18 October 2023 , 14:42
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High street businesses are bracing for a sharp increase in their business rate payments next year, following new inflation data. Industry leaders warn this could be the "undoubtedly be the final nail in the coffin for many" firms.
The Office for National Statistics (ONS) announced on Wednesday that UK inflation remained at 6.7% last month. This figure is typically used to determine the rise in business rates - the property tax paid by businesses like retailers, pubs and offices - for the following April.
This means there could be a £1.95 billion increase in these tax payments by businesses in England, according to real estate intelligence firm Altus Group. However, property experts at Gerald Eve predict it will be closer to £1.7 billion.
This will put significant pressure on the retail and hospitality sectors, which have already been hit hard this year due to rising costs and tighter consumer spending.
Last month, bosses from major retailers including Tesco, M&S and Ikea urged the Government to scrap the planned inflation-linked rise in next month's autumn budget.
Shop prices 'are yet to peak and will remain high' as inflation hits new heights
The British Retail Consortium (BRC) said on Wednesday that retailers are set to face a £470 million increase in their business rate bills in April 2024 due to the inflation figures.
Helen Dickinson, the boss of the BRC, warned: "This will inevitably put renewed pressure on consumer prices." She also urged the Chancellor to freeze business rates to help retailers lower prices and create new jobs.
UKHospitality, another industry group, revealed that hospitality businesses could face a £234 million increase in costs, with an additional £630 million potentially due from the end of a relief scheme. Kate Nicholls, the group's chief executive, described the expected rise in tax bills for pubs, restaurants, and hotels as a "bleak picture".
She added: "Almost a billion pounds in extra costs from business rates alone is unfathomable and insurmountable for many," warning that such increases could be the final straw for many businesses, especially small, independent ones.
Experts have also warned that customers may see more price hikes due to the tax increase. Simon Green, head of rates at Gerald Eve, said: "If the Government were to introduce a 6.7% rise for every ratepayer, at a time when costs are already under enormous pressure, that risks causing further inflation as businesses will have no choice but to pass on the costs to customers."
"Clobbering high streets, retail parks, office blocks and logistics firms with these sky-high rises will also create a significant blow to the economic recovery that everyone wants to see."
Alex Probyn, global president of property tax at Altus Group, said: "Our clients tell us that the business rates burden is a disincentive to invest and are already at an unsustainable level."
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