Labour has pledged to reform business rates if it wins the upcoming general election, as part of a number of support plans aimed at high street SMEs.
Business rates are a tax on non-domestic premises that companies must pay annually. The party has said the move will help to revitalise the UK’s struggling high street shops, restaurants, and cafes, by enabling brands to more closely compete with online rivals.
Business rates have long been a topic of contention for small firms. Back in March, SME owners expressed hope that the government would announce a reduction on rates. They were disappointed when chancellor, Jeremy Hunt, instead confirmed a tax hike of 6.7%.
Failing high street
Labour first unveiled its business rates reform pledge back in November, when it published a list of planned support measures for UK small firms. This included an intention to scrap business rates and “replace it with a system that is fairer for bricks and mortar businesses”.
At the moment, business rates are calculated using a building’s rent costs (also called the rateable value). However, rising inflation and mortgage rates have seen many landlords introduce hefty surges on rent charges, pushing up business rate charges for cash-strapped SMEs.
The bill increase has been compounded by financial challenges such as soaring energy bills and lower profit margins. This resulted in a net decrease of 5,000 stores in the UK last year.
What would business rate reform look like?
Labour‘s business rate intervention is a promising start for SMEs. However, few details have so far been given on what will replace the current system.
Over the weekend, shadow chancellor Rachel Reeves told the BBC that Labour “want to reform the business rate system in a way that reduces the costs for small businesses.”
This could include an overhaul of Small Business Rate Relief (SBRR). SBRR is a discount scheme which ensures a lower bill if a property’s rateable value is below £15,000. Last year, the Welsh government slashed the SBRR discount for hospitality firms from 75% to 40%.
Campaigners have previously called for the government to raise rateable values, in order to ensure more organisations can qualify for SBRR financial assistance.
Last November, Federation of Small Businesses (FSB) National Chair Martin McTague said: “Government needs to bring about a sea change when it comes to business rates. It’s long been known that the system is not fit for purpose and needs an urgent overhaul.”
Labour targets small business vote
Alongside business rates reform, the opposition party has announced a number of other plans aimed at winning over small business votes ahead of the general election on July 4.
These include tackling anti-social behaviour, answering a rise in the number of shoplifting offences, and unveiling new powers to take over empty shops.
Labour says it would also target late payments, and create “banking hubs” to ensure small business and customers are not left behind as the UK increasingly goes cashless.
While the Tories might traditionally be viewed as the party for businesses, their support among entrepreneurs appears to be waning.
In a survey conducted by Startups at the end of 2023, 58% of businesses told us they thought a change in government this year would be positive for their organisation.
“Now is the time for change and we, as a country, have been waiting long enough,” says Jenny Blyth, owner of Storm in a Teacup Gifts. “I will be voting Labour, not because I think they are the solution, but because we need to do something different right now.”
