Business rates discount 'a sticking plaster' that 'will not help larger firms'

In yesterday's (27 October) Autumn Budget, Rishi Sunak promised to 'ease the burden' of business rates​​, but stopped well short of the major overhaul many had originally been calling for.

The Chancellor said removing the controversial levy would be 'irresponsible', citing that it raises £25bn for the Treasury. However, he did commit to reforming the system. This will mean that from 2023 there will be revaluations every three years, rather than every five.

Next year's planned in increase in the multiplier will be cancelled; and there will be a one-year 50% cut in business rates for high street sectors including hospitality and leisure up to a maximum of £110,000 per business.

While trade bodies broadly welcomed​​ the announcement, not everyone is impressed with the Chancellor's statement. 

John Webber, head of business rates at property agency Colliers, has described it as a 'superficial response' to industry consultation on business rates reform.

“After delaying his response four times in the last year, the Chancellor has yet again missed a golden opportunity to reassure businesses and to instigate the fundamental reforms campaigned for and needed," he says.

“There were some positive announcements – but overall, the Chancellor’s measures were underwhelming.

“The Chancellor has made it clear he is determined to continue to raise £25bn from this tax and as a result his proposals only tinker with the system. The measures suggested will not have a major impact on saving the high street in the longer term.” 

With regards to the 50%, one-year discount announced, Webber is particularly critical, describing it as a 'sticking plaster'.

“The Government is limiting reliefs to a maximum of £110,000 - so again this will not help the bigger [firms], the ones making the major decisions on opening or closing [sites] and maintaining jobs.

"This will have limited benefits."

'Insulting response' to business rates problem

Webber's words have been echoed by larger businesses in the hospitality sector. Peter Borg-Neal, executive chairman of Oakman Inns, wrote on Twitter​​ that for businesses with multiple sites, the discount does very little to mitigate the burden of business rates.

He said: "It’s an insulting and ridiculous response to addressing the iniquity of business rates. This Budget is a disaster for SME’s in the hospitality sector - and therefore a big negative for economic growth."

Smaller hospitality firms have welcomed the discount, though. 

"The rates relief will be a big help for us," says Brodie Meah, co-founder of lively neighbourhood restaurant Top Cuvée in London's Highbury, as well as its retail offshoot Shop Cuvée and recently-launched underground wine bar Cave Cuvée in Bethnal Green.

"[This is] money we'll be re-investing straight into the maintenance of our properties which have taken a battering over the last years constant change of usage."

In his Budget, Sunak also announced the introduction of business rates 'improvement relief', which means any business that makes improvements to property will pay no extra business rates for 12 months; and there will be a new relief to encourage green investment in technologies like solar panels.

Zack Bishti, CEO of plant-based restaurant chain Neat Burger, which is currently ramping up expansion across London and the UK, is upbeat.

"We are big believers in brick and mortar, and the annual cut, paired with the improvement relief is a good first measure in keeping high streets alive," he says. "Hospitality businesses are dealing with inflationary pressures, supply chain issues and labour shortages, so the rates relief comes at a much-needed time as businesses navigate the tail end of the pandemic."

According to Sunak, the tax cut will be worth almost £1.7bn, and with Small Business Rates Relief more than 90% of eligible businesses will see a discount of at least 50%. “This is the biggest single year tax cut to business rates in over 30 years,” he said.

As well as changes to the business rates system, the Chancellor also announced reforms to alcohol duty. However, in a blow to the sector he failed to offer any further VAT relief, meaning it will return to its pre-pandemic level of 20% in April 2022.