CPI Figures at 1.7 % announced today mean businesses due to pay an extra £500 million in rates bills next April -on top of the £1.74 billion rise seen this year, says Colliers.
Business rates bills in England and Wales are estimated to rise by a total of £0.5 billion next April, to provide the central coffers with nearly £30 billion in funds. This rise comes on top of the £1.74 billion rise seen in April 2024. “Such rises year on year are unsustainable long term for all sectors of the economy,” says John Webber, Head of Business Rates at Colliers, “It’s really time the Government steps in and properly addresses the multiplier.”
Rates bills rise in line with inflation every year and are based on the CPI figure for the previous September. With CPI announced today at 1.7% for September 2024, the total estimated income for government from business rates in England and Wales is expected to rise from around £29.4 billion in 2024/5 to £29.90 billion 2025/6 from next April. This rise came on top of the 6.7% rise in business rates bills already faced by businesses in April this year.
The further rise will occur unless the government steps in and freezes the business rates multiplier for all sizes of business. Last year Chancellor Jeremy Hunt froze the multiplier for small businesses at 49.9p. However, the standard multiplier was untouched and rose with inflation reaching 54.6p for the current tax year.
Without government intervention, John Webber points out that all sectors will be penalised by this unsustainable tax:
· The retail sector pays around 21 % of the total business rates tax bill and will see its rates bills rise by around £105 million next April. This comes on top of the £366 million rise it saw this April 2024. The sector will be hit even harder if business rates reliefs come to an end at the same time. This could have a deep impact on retail businesses in the high street. As a result retail campaigners are calling for a reduced multiplier -“The Retail Rates Corrector” – which would mean a 20% downward adjustment in business rates paid on retail properties. The government is reported to be considering this proposal, as a way of helping the high street.
· The logistics/manufacturing sector also pay a hefty 27% of the total business rates tax bill and saw steep rises in its rates bills last year, as a result of the 2023 Revaluation. Colliers estimate the sector will see its rates bills rise by around another £135 million in April, on top of the £453 million rise seen this year.
· Similarly, the offices sector representing 23% of the total rates bill is expected to face an extra £115 million on its total rates bill, on top of the £401 million rise experienced this year. At a time when companies are still analysing their office space requirement, this is certainly not going to help the “case” for investing in office space.
According to Webber the continued upward march of the multiplier every year is unsustainable. “In two years (2024/5 and 2025/6) the burden of business rates will have increased by £2.25 billion across the board.
"In a period when all sectors are suffering from increased costs, whether from increased wage bills, materials or energy costs, we now have a plus 50p property tax (and rising) on top. Higher occupation costs will only dampen expansion and growth plans and for many businesses might be the last straw. The government must do something to intervene."
"The failure to freeze the standard multiplier last year has come to roost. But even if the government did this for 2025/6 it would only really paper over the issues. What we need and what we have been calling for is proper business rates reform, primarily by the government rebasing the multiplier to a level that businesses can afford- say 34p in the £ - and reforming the sticking plaster relief system- so that every business contributes something for their local amenities.”
He added, “We believe the lower multiplier should be in place for all businesses not just retail, as a high multiplier deters investment and expansion into property across the board.”
“It is desperately disappointing that at the Labour party conferences there was no real mention of what to do on 'the business rates question' apart from a pledge to reform, whist raising the same amount of tax and 'saving the high street'.
“With rises of over £0.5 billion looming again next year, we are fearing a 'head in the sands' approach yet again. We’ll have to see what materialises in practice. “
ENDS
*CPI : Consumer Prices Index rose by 1.7 % in the 12 months to September, down from August at 2.2%
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