High street businesses may have to cut hours or axe staff in the face of a potential jump in business rates, industry leaders have warned.
Experts have predicted that fresh inflation figures are likely to result in an almost-£500 million increase in business rate payments by firms.
Business rates are the tax paid on commercial properties by businesses across the UK.
These typically increase each financial year in line with the previous September’s consumer price index (CPI) inflation figure.
On Wednesday, the Office for National Statistics (ONS) confirmed that inflation decreased to 1.7% for September 2024 – the lowest level since April 2021.
However, this will result in a £488 million increase in the property tax payments by businesses in England next April, if the Government confirms it will increase business rates payments in line with the 1.7% reading, according to Altus Group.
The real estate consultancy said £224 million of this is expected to be shouldered by the retail, hospitality and leisure sectors.
However, roughly 250,000 high street firms could witness an even sharper rise, with a current 75% business rates discount for retail, hospitality and leisure firms in England also due to expire in April 2025.
This discount was a one-year commitment to be applied for 12 months from April 1 this year, with Altus forecasting that the end of this could cost businesses up to £2.41 billion extra.
Business leaders have, therefore, called on the government to provide more support for firms next year in the Budget later this month.
Kate Nicholls, chief executive of UKHospitality, said: “These inflation figures confirm that hospitality is set for an eye-watering £914 million tax bill in April, if the Chancellor doesn’t act at the Budget.
“Business rates must be addressed, or venues at the heart of communities will see their rates bills quadruple and find themselves making awful decisions about whether to shorten hours, close more days, lay off staff, or even close their doors for good.”
Ion Fletcher, policy director at the British Property Federation, said: “Falling inflation is a good thing. But it still means a tax increase for hard-pressed businesses come next April, thanks to business rates being automatically increased in line with September’s figure.
“It’s simply not sustainable for business rates to rise every year regardless of rents and other property costs, or how well a business is doing.”
Alex Probyn, president of property tax at Altus, said the Chancellor must “look at ways of permanently ending the policy of increasing tax rates by inflation annually and how to lower the burden once and for all rather than leaving firms on this an annual cliff edge.”