UK Manufacturers to Pay £940m More Annually in Business Rates Under New Government Changes
British manufacturers are set to incur an additional £940m per year in business rates as a result of modifications introduced by Chancellor Rachel Reeves, which took effect this month. According to analysis by MakeUK, an industry lobby group, this increase places a disproportionate financial burden on manufacturers, primarily due to their extensive factory floors.
Disproportionate Impact on Manufacturing Sector
MakeUK highlights that factories constitute approximately one-fifth of the property rateable value in England and Wales, despite manufacturers contributing only a tenth to the economic output. This discrepancy arises because business rates are calculated based on property size, with larger premises like industrial floors facing higher charges regardless of business performance.
The chancellor's budget adjustments in November included an extra surcharge for properties valued over £500,000, affecting two-thirds of UK manufacturers surveyed by MakeUK. Verity Davidge, policy director at MakeUK, criticized the system as outdated and blunt, stating it unfairly targets a strategic sector already grappling with external pressures.
Government Response and Industry Appeals
Initially, the government faced backlash from sectors such as pubs and live music venues, leading to a partial reversal in January with £80m in discounts to prevent closures. Retailers also successfully lobbied against steeper rate hikes. However, MakeUK argues that manufacturers deserve similar consideration, especially amid energy price shocks linked to geopolitical conflicts like the US-Israel war on Iran.
The lobby group advocates for reforms, suggesting business rates should correlate with turnover, size, and business type, with exemptions for small and mid-sized enterprises. They also recommend a year's advance notice before any rate increases to allow better planning.
Broader Implications and Statistics
Across England and Wales, there are an estimated 380,000 manufacturing sites, with industrial properties valued at £14bn, accounting for over 20% of the total rateable value. This underscores the significant role manufacturing plays in the property tax base, yet the sector's economic contribution does not align proportionally with its rates burden.
Davidge emphasized that the timing of this hike exacerbates challenges from rising energy and employment costs, threatening the viability of many companies. She noted that for numerous firms, merely surviving these imposed burdens would be a notable achievement in the current climate.
