Ahead of COP26, employers representing around 261,000 businesses and nine million employees say business rate reform essential for green investment.
The CBI, along with 41 trade associations spanning the UK economy, have issued a joint statement outlining how action by the Chancellor at the Budget to reform the current business rates system could unleash a wave of business investment across key government priorities, including net zero and levelling up.
Presently, in England, the existing, outdated and outmoded business rate regime acts as a drag on the government’s goal of a high wage, high productivity and high investment economy. With up to 50% of business investment potentially subject to business rates, the current system actively disincentivises business investment in decarbonisation and wider investments which can improve all-important productivity, which is the only sustainable route to higher wages.
The joint statement from businesses is backed by 41 trade associations including British Retail Consortium, UK Hospitality and SMMT, representing around 261,000 businesses and nine million employees (see notes to editors for full list of TAs).
The joint statement reads:
Government and business are united in a mission to Build Back Better and Greener from the global pandemic. If we as a country are to truly level up and meet our net zero commitments, leading by example in the year we host COP26, then unleashing a wave of business investment should be the focus. Up to 50% of business investment is potentially subject to business rates, so the financial burden on firms is high and the 2023 revaluation could see it increasing further. Therefore, with the current business rates system acting as a tax on investment, action is needed to rebuild the UK’s international competitiveness.
The Government has confirmed that policy announcements as part of the long-awaited reform of the business rates system will now be made this autumn. Firms need to see fundamental reform of the system to address long-standing barriers to investment. The Government has backed business throughout the pandemic with short-term reliefs, but as businesses begin to rebuild, they need the confidence to invest.
However, the current system hasn’t kept pace with the challenges and opportunities we face as a country. No business begrudges paying into the tax system, and the pandemic has shown how important and valued our public services are. But in their current form, our business rates system is uncompetitive, unproductive and unfair.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said:
“Sky high business rates are closing stores up and down the country and preventing new ones from opening. A recent BRC survey found that four-in-five retailers will be forced to close shops unless the rates burden falls following the Government’s upcoming Fundamental Review. Without change, the areas most in need of levelling will be hit hardest, and the Government’s levelling up agenda will fail. The choice is clear – cut rates and boost investment and jobs, or leave them unchanged and see more shops closed and jobs lost.”
Michael Hawes, Society of Motor Manufacturers & Traders, said:
“The business rates system is overdue an overhaul. Business rates are an absolute, and relatively high, fixed cost, unresponsive to the economic cycle and generally seen as a competitive disadvantage when UK automotive plants compete with others across Europe and beyond. The current arrangements, whereby anyone wanting to invest in new equipment – especially green technologies – sees their business rates rise, is a perverse disincentive to investment and productivity improvement. To address this uncompetitive situation, rateable and non-rateable plant and machinery should be removed from manufacturing business rates valuation. Automotive is fully supportive of the government’s levelling-up and net zero ambitions but we need a modern and progressive rates regime, one that incentivises investment and helps deliver productivity improvements.
Melanie Leech, Chief Executive, British Property Federation said:
“The business rates system is undermining town centre recovery and poses a significant risk to the future of our high street businesses. Business rates have become so unaffordable, they are now hampering town centres’ ability to adapt, modernise and thrive. Fundamental business rates reform will unlock much-needed investment for businesses, town centre regeneration and the nation’s net zero ambitions – the Government cannot afford to waste this opportunity.”