Retailers Face £250m Business Rates Rise Despite Healey’s High Street Relief Plan

The headline promise of relief for high streets sits alongside a £250m increase in their business rates bills next April. That gap between the Chancellor’s description of his plan and the cost retailers expect to face is driving the industry’s response to John Healey’s first Budget: support is on offer, but its scale and reach remain in question.

Healey said the package would reduce the burden on small firms and give businesses more room to invest in jobs and premises. It raises the threshold for small-business rates relief from £12,000 to £18,000, which is expected to exempt 70,000 additional companies. For other businesses in retail, hospitality and leisure, he described the plan as a freeze on rates bills.

The difficulty lies in what that freeze means in practice. Bills are still due to rise by 3.5 per cent, in line with inflation, adding an estimated £250m to the high street’s total rates burden next April. The industry’s objection is less about whether the package contains relief than about the gap between that relief and the increase facing many firms.

The British Retail Consortium (BRC), whose members include Tesco, Sainsbury’s and Marks & Spencer, called the announcement “smoke and mirrors”. Helen Dickinson, its chief executive, said rising bills would deliver “another body blow to high streets already struggling with rising costs and empty units”. Her criticism points to a practical problem: a higher relief threshold may help firms that qualify, while inflation-linked increases can still raise costs elsewhere across the sector.

Relief with limited reach

One measure is intended to protect firms receiving transitional relief from sharper increases in their rates bills. However, it is understood to apply to only a small number of high street businesses. That limits how much reassurance it can offer retailers looking for broad, visible reductions in operating costs.

The BRC’s response also reflects expectations built before the Budget. Retail leaders had hoped for more substantial changes to business rates and cuts to employment costs. Healey had met high street representatives two weeks earlier and discussed both the rates burden and ways to help more young people who are not in education, employment or training into work. The Budget has not, in the view of industry figures, answered those requests at the scale they expected.

Some of the sector’s other priorities also went unaddressed. Sam Waller, a consumer markets expert at PwC, said retail, hospitality and leisure had “a lot riding” on the Budget, given Andy Burnham’s emphasis on high street revival. Waller said there was no change on calls for lower VAT for hospitality, the return of tourist tax refunds, or a reduction in payroll pressures introduced in the previous Budget.

Those are distinct cost pressures, and the rates package does not resolve them. For hospitality businesses, VAT and payroll costs affect the economics of serving customers and employing staff. Retailers, meanwhile, must account for property costs alongside staffing and other expenses. A rise in rates can therefore matter even when a firm gains some relief elsewhere, particularly where costs are already high or premises are difficult to fill.

The test for the high street

Healey said the measures were funded through higher taxes on gambling firms and a VAT crackdown on e-commerce platforms, which he argued would help pubs, cafes and shops thrive. The plan pairs those revenue measures with targeted business rates support. But the available figures leave a clear question for retailers: how many businesses will benefit enough to offset the expected increase in the sector’s total bill?

That question matters because the stated aim is to support investment in shops and jobs. A lower relief threshold could make a material difference to newly eligible firms, while a rates increase could absorb funds that other businesses might otherwise put towards staffing, maintenance or improvements. The effects will vary by business, and the source figures do not set out how the additional £250m is distributed among individual firms.

Ros Morgan, chief executive of the Heart of London Business Alliance, said “serious questions” remained over whether the Budget went far enough to meet the stated ambition for high streets. Her assessment echoes the wider industry response: naming the package a freeze does not settle whether businesses will see their bills fall, stay level or rise.

Healey’s changes widen eligibility for relief and offer protection to a limited group receiving transitional support. Yet the projected £250m increase, combined with demands for help on employment and other costs, gives retailers reason to judge the measures by their actual effect on bills. The next test is whether the relief reaches enough businesses to support investment while the inflation-linked rise takes effect.