Shock fall in inflation could see retailers hit with £105m business rates hike
Retailers could be hit with a £105m business rates hike next April, says Colliers, following today’s surprise CPI figure showing inflation at 1.7%, the lowest rate in three-and-a-half years.
This increase in rates would add to the £336m rise the sector saw in April 2024.
Across all sectors, business rates could rise by half a billion pounds next April, adding to the £1.74bn increase seen this year, providing the central coffers with nearly £30 billion in funds.
John Webber, head of business rates at Colliers said the year-on-year rises are “unsustainable long term for all sectors of the economy.”
“It’s really time the government steps in and properly addresses the multiplier”, he added.
Business rates bills rise in line with inflation every year and are based on the CPI figure for the previous September. With today’s announcement that inflation dropped to 1.7% in September, the estimated income for government from business rates in England and Wales is expected to increase from around £29.4 billion in 2024/25 to £29.9 billion 2025/26 from next April.
Colliers said the rise in business rates will occur unless the government steps in and freezes the business rates multiplier for all sizes of business.
Last year, the Chancellor Jeremy Hunt froze the multiplier for small businesses at 49.9p, however the standard multiplier remained untouched and increased with inflation, reaching 54.6p for the current tax year.
Colliers said the retail sector – which pays around 21 % of the total business rates tax bill – will be hit even harder if business rates reliefs come to an end next April. Retail campaigners are calling for a reduced multiplier – a “Retail Rates Corrector” – which would mean a 20% downward adjustment in business rates paid on retail properties.
John Webber added: “The failure to freeze the standard multiplier last year has come to roost. But even if the government did this for 2025/6 it would only really paper over the issues. What we need and what we have been calling for is proper business rates reform, primarily by the government rebasing the multiplier to a level that businesses can afford – say 34p in the pound – and reforming the sticking plaster relief system- so that every business contributes something for their local amenities.
“We believe the lower multiplier should be in place for all businesses not just retail, as a high multiplier deters investment and expansion into property across the board.
“It is desperately disappointing that at the Labour party conferences there was no real mention of what to do on ‘the business rates question’ apart from a pledge to reform, whist raising the same amount of tax and ‘saving the high street’.
“With rises of over £0.5 billion looming again next year, we are fearing a ‘head in the sands’ approach yet again. We’ll have to see what materialises in practice.“
Also responding to today’s CPI figure, the British Retail Consortium (BRC)has predicted that the extra burden on retailers could reach as high as £140m.
Kris Hamer, director of insight at the BRC, said: “For too long, the gradual increases to business rates have been contributing to the decline of our high streets and town centres, damaging investment and preventing the creation of new shops and jobs. This effect could be compounded if other business taxes are increased at the Budget. The Chancellor should introduce a Retail Rates Corrector – a 20% downward adjustment in business rates paid on all retail premises – to redress the imbalance that sees retailers paying a higher proportion of their profits in taxes of almost any industry.”
Prior to the election, Labour had to replace business rates as part of its plan to “breathe life” into Britain’s high streets.