On Budget day, many MPs were quick to celebrate the Chancellor’s announcement of a “permanently lower tax rates for retail, hospitality, and leisure properties”. I thought that was premature. With all the other tax rises going on, this announcement seemed too good to be true.
There was rather more to it than was made apparent. New rateable property values coming into force in April, a much smaller-than-expected reduction in the business rates multiplier, and the phasing out of business rates relief together mean big increases for many businesses.
In East Hampshire there are over 70 pubs and many cafes and restaurants. These are not only important employers but vital community assets.
UK Hospitality, the industry body, warns that nationally as many as six hospitality venues a day could close in 2026 unless the government acts to rein in the planned increases.
Here in East Hampshire, the average hospitality business faces a projected increase in business rates of over £13,000 over the next three years.
Many are already struggling with cost pressures including higher employer National Insurance Contributions and energy bills.
Soon we will also have the effect of the new Employment Rights Act too. This adds further cost and complexity especially for seasonal or variable-demand businesses, including many in hospitality.
We were told this week that the Chancellor had not fully understood the impact her changes to business rates would have. But two days later, the Valuation Office Agency said the government did know that thousands of pubs would see their business rates double.
It is hardly surprising that we have now seen yet another government U-turn – which is welcome – but at the time of writing, we don't know exactly what it will entail.
The government have talked specifically about helping pubs, but what about the rest of the hospitality sector, including local hotels, live music venues, cafés and restaurants, some of which also face huge pressures?
There’s another aspect of business rates, too, that I’ve been analysing. The government has also introduced a new, higher multiplier band for the costliest properties. This has been presented as a way of making online giants pay more and “levelling the playing field” with the high street. But what has not been made clear is that many other businesses will also be caught by this higher band.
Those include suppliers to high street retailers, whose increased costs may simply be passed on, as well as hotels. I am also pressing ministers on the potential impact on parts of the public sector, including health and education, which may find themselves subject to the higher multiplier.
So, this may be a difficult moment for the government, but it is a very very hard one for many businesses in the hospitality sector and beyond. The Chancellor must now spell out, clearly and urgently, how she intends to mitigate the plan she put forward.
