Businesses accuse ministers of “smoke and mirrors” over rates overhaul

Hospitality businesses across the UK are warning that they face significant increases in business rates from next April, despite government claims that reforms will deliver the lowest effective rates for the sector since 1991. Industry leaders say the measures, combined with a revaluation of premises and the phasing out of Covid era discounts, could accelerate closures on high streets and in town centres.

The Chancellor, Rachel Reeves, used the Autumn Budget to announce a new tiered business rates system. It lowers the multiplier for around 750,000 retail, leisure and hospitality properties, funded by higher charges on more valuable sites such as large distribution warehouses. Ministers say the “rebalancing” is intended to shift the burden away from high streets and towards online giants.

Yet many operators argue that the headline cut will be overwhelmed by two other shifts. Rateable values, which are based on assessed rental levels, have risen sharply for a large share of hospitality premises. At the same time, the 40 per cent relief introduced during the pandemic is being unwound, pushing businesses closer to full liability.

UKHospitality estimates that the average pub will pay about £1,400 more next year, a rise of roughly 15 per cent. Over three years, it expects bills to climb by around £12,900 for pubs and by more than £205,000 for the typical hotel. The organisation says that by 2028 to 2029, business rates could be about 76 per cent higher for pubs and 115 per cent higher for hotels, even after transitional support.

Trade bodies also say the promised shift towards taxing large warehouses more heavily is not materialising at the pace ministers suggested. UKHospitality’s analysis shows much smaller increases for distribution warehouses than for high street pubs and restaurants.

Operators say impact is already clear

Phil Thorley, who runs a pub group in south east England, says most of his venues are facing higher bills, adding about £62,000 a year to costs. He warns that investment and hiring will suffer if the rises go ahead.

Leon Burton, managing director of the Pub Grill Co, goes further, arguing that the policy amounts to a stealth increase. He says hospitality firms were led to expect a meaningful reduction, only to find that higher valuations have left them worse off. In his case, rateable values across six pubs have risen by about 40 per cent on average, leaving the business around £85,000 a year worse off, despite the lower multiplier.   

Sacha Lord, chair of the Night Time Industries Association, says many businesses initially welcomed the Chancellor’s announcement but felt misled once the numbers were calculated. He describes the overhaul as a stealth tax on high street venues and warns that closures in early 2026 could exceed even pandemic levels.   

Emma McClarkin, chief executive of the British Beer and Pub Association, says the sector was promised genuine reform but received what she calls a “smoke and mirrors” Budget. She argues that without deeper change, pubs will face another year of fixed-cost pressure on top of wage and employment tax rises.   

Dan Neidle, CC BY-SA 4.0, via Wikimedia Commons

Government and analysts defend the package

The Treasury disputes claims of a hidden rise. It says a £4.3bn transitional relief package will cap annual bill increases and that a typical independent pub will pay about £4,800 less next year than it otherwise would have. Ministers also point to licensing and alcohol duty measures aimed at supporting pubs and restaurants.

Tax analyst Dan Neidle of Tax Policy Associates says much of the shock reflects a return from unusually low pandemic-era valuations. He highlights transitional relief that caps next year’s rises for small and medium businesses at about 15 per cent, arguing that the overall receipts picture is more complex than headline stories suggest.  

UKHospitality’s chair, Kate Nicholls, accepts that transitional relief helps but says it does not offset the scale of revaluation. She is calling for a larger sector discount, closer to 20p in the pound, warning that current plans risk reversing the stated aim of levelling the field between high streets and online infrastructure.   

What it means for hospitality

For hospitality operators business rates are a fixed cost tied directly to location. Sector leaders argue that venues in central or community settings are exposed to higher valuations precisely because they are where customers are. That can leave high street businesses paying more than out-of-town or warehouse-based operations.

The timing is sensitive. Many businesses are already absorbing higher wage floors and employer national insurance, costs that weigh heavily on labour-intensive firms. Operators say rising rates could push them to cut staffing, reduce opening hours, delay investment and raise menu prices.

The government maintains that hospitality remains better off than it would have been without reform. The industry response is that promised relief has not matched the speed of valuation increases, leaving many venues facing a heavy reset before trading conditions have fully stabilised.

Whether ministers revisit the discount level, or adjust the balance between high street sites and large logistics premises, may determine how many pubs, restaurants and independent takeaways can sustain investment and employment into 2026 and beyond.