Shops, cafes and pubs in England had a reprieve from a jump in business rates next year after British finance minister Rachel Reeves extended a relief scheme introduced during the COVID pandemic.
"I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26 up to a cap of £110,000 per business," Reeves said.
High street businesses have long complained that the rates system penalises them.
According to trade groups UKHospitality and the British Retail Consortium, high street businesses pay more than one third of the business rates collected every year, amounting to almost £9 billion (€10.8 billion), far more than the sector's 9% contribution to the overall economy.
The bosses of pubs groups Fuller's, Greene King, JD Wetherspoon, Stonegate and Young's and brands like Burger King, Caffe Nero and KFC were named as supporters of campaign to extend relief ahead of the budget.
Earlier this month, retail CEOs in the UK called on the government to introduce a Retail Rates Corrector as part of its commitment to reforming the business rates system.
'A Tale Of Two Halves'
Erin Brookes, managing director and head of retail and consumer, Europe at Alvarez and Marsal, commented, "Today’s budget is a tale of two halves for retailers. Business rates relief will avoid the cliff-edge that many had feared next year, while the maintenance of R&D tax relief will help encourage investment in new technology and products.
"The increase in the National Living Wage (NLW) may offer a welcome boost to consumer confidence, which has been notably low, with many individuals concerned about their personal finances."
According to Brookes, this increase NLW is a "double-edged sword for retailers". Along with a positive impact on lower-paid employees, including younger and part-time workers, it could also lead to a challenging adjustment period for retailers due to associated rise in operating costs.
"This, coupled with the increase in employer national insurance, means that retailers may face difficult decisions as they seek to balance supporting their front-line teams with the need to invest in productivity-enhancing areas like technology. To manage these added costs, we could see businesses prioritising cost efficiencies elsewhere to stay resilient against this headwind," Brookes added.
Tech Investments
Ed Bradley, CEO and founder of Virtualstock, welcomed the business rate relief and added that tech investments are another way the government could support retail businesses.
Bradley explained, "Rachel Reeves’ apparent lack of tech investment could negatively affect the retail industry. Technology is critical for optimising supply chains, reducing inventory holding costs, and improving productivity.
“With concerns around the 'death of the high street', embracing digital transformation is crucial for survival and boosting the UK economy. Not to mention that amongst consumers, there is a growing demand for agile, e-commerce-driven solutions. It’s tech and not just tax that the government must think about.”
News by Reuters, additional reporting by ESM.
