The Budget: Industry reacts to business rates changes
The Chancellor Rachel Reeves has laid out the Labour Party’s plans for the economy in the Government’s first budget.
Amongst the new measures to be introduced is a number of changes to business rates which include:
- An intention to permanently reduce lower rates multipliers for retail, hospitality, and leisure properties with a rateable value of under £500,000 from April 2026-27.
- This will be funded through a higher multiplier on properties with a rateable value of £500,000 and above, which includes the majority of large distribution warehouses used by online retailers.
- Providing 40% relief (down from 75%) to retail, leisure, and hospitality business on their rates in 2025-26, up to a cash cap of £110,000 per business.
- Freezing the small business rates multiplier at 49.5p in 2025-26.
Prior to the election, Labour had pledged to abolish the business rates system, replacing it with “a new system of business property taxation”.
Here is some reaction to the Chancellor’s budget from leading industry figures:
John Webber, head of business rates at Colliers:
“The Chancellor’s announcements concerning business rates today were desperately disappointing. Despite pre-election promises of business rates reform, nothing of significance was announced. There is to be no consultation, just a discussion document, and the measures announced hardly put a sticking plaster over the gaping wound rather bringing in any fundamental reform.”
“And the outlook for the high street is not good either. The Chancellor said she was heading off the knife edge that the retail/hospitality/leisure sectors might face, when the 75% discount relief that sector currently enjoys, comes to an end in April 2025.
“Far from heading off a cliff edge, the Chancellor’s measures potentially are driving the sector to the wall. By replacing the current 75% discount to business rate bills, with a discount of 40%, those businesses currently eligible for the relief will see their business rates bills actually rise by a massive 140% next year.
“Moreover in 2026/27, despite the two permanent lower multipliers for retail/hospitality/leisure, many businesses in the sector will still see their rates bills rise significantly as a result of the 2026 Revaluation.
“Through discussions with the VOA (Valuation Office Agency) we have also learnt that these measures, together with freezing of the smaller business rates multiplier, will be funded by introducing an even higher multiplier for larger businesses (those with an RV of over £500,000.) This will include businesses in the retail, hospitality and leisure sectors too.
“So, the bigger businesses, the ones that actually create the jobs will be hit for six. I fail to see how any of these measures help the high street in the long term.
“Like the government before her, the Chancellor has failed to tackle the business rates issue. There has been no pledge for business rates reform across the board, no attempt to freeze the larger multiplier or to bring it to a sustainable level that businesses can afford, nor to tackle the business rates deserts we see in some parts of the country, nor to reform the creaking appeals system.
“Far from saving the high street we have a potential disaster looming.“
David Parker, head of rating at Savills:
“The need to assist smaller businesses is undoubtedly acute and this measure goes some way to addressing that in part, but general business rates bills are unpopularly high, and have been for many years and so whilst the introduction of 40% tax relief for retail, hospitality and leisure properties up to a maximum of £110,000 per business is welcome, it is a reduction from the previous 75% relief, which will disappoint many.
“The annual multiplier in 1990 was 34.8p, meaning the annual bill was hypothetically 34.8% of a property’s rateable value. With it now approaching 60p (or 60%) of a rateable value for some properties, it’s disappointing that the funding of the relief to smaller businesses is at the direct expense of larger businesses.
“An alternative solution could have seen a uniform reduction to the annual multiplier of 20% to 30% across all properties, which would have immediately addressed many of the complaints regarding high business rates. This approach would have also created a property tax which is efficient and in general fair as it is self levelling based on the amount of rent a business is willing to pay in order to occupy its premises.”
Vivienne King, chair of the Shopkeepers’ Campaign:
“Restricting retail, hospitality and leisure relief will leave shopkeepers facing higher business rates bills in April. We needed a comprehensive overhaul of business rates to address the failures in the system that continue to plague our high streets. We will continue to urge the Government to take action to stimulate investment in the retail economy and the revitalisation of our high streets.
“It is encouraging to see the Government considering the introduction of a permanent reduction in business rates for retail, hospitality and leisure properties. High street businesses have long been at a disadvantage under the current system which unfairly penalises those with physical stores and ignores their contributions. However, truly levelling the playing field means lowering the business rates burden for all.
“The Chancellor’s decision to reduce the Retail, Hospitality, and Leisure (RHL) relief from 75% to 40% is a step back for businesses that have relied on this support during challenging times. This move shows that the Chancellor fails to appreciate how close to the edge our high streets shops are. This will leave many facing unmanageable bills and difficult decisions about their future.
“Freezing the small business rates multiplier was a sensible move but the loss of the retail, hospitality and leisure relief will still see bills for shopkeepers rising. Business rates remain intolerably high for shops and the multiplier must be lowered to an affordable rate for all.
“The standard multiplier has been too high for too long. Occupiers that were already facing record high business rates bills will react to this news with horror, disbelief, and cynicism. Higher business rates bills will mean more empty shops and less investment in our high streets and town centres.
“We urge the Government to continue engaging with the sector and to prioritise a comprehensive overhaul of the business rates system. High streets are the backbone of our communities, and their revival depends on creating a tax environment that encourages investment, growth, and entrepreneurship. There is still a long way to go to ensure that our high streets can thrive in a rapidly changing economy.”
Chris Grose, rating director at Hartnell Taylor Cook:
“As ever, the devil is in the detail on today’s announcement of a decreased rate in the pound for retail, hospitality and leisure properties. Ultimately, it is disappointing that no other reforms having been announced to combat the high rate in the pound, which is the root cause of the business rates problem.
“The new rate will apply to retail hospitality and leisure properties with a rateable value between £51,000 and £500,000 which suggests it will be a lot less generous than the current relief of 75% being reduced to 40% from April 2025. The actual rates in the pound will not be known until autumn 2025.
“Determining who should pay this lower rate is equally challenging in light of the confusion surrounding what exactly qualifies as a retail property. Covid grants for retailers lead to a surge in properties claiming to fall under the umbrella to qualify – how might this be navigated? And what about empty retail units being used for mitigation or storage – which rate might they pay?
“These questions must be addressed for government to successfully support the retail, hospitality and leisure industries.
“It appears the 2026 revaluation of business rates is going ahead. While this may give business certainty on future payments, this does not address the inherent issues with the rates system and the current high rate in the pound. The real solution is to reduce the rate in the pound and reform council tax to pay for it.”
Tim Harding, head of occupier rating at CBRE:
“We are disappointed that the 75% Retail, Hospitality and Leisure relief has reduced to 40%, a change that will affect small retailers who will feel the increase in rates bills due to the removal of 35% of the current rates year relief. Of more importance perhaps is the Transforming business rates discussion paper published alongside the budget, in which the Government set out to achieve a fairer business rates system to protect the High Street. This includes Ratable Value thresholds under £500k being introduced to permanently reduce the burden on Retail, Hospitality and Leisure whilst a higher multiplier applies on Ratable Value above £500k.”
Michelle Buxton, CEO of Toolbox Marketing and Revo board member:
“Sadly the Chancellor’s announcement has made things worse for retail and leisure businesses with many reliant on the 75% business rates relief. With this now reduced to 40% and with minimum wage and national insurance contributions increasing while the multiplier remains static, or is set to increase, cost increasing will be painful for those in the retail and leisure sector. Although we welcome the promise of a business rates discount for retail from 2026, it is kicking the can down the road and does little to encourage investment and innovation across the retail and leisure sector, in line with the government’s growth agenda.
“Revo’s recently released Future Insights found that a thriving retail and leisure sector had the potential to unlock economic growth across the UK. Meanwhile, a recent joint study between Revo and Lambert Smith Hampton found that 71% of people believed business rates reform was the most useful government intervention to support town centres. However, by failing to go further to address this major barrier to entry for those seeking to support the retail and leisure sector, this Budget announcement has missed the chance to secure increased investment which would have created safe and thriving communities and led to economic prosperity across the UK.”
Michael Shapiro, commercial real estate partner at Spencer West LLP:
“For those in the retail and hospitality sectors, the cost of business rates is becoming prohibitive, and this is one of the major causes of so many high street units and pubs being empty. Anything that is giving support is welcomed. Whilst the business rates system needs a complete overhaul, this is at least a positive start.”
This article is being continually updated.