Business rates are a relic of a bygone era. Reform them to save the high street
Business rates are sinking Britain’s high streets – inaction is no longer an option for the Chancellor, writes Shevaun Haviland
Walk down almost any British high street today, and the signs of decline are there to see. Empty storefronts, ‘to let’ signs, and an air of decline in too many towns and cities that were once hubs of community and commerce.
Week by week, we see household names – from Superdrug to Poundland – announcing more store closures. The Centre for Retail Research has dubbed it a ‘permacrisis’ for the UK retail sector, with store closures predicted to rise to around 17,350 this year – the highest level in more than a decade.
Clearly, a combination of factors has contributed to this decline, from the rise of online shopping to changing consumer habits. But there is one major outdated policy that continues to handicap UK companies: business rates.
Business rates are outdated
The current system, a property tax on non-domestic properties, is a relic of a bygone era. It calculates a business’s annual tax bill based on the rental value of its property, not its profitability. This is its fundamental, fatal flaw.
Retailers I meet up and down the country – from small independent bookshops and family-run cafes to larger high street stores – repeatedly tell me how they are being forced to pay a hefty, fixed cost, heavily burdening them regardless of their ability to pay.
With businesses having to contend with soaring energy bills, increased wages and fierce competition, these fixed costs are often the final straw, turning a viable business into a failed one. This tax punishes businesses for simply existing in a physical space, the very space we need to revitalise.
This is creating a deeply unfair and uneven playing field. The retail sector pays a disproportionate share of the tax, contributing 25 per cent of all business rates while accounting for a significantly smaller portion of the economy.
While the government has offered piecemeal support such as business rates relief and transitional schemes, these have proven to be band-aid solutions.
An extra 1,000 pints to cover lost relief
In fact, the one support businesses had through business rates relief has been slashed by around half from 75 per cent to 40 per cent. This has put thousands of businesses under renewed pressure as bills have surged, just when they were beginning to recover from a period of unprecedented economic turbulence.
Take a pub with a current rateable value of £61,000 paying around £15,000 per year. The cut in relief has added between £6,000-£7,000 to their costs. The owner now tells me they’ll have to sell an extra 900–1,000 pints every year to cover it.
The introduction of a permanent lower multiplier for retail, hospitality and leisure businesses from April 2026 is welcome, but cherry-picking sectors will simply exacerbate the situation further.
Retail businesses, small and large, are sounding the alarm. What is needed is not another temporary fix, but a comprehensive overhaul of the business rates system to help ease the pressure on businesses and support them to grow and invest.
How to reform the system
With the business rates multiplier – the figure set by the government used to calculate a business’s rates bill – remaining one of the largest barriers to business premises occupation, the British Chambers of Commerce is urging the government to deliver a pathway to lower this to at least below 45p by the end of the parliament. And this should be extended to all businesses, not just those who qualify as retail, hospitality and leisure.
If rateable values are not lowered and the multiplier remains at the current levels, businesses will simply cease to exist or move exclusively online.
By moving to a more progressive tax model, we can incentivise and reward businesses for growth and investment, rather than penalising them for it. A reformed system could also offer local authorities more flexibility to use business rates as a tool to incentivise development and fill vacant properties, rather than as a rigid revenue-raising mechanism.
The high street is more than just a place to shop. It’s the beating heart of our communities, a place of social connection, and a vital source of local employment. We must not allow it to wither under an obsolete tax.
As the Chancellor prepares for her upcoming Budget, we’ve been clear that there must be no new taxes on business. And on business rates, she has a choice: continue with a broken system that is accelerating the decline of our high streets, or act decisively to deliver wholesale reform that will give our high streets a fighting chance. Businesses can’t afford to wait any longer.
Shevaun Haviland is director general of the British Chambers of Commerce