announce at his budget next month — or even sooner — that the rise in line with inflation will be scrapped and until inflation is back to a more manageable level and to extend the rates relief support for the retail, hospitality and leisure sectors which continue to suffer,” he added.
“This will reassure businesses struggling with rising costs.”
Kate Nicholls, UKHospitality chief executive said the latest inflation reading will cost hospitality businesses an additional £234m and could be a “final nail in the coffin” for many businesses.
“Today’s figures finally confirm the bleak picture facing hospitality businesses next April. Almost a billion pounds in extra costs from business rates alone is unfathomable – and insurmountable – for many,” she said.
“It would be particularly perilous for small, independent businesses, for which ongoing relief measures are a lifeline at a challenging time.
“Hospitality is at the heart of our communities and it’s essential we do all we can to protect them and the value they bring, from driving economic growth to creating jobs.”
The British Retail Consortium (BRC) said retailers face a £470m-a-year increase from next year as a result of the inflation bump.
Helen Dickinson, chief of BRC, said: “Retailers are publicly calling on the chancellor to freeze the business rates multiplier, allowing them to keep driving down prices, and invest in new shops and jobs.”
“With the all-important Christmas period fast approaching, retailers hope that cost pressures continue to ease in the coming months. “
“Unfortunately, the September CPI figures — which will determine how much business rates will increase in April 2024 — mean that retailers face a £470m-a-year increase from next year; this will inevitably put renewed pressure on consumer prices,” she added.
City A.M contacted the Treasury for a comment