CBI launches business rates report

CBI CEO Rain Newton-Smith has called on the government to fix antiquated business rates rules in England to boost investment and grow the economy. Ahead of the Autumn Budget, the CBI convened firms from 12 sectors, including retail and manufacturing, to develop cross-economy solutions for a competitive and transparent business rates system.

Businesses from all regions of England told the CBI that the current business rates system is too complex, unpredictable and unfair – factors that dampen productivity and economic growth. The government has already committed to reforming the rates regime but insists that overall revenue must remain the same, which makes root and branch reform almost impossible and risks simply creating new and different imbalances.

Firms want to see a fair and balanced approach to reform, which requires ditching the revenue neutrality principle and creating a bridge between the current system and any long-term systemic changes. That could mean short-term support for the most adversely affected sectors, which could be delivered, along with a long-term plan, at the coming Autumn Budget.

The CBI’s recommendations include:

• Create a tailored approach that works across the economy
  • Change the application of business rates multipliers to a banded (‘slice’) approach, more like income tax, removing cliff edges and creating a more progressive system
  • Implement annual revaluations from April 2029 to address uncertainty caused by current revaluation cycles
• Make business rates investment-friendly to boost growth
  • Introduce a 120% green super deduction to shift the dial on net zero investment for businesses that invest in retrofitting business properties to make them more energy efficient
  • Make improvement relief more generous for companies who invest to upgrade commercial properties by extending its duration from 1 year to 3 years and removing the requirement for the same business to occupy the space before and after the works.
• Streamline reliefs and exemptions to free up funding
  • Review all reliefs – prioritising reform over reliefs where possible. A banded (‘slice’) approach removes the need for many existing reliefs altogether.
  • Cut out bureaucracy by excluding public sector buildings without a commercial purpose, such as NHS hospitals and government departments, from business rates and provide local authorities with equivalent levels of funding via another route
• Prioritise Valuation Office Agency (VOA) transparency and performance to help firms meet their obligations to pay
  • Delay the introduction of the duty for businesses to notify the VOA of changes to their properties to 2028 as current timelines are unrealistic and will create an unmanageable administrative burden
  • Provide the justification for changes in valuation methodology and set out a clear and fair challenge and appeals process for firms facing higher bills

CBI CEO Rain Newton Smith said: “It’s time to fix the antiquated business tax system once and for all, seizing the chance to boost investment and grow the economy. The current system is simply not fit for purpose, and enduring inaction has hurt firms across the country.

“Businesses want a system built on certainty, simplicity, competitiveness, transparency and fairness. Together with members, the CBI has developed cross-economy solutions to establish a business rates system that helps, not hinders our growth ambitions. At the Autumn Budget, firms will be looking for an investment-friendly, tailored approach to business rates, with streamlined reliefs and more transparency.

“Firms have wholly welcomed the government’s commitment to reform business rates. But the insistence on revenue-neutrality is misplaced. It’s key that this condition is reconsidered, to ensure that business rates reform is approached with an open mind. Not doing so risks perpetuating the imbalance the government says it wants to fix”.

“The CBI stands ready to work hand-in-hand with the government to ensure that the reform of business rates improves competitiveness and boosts our growth prospects.”

James Burchell, co-founder and partner, Tellon Capital said: “We need urgent, fundamental reform and I was honoured the CBI asked me to chair the committee to recommend how government can get this right. Over the last few months, we met with numerous occupiers from many different sectors to come up with recommendations for a progressive, equitable system that incentivises success in our businesses and the regeneration of our town centres.

“A modern economy needs modern solutions, flexible enough to reflect the changing world we live in. So, from modernising the revaluations process to moving to an agile, progressive banding system, that’s what our recommendations aim to do. I am convinced that these can help drive forward the growth story for businesses and the UK.”

Dan Foxton, senior director – Estates & Acquisitions, Asda: “With a property portfolio spanning more than 1,200 properties across the UK, business rates are one of the most significant costs for Asda.

“The current business rates system is an obvious inhibitor to growth, which prohibits investment in retail stores, and we welcome Labour’s plans to replace business rates with a system for the 21st century.

“The CBI’s report sets out clearly how the government can deliver that reform in a way that benefits businesses, levels the playing field and ends the penalty for investing in our store estate.”

Tim Beattie, head of UK Rating, JLL:  “I strongly support the CBI’s Business Rates Reform initiative. The proposed shift to a progressive ‘slice’ system and the move towards more frequent revaluations reflect a balanced and forward-thinking approach.

“These reforms address key business concerns and promote fairer, more predictable taxation. Importantly, the recommended roadmap will enhance transparency and reduce compliance burdens, particularly for businesses with complex sites. If implemented these proposals would be a crucial step towards creating a more equitable and dynamic business environment.”

Alex Kramarenko, director – Real Estate Tax, PwC UK, said: “We at PwC are pleased to have contributed our technical expertise and practical experience to the CBI’s consultation on Business Rates Reform. It is clear from this project and from our experience that businesses find the business rates system to have significant challenges.

“A more simple, equitable system which is more accessible and comprehensible, minimising the need for specialised external advice, would clearly be appreciated by most businesses and be supportive of the growth agenda for the UK.”

Paul Greenwood, ExxonMobil UK chairman, said: “ExxonMobil supply consumers and businesses across the UK with energy to power daily life and chemicals that make everyday products possible. We operate a network of nationally significant infrastructure, that requires constant investment and maintenance to operate efficiently.

“ExxonMobil support the development of a progressive tax system that recognises the importance of large infrastructure and seeks to maintain the viability of such businesses, thereby enabling future potential investment.  Should the current system evolve, policymakers must consider the fiscal competitiveness of UK industry and how rapidly increasing business rates are hampering potential growth.

“The CBI’s report offers a way forward for the business rates system to support rather than hinder business investment and growth.”