Government’s business rates policies will create even more carnage on the high street

The Labour government’s business rates policies will soon put even further pressure on the high street as bills for the new rating year start to drop through the letterbox next month.

We have calculated that the government’s decision to cut the retail, hospitality and leisure business rates reliefs from 75% to 40% from 1 April 2025, will see thousands of shops, restaurants, pubs, gyms and nightclubs facing business rates bills rise of 140% or more in the year ahead.

The Conservative government introduced the Retail, Hospitality and Leisure Relief Scheme in November 2022 to cushion the sector from high rates bills that many could not afford. The scheme provided eligible properties with 75% business rates relief up to a cash cap of £110,000 per business. However, the new Labour chancellor announced this would be reduced to 40% in the Autumn Statement last year.

We have calculated that this will mean that retailers currently benefiting from the relief will see their business rates bills increase in April on average from £3,751 a year to £9,003, and restaurants will see a rise on average from £5,563 to £13,351 a year. The average pub will also see its rates bill go up – from £4,017 to £9,642 a year.

I am worried such rises will be unsustainable for many. According to the Centre for Retail Research, store closures in 2025 are forecast to be as high as 17,349, surpassing previous years- with business rates increases cited as the final blow to a sector already hit by increases in the employer national insurance contributions and increases in the minimum wage.

And the outlook for pubs also looks grim. Numbers are already at an all-time low following over 400 pubs shutting in 2024 – around 34 a month. According to analysis by insolvency specialists Price Bailey, more than one in 10 British pubs are in imminent risk of closure this year.

Other leisure businesses will also be impacted by the cut in reliefs. We estimate nightclubs will on average see their annual bills rise from £7,479 to a staggering £18,245 in April – worrying news for a sector which has seen 37% of all clubs across the country permanently shut since March 2020 (according to the Night Time Industries Association), an average of three clubs a week.

And gyms will also see their bills rise substantially – on average from £2,942 to £7,060 in April.

This is all very worrying. The Labour government has said it will help the retail, hospitality and leisure (RHL) sectors by introducing a lower multiplier for those who have up to now received reliefs. This bill is currently going through Parliament.

However, I do question how helpful this will be since this won’t be implemented until April 2026 and will coincide with the 2026 revaluation where RHL rateable values are expected to rise in line with rental growth, resulting in rates higher bills.

Meanwhile businesses still have the year ahead to face in which the current reliefs will be slashed with no other cushion for businesses.

And in an added blow, this new government bill also includes a proposal to increase the multiple for businesses occupying property with a rateable value over £500,000 by an extra £10p in the £ – a 20% increase on their rates bills in 2026. This applies to all sectors – including retail, hospitality and leisure – so those bigger retail players and supermarkets who create the jobs in the sector will also see steep bill rises. How will this policy help confidence in the high street either?

The RHL sector has already been hit for six with the increases in employer national insurance contributions, increases in the minimum wage and increased inflation. Many businesses are now considering their options, and some won’t survive. For the government to add these extra business rates costs on top just now beggars belief.

Labour said if it came into power, it would “Save the High Street”. This slashing of reliefs this year will sadly do just the opposite – as we’ll sadly see when the bills drop through the letterbox in the month ahead.

John Webber is head of business rates at Colliers