​Retail, Hospitality, and Leisure Brace for Business Rate Increases

Since April, property bills for retail, hospitality, and leisure businesses in England have been set to more than double due to changes in business rate relief, according to an analysis by property consultancy Colliers. The government's decision to cut business rate relief from 75 to 40 per cent will leave thousands of businesses grappling with rate increases of 140 per cent or more.

The head of business rates at Collier's, John Webber, has warned that the reforms could have severe consequences for high street businesses already struggling with mounting costs. "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," Webber said. (We recently hosted a podcast with John Webber to delve deeper into these issues—listen to gain valuable insights.)

Relief Scheme Reductions

The Conservative government introduced the retail, hospitality, and leisure relief scheme in November 2022, offering 75 per cent relief up to a cap of £110,000 per business. However, Labour's October announcement revealed this would drop to 40 per cent from April 2025, drastically raising business costs.

Colliers' analysis paints a stark picture:

High Street Struggles

A report by the Centre for Retail Research forecasts 17,349 shop closures in 2025, surpassing previous years. Many closures will be attributed to higher business rates, compounding other financial challenges, such as increased employer national insurance contributions and higher minimum wages.

The hospitality sector is also under threat, with insolvency specialists Price Bailey revealing that more than 10 per cent of British pubs face imminent closure this year.

Voices of Concern

Retailers in London's iconic West End district have voiced concerns about the impact of the reforms. The New West End Company, representing 600 retailers, hotels, and restaurants, warned that property bills in the area would rise by £44.5 million annually. The organisation's chief executive, Dee Corsi, described the increase as "another cost for businesses which are significant national employers, anchors for nearby communities, and drivers of local and national economic growth."

Future Promises

The Labour government has pledged to replace the current business rates system with a model that raises equivalent revenue "in a fairer way." Shadow Chancellor Rachel Reeves announced the first step of this plan in October, aiming to level the playing field between high street businesses and large online retailers while addressing issues such as empty properties.

The Treasury defended its position, stating that the relief scheme would have ended entirely this April without government action. "Instead, we are protecting one in three business properties from paying business rates, extending 40 per cent relief for 250,000 properties in retail, hospitality, and leisure, and introducing a new, permanently lower business rate in 2026," a spokesman said.

Reflection

As these reforms take effect, questions arise about the broader implications for the economy. Can Labour's proposed long-term reforms mitigate the immediate strain on the high street? Or will this be another chapter in the decline of Britain's retail and hospitality sectors?