Retailers: align business rate with April inflation

Five leading trade bodies have written to the Chancellor ahead of the Spring Budget, urging him to align the business rates rise in April with the rate of inflation at that point. Currently, April’s rise is linked to the previous September’s CPI, meaning retailers, hospitality & leisure venues, pubs and breweries will be saddled with an inflation-busting 6.7 per cent increase.

The letter, signed by the Association of Convenience Stores, British Beer and Pub Association, British Independent Retailers Association, British Retail Consortium, and UK Hospitality, urges the Chancellor to instead use the Bank of England’s Q2 forecast for inflation – currently 2.0 per cent.

BRC states today (4), "April’s rates rise should be based on April 2024 CPI, rather than the level from seven months prior, when global cost pressures were still keeping inflation high. This would keep our business rates contributions in line with current changing prices, rather than introducing an inflationary rise. It would support our industries as they seek to drive greater investment in villages, towns and cities all over the country."

Business rates remain one of the biggest pressures on the viability of tens of thousands of shops, hospitality businesses, and pubs. The tax was introduced in 1990 at a rate of 35p in the pound, and has since swelled to 51.2p (or 49.9p for small businesses) – making the UK the most expensive place in Europe for such property taxes. This constant rise has been one factor behind the closure of tens of thousands of shops, restaurants and pubs over the last five years.

The five trade bodies represent businesses in every part of the UK, employing 6.5 million people. Together they invest over £25 billion annually across the country. However, the letter notes the UK has seen "the loss of over 26,000 shops, pubs and brewers and hospitality and leisure venues in the last five years".

Helen Dickinson, Chief Executive of the British Retail Consortium, said, "April’s rates rise will be more than three times the expected inflation at that time. This means above-inflation cost increases for businesses, which will put significant upwards pressure on prices, jeopardising the current success in bringing down inflation. The Government needs to fix this anomaly and make sure April inflation is the determinant of April’s rates rise.

“With retail on the line for an additional £400m in rates, it is inevitable that there will be renewed pressure on retail prices, as well as blocking much new investment in our town and city centres. It is essential that the Chancellor uses the Spring Budget to make this change and give our local communities a fighting chance to thrive.”

James Lowman, Chief Executive of the Association of Convenience Stores, said, "Ongoing support with the cost of business rates is crucial for incentivising investment in local high streets and shopping parades. While the extension of business rates relief announced at the Autumn Statement was a positive step, retailers are still bracing for a steep increase in rates come April. Such an increase poses a significant burden on businesses already contending with a challenging economic landscape. Adjusting the rate increase to reflect April’s CPI could bolster the continued growth of the £600 million annual investment that local convenience stores contribute to their communities, enabling them to invest and grow.”

Andrew Goodacre, CEO of the British Independent Retailers Association, said, “The retail sector, especially the non-food sectors, are very fragile with weak sales and rising costs. The last thing we need in April is an increase in business rates higher than the current rate of inflation for those retailers who do not qualify for the retail discount.”