The government’s business rates policy is likely to misfire

For years, policymakers have preached about saving Britain’s high streets, yet the government’s latest political moves are unlikely to do so. The government’s new business rates policy – designed to shift the tax burden towards larger businesses while easing costs for smaller retail and hospitality businesses – appears, on the surface, to be an attempt at fairness. However, as recent research from Colliers shows, this strategy is more misfire than masterstroke and could accelerate the decline of some of the UK’s most important retail centres.

At the heart of the issue is the Non-Domestic Rates Bill, now passed by Parliament which promises to lower the business rates multiplier for smaller retail, hospitality, and leisure (RHL) properties while imposing a significantly higher multiplier (and hence business rates tax) on larger businesses – those with a rateable value (RV) above £500,000. This increase could amount to an effective 20% tax hike for some of the biggest players on the high street – the very businesses that provide anchor tenants, attract footfall and keep town centres thriving.

Nowhere is this more evident than in London’s West End, where retailers are expected to be hit hardest by this new legislation. Recent figures from Colliers show that there are 335 retail properties in the West End, including Knightsbridge, that are likely to exceed the £500,000 RV threshold next year and so face the higher multiplier. This is particularly alarming given that rateable values in this area could increase by 30% following the 2026 revaluation. As a result, annual liabilities for these properties are projected to jump from £212m to £274m next year, equating to an average increase of £182,727 per property – a staggering financial burden for retailers in this prime area, particularly if they have multiple properties.

And elsewhere in the UK, even cities with smaller numbers of RHL properties over the large multiplier threshold will be affected, such as Birmingham with 25 or Liverpool with 24, since these represent the larger anchor stores and supermarkets or leisure attractions that bring life blood to many of these centres.

Indeed, larger food stores and supermarkets, which have historically been cornerstones of town centres, will suffer under this policy. According to Colliers, around 90% of the property portfolios of Tesco, Asda, and Sainsbury’s have ratable values above the £500,000 threshold and so will face the higher tax. The ripple effect doesn’t stop there – manufacturers, warehouses, and suppliers, including large bakeries and dairies, will also see millions added to their tax bills, increasing supply chain costs and possibly leading to higher prices for consumers.

Ironically, the government has marketed this policy as a way to “save the high street” by shifting the tax burden onto online giants. Yet, the reality is starkly different. Rather than fostering growth, the new rates system will discourage major retailers from investing in expansion or hiring new employees. If these anchor tenants begin to disappear, smaller businesses – despite benefiting from a lower multiplier – may struggle to survive without the customer traffic they generated.

Smaller RHL businesses, which should theoretically benefit from the lower multiplier designed to provide tax reductions, won’t escape unscathed either. Many saw their business rate reliefs slashed this year and will lose them entirely next year, potentially leaving them vulnerable to increased rateable values in the new rating list.

Indeed the timing of the new policy couldn’t be worse. The 2026 business rates revaluation, based on rental levels post-Covid, will likely drive retail rateable values up by 20–25%, further compounding the financial pressure on retailers. As businesses brace for the inevitable, it wouldn’t be surprising to see property expansion plans shelved or hiring freezes implemented.

What we had hoped to see from Labour’s business rates policy was a lower multiplier across the board – rebasing it to a 35p in the pound tax – something all businesses could afford, stimulating growth and investment. Instead, we have a system that is even more complicated and looks likely to damage rather than save the high street. We call the government to reconsider or at the very least to water down this deeply flawed policy before irreversible damage is done.

John Webber is head of business rates at Colliers