Influential lobby groups line up to demand fundamental changes to business rates

The Confederation of British Industry (CBI) and 41 other leading trade groups are demanding fundamental changes to business rates ahead of Rishi Sunak’s autumn budget statement.

The mix of trade bodies, including UK Hospitality, have warned that firms could go under unless the chancellor delivers on a manifesto pledge to reduce the burden of business rates.

The government froze business rates for retail, hospitality and leisure during the summer of 2020 as high street footfall fell off a cliff during the lockdowns. The rates were reintroduced with a 66 per cent cut in 2021, but are set to return to their former rates as from April, 2022.

A statement from CBI and other trade bodies is demanding fundamental changes to the business rates system. Labour has already pledged to freeze business rates and undertake the “biggest overhaul of business taxation in a generation,” announced by shadow chancellor Rachel Reeves at the party’s recent conference.

The current system “penalises high-street shops in favour of online giants and deters businesses from investing in new green technologies,” said Reeves in response to the CBI statement.

Businesses fears the combined pressure of increased business rates and an increase to the VAT rate from April 2022 will lead to closures and job losses.

In contrast to Labour’s strong stance on business rate reforms, the chancellor is expected to announce minor changes to the business rates regime in his upcoming budget announcement, but “wholesale reform” has been kicked into the long grass, according to a recent report by The Daily Telegraph.

The Conservative Party promised in its election manifesto to reduce the overall burden of business rates at its first budget review. Businesses looking for support from Sunak also face huge energy bill hikes as well as increased supply chain costs and wage rises.

At a time when all eyes are turning towards COP26, perversely, owners investing in green technology such as solar panels would increase the value of their premises, and therefore increase the amount of business rates they have to pay. The CBI argues that reforming the current business rates system could usher in a wave of business investment that would support the goal to reach net zero climate emissions.

However, government insiders are concerned that business expectations on the Chancellor’s autumn business rates announcement are already too high and the recent media leaks are seen as an attempt to downplay any suggestion of meaningful reform, with civil servants requesting more time on reforming the contentious tax regime.