Investment management group Colliers has voiced concerns over the anticipated significant increase in UK business rates next spring, deeming it “unsustainable.” According to John Webber, Head of Business Rates at Colliers, unless the government takes action, there will be a total rise in business rates of approximately £1.74 billion in April, reaching a staggering £27.74 billion. This sharp increase is predicted to have a detrimental impact on all sectors of the economy, particularly retail businesses on the high street.

Business rates are calculated based on the Consumer Price Index (CPI) figure from the previous September and increase in line with inflation. With the latest CPI figures standing at 6.7%, it is projected that the total revenue generated from this tax will reach £27.74 billion in the fiscal year 2024/2025, up from £26 billion in 2023/2024 starting from April next year.

Webber highlights that the government can prevent this rise by freezing the business rates multiplier, as Chancellor Jeremy Hunt did for the current tax year, maintaining it at 51.2p for every £1 of a commercial property’s rateable value and 49.9p for small businesses. Failure to intervene will burden all sectors with an unsustainable tax. The retail sector, which presently contributes 21% of the total business rates tax bill, is expected to face rate hikes of around £366 million in April. Moreover, the expiration of business rates reliefs will further exacerbate the impact on the retail sector.

The logistics/manufacturing sector, accounting for 26% of the total business rates tax bill, has already experienced significant increases in rates bills this year due to a 2023 Revaluation. Colliers estimates that this sector will face an additional rise of approximately £453 million in April. For instance, the Amazon London distribution park in Tilbury anticipates its rates bill to escalate from around £4.7 million in 2023 to £6.75 million from April 2024, unless preventive measures are announced.

Webber expresses disappointment that neither the Conservative nor the Labour party conferences addressed the issue of business rates. With imminent increases of over £1.74 billion next year, he fears that both parties are adopting a “head in the sand” approach. Urgent action is required to tackle this issue.

Useful links:
1. Government Guidance on Business Rates Reliefs
2. Colliers Official Website