Why the chancellor’s autumn statement on business rates is failing UK business

The chancellor’s announcements during the autumn statement this week showed that yet again, the Conservative government has failed to support the high street over business rates.

By freezing the multiplier for another year (currently 49.9p) for small businesses only and extending for one year the 75% discount on rates bills up to £110,000 per business, the chancellor has ignored the needs of the larger retail and hospitality businesses who will see an eyewatering 6.62% rise on their business rates bills next April. This will probably be double the rate of inflation at the time.

For these businesses, the multiplier will be 54.6p which will create a massive hit to the high street where the sector is already under cost pressure as energy, employment and insurance costs soar. The chancellor seems to have forgotten that the larger retailer and hospitality chains are the main employers in their sectors. Hitting them with a 6.62% rise in their rates bills next April whilst increasing the NMW in line with inflation will certainly dampen expansion and growth plans. It will do nothing to discourage the move to online retail as opposed to having shops on the high street. And it will almost certainly lead retailers and hospitality businesses to put their prices up, passing such costs onto the consumer. So much for the chancellor’s plans at controlling inflation!

Colliers looked at the liabilities (bills) of some of the high street chains. Next for example will see an annual rise in its business rates bills of over £6m, from £97.3m to £103.6m, H&M will see a £2m plus rise, from £33.5m to £35.7m, and Zara will see its rates bills rise by £1m, from £15.29m to £16.3m. Selfridges’ rates bill will increase by over £0.55m to an eye watering £9.503m per annum.

These increases are not confined to Central London: Primark in High Street Birmingham, for example, will see its rates bill increase from £681,000 to £725,000 next year.

This is a damning indictment for the Conservative government, who has clearly failed its manifesto promise to reduce this tax or introduce any proper business rates reform during its term in power.

And of course, these rates rises do not just apply to the retail sector but to all medium and large businesses who don’t fall into the ‘small business’ bracket. The failure to freeze the larger multiplier fundamentally means substantial business rates rises for the UK’s biggest businesses from 2024. Those larger players in offices or manufacture will be equally impacted. Overall around 220,000 ratepayers will see their bills rise by 6.62% next April, adding £1.66bn to their bills in the year alone. Given larger companies pay over 75% of the business rates burden, this is a big hit to UK PLC.

Nowhere else in Europe do businesses pay approaching 60% the rental of their premises in property taxes and at current levels this is unsustainable. It certainly makes the government’s pledge to encourage investment and growth sound extremely hollow.

John Webber is head of business rates at Colliers