Business rates could rise by £1.95bn in ‘bleak picture’ for UK retail and hospitality

High street shops could see their business rates bill increase by up to £1.95bn next year because the rate charged is linked to inflation.

Hospitality industry leaders warned the expected rate rises would “undoubtedly be the final nail in the coffin” for many businesses which have already been squeezed by the rising costs of labour, energy and ingredients.

Helen Dickinson, head of the British Retail Consortium trade body, which represents most of the UK’s major chains, said the rise would “inevitably put renewed pressure on consumer prices” and called on the government to take steps to ease the expected increase.

Last month, bosses from major retailers including Tesco, M&S and Ikea called on the government to scrap the planned inflation-linked rise in next month’s autumn budget.

The September inflation figure is typically used to decide the annual increase in the property-based tax levied by local councils from businesses such as retailers, pubs and offices. On Wednesday, the Office for National Statistics revealed the inflation rate for September was 6.7%.

The data signals a £1.95bn jump for business rates in England, according to the real estate intelligence firm Altus Group. Property experts at Gerald Eve have predicted it will be closer to £1.7bn.

Kate Nicholls, the chief executive of UKHospitality, warned of a “bleak picture”. She said the trade body estimated the jump in tax bills paid by pubs, restaurants and hotels to be £234m, while an end to government relief schemes on rates could add a further £630m to costs.

“Almost a billion pounds in extra costs from business rates alone is unfathomable – and insurmountable – for many,” she said. “Such dramatic cost increases would undoubtedly be the final nail in the coffin for many businesses. It would be particularly perilous for small, independent businesses, for which ongoing relief measures are a lifeline at a challenging time.”

Alex Probyn, the global president of property tax at Altus Group, agreed there could be a “double whammy” on business rates if relief in place for small businesses and certain categories, such as music venues, were removed.

Simon Green, head of rates at Gerald Eve, said: “Clobbering high streets, retail parks, office blocks and logistics firms with these sky-high rises will create a significant blow to the economic recovery that everyone wants to see.”