High street firms in the UK are facing the possibility of having to cut jobs due to a potential rise in business rates, according to industry bosses. Experts have forecasted that there could be an increase of nearly £500 million in business rate payments by firms, following the release of fresh inflation figures.
Business rates are taxes that businesses pay on their commercial properties across the UK. Typically, these rates increase each financial year in line with the previous September’s consumer price index (CPI) inflation figure. The Office for National Statistics (ONS) recently confirmed that inflation had dropped to 1.7% for September 2024, the lowest level since April 2021.
If the Government decides to increase business rates payments in line with the 1.7% reading, it is estimated that there will be a £488 million rise in property tax payments by businesses in England next April, as reported by Altus Group. A significant portion of this increase, around £224 million, is expected to impact the retail, hospitality, and leisure sectors.
Moreover, approximately 250,000 high street firms could face an even steeper rise in rates, as a current 75% business rates discount for retail, hospitality, and leisure firms in England is set to expire in April 2025. This discount was a one-year commitment that came into effect from April 1 this year. Altus Group projects that the expiration of this discount could lead to businesses having to pay up to an extra £2.41 billion.
Amidst these challenges, business leaders are urging the government to offer more support to firms in the upcoming Budget later this month. Kate Nicholls, the chief executive of UKHospitality, highlighted the impact on the hospitality sector, stating that without intervention, venues could face a substantial £914 million tax bill in April.
Ion Fletcher, policy director at the British Property Federation, expressed concerns over the automatic annual increase in business rates, regardless of a business’s performance or other property costs. He added that it is not sustainable for rates to rise every year in this manner.
Alex Probyn, president of property tax at Altus, called for a re-examination of the policy of annual tax rate increases and suggested exploring ways to permanently reduce the burden on businesses. Business owners are facing tough decisions ahead, with the potential need to shorten hours, cut staff, or even close down if the financial strain continues to escalate.