Businesses face 140% rate hike as relief cuts hit

Thousands of retailers, restaurants, pubs and gyms are bracing for financial trouble as the government’s new business rates policy takes effect in April. “The Labour government’s business rates policies will soon put even further pressure on the high street as bills for the new rating year start to drop through the letterbox next month,” said John Webber, head of business rates at Colliers. Government’s move to slash business rates relief for the retail, hospitality and leisure sectors from 75% to 40%, effective from 1 April 2025, will result in thousands of businesses facing hikes of 140% or more in their bills over the next year, according to Colliers. In November 2022, the Conservative government introduced the Retail, Hospitality, and Leisure Relief Scheme to help the sector cope with unaffordable business rates. The scheme offered eligible businesses 75% relief on rates, capped at £110,000 per business. However, in last year’s Autumn Statement, the Labour chancellor Rachel Reeves announced a reduction in the relief to 40%. This will mean retailers currently receiving relief will see their annual business rates rise from an average of £3,751 to £9,003 in April. Similarly, restaurants will face an increase from £5,563 to £13,351 per year on average, while pubs will see their bills rise from £4,017 to £9,642 annually.  Closures The Centre for Retail Research predicts that store closures in 2025 could reach 17,349, exceeding previous years, driven rising business rates, higher employer national insurance contributions and increases in the minimum wage. The situation for pubs is equally bleak, with numbers at a historic low after more than 400 closures in 2024 – an average of 34 per month. Analysis by insolvency practice Price Bailey suggests that more than one in 10 British pubs are at risk of closure in 2025. Other leisure businesses will also be impacted by the cut in relief. For instance, nightclubs will on average see their annual bills rise from £7,479 to £18,245 in April. Since 2020, the sector has seen 37% of all clubs across the country permanently shut – an average of three clubs a week – according to the Night-Time Industries Association. Gyms will see their bills rise on average from £2,942 to £7,060 in April. No cushion for businesses “The government has said it will help the retail, hospitality and leisure sectors by introducing a lower multiplier for those who have up to now received reliefs. However, we question how helpful this will be since this won’t be implemented until April 2026 and will coincide with the 2026 revaluation, where RHL rateable values are expected to rise in line with rental growth, resulting in higher rates bills. Meanwhile, businesses still have the year ahead to face in which the current reliefs will be slashed with no other cushion for businesses,” said Webber. “The RHL sector has already been hit for six with the increases in employer national insurance contributions, increases in the minimum wage and increased inflation. Many businesses are now considering their options, and some won’t survive. For the government to add these extra business rates costs on top just now beggars belief. “Labour said, if it came into power, it would ‘save the high street’. This slashing of reliefs will sadly do just the opposite, as we will sadly see when the bills drop through the letterbox in the month ahead.”  Photo by Maureen McLean/Shutterstock (14980097at)