Trade associations urge Sunak to overhaul ‘unfair’ business rates

Labour has vowed to scrap the ‘unproductive’ tax

Shoppers on the high street in Loughborough, Leicestershire (PA)

The chancellor Rishi Sunak must urgently reform the country’s “unfair” and “unproductive” business rates system, dozens of trade associations have said.

In a statement, the Confederation of British Industry (CBI) and 41 business groups, which represent a total of 9 million employees, urged the Treasury to tackle the issue in this month’s Budget.

The signatories warned that the government would fail in its drive to level up the country and achieve net zero if it does not significantly alter business rates, a levy on non-domestic properties such as shops and warehouses.

They said the “outdated” tax contributes to the demise of high-street stores across the country and creates disincentives for green investment.

“If a business invests in solar panels, or other plant and machinery to improve their property, this increases their rates bill,” the statement said.

The system is “uncompetitive, unproductive and unfair” in its current form and does not compare favourably to property taxes in other countries such as Germany, the industry groups added.

As a means of aiding the UK’s economic recovery, the business associations called for a “modern system that rewards investment, turbo charges net zero and kickstarts growth for the next decade”.

To this end, they called for business rates to be lowered, for the frequency of revaluations to increase and for the creation of a “greener” model.

Rain Newton-Smith, the CBI’s chief economist, said action on the issue was “sorely needed” to reinvigorate the economy.

Fundamental business rates reform would allow the country to achieve high wages, productivity and skills in the future, he argued.

Michael Hawes, of the Society of Motor Manufacturers and Traders, agreed that the system is “overdue an overhaul”.

“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,” he said.

Meanwhile, Melanie Leech, the head of the British Property Federation, said the current approach poses “a significant risk” to high street businesses and was hampering the ability of town centres to modernise.

Speaking at the Labour conference last month, the shadow chancellor Rachel Reeves said her party would scrap business rates.

“We will carry out the biggest overhaul of business taxation in a generation, so our businesses can lead the pack, not watch opportunities go elsewhere,” she said.