The Treasury has ordered a review into how business rates are calculated for pubs and hotels, with recommendations for reform due by the end of March next year. The move follows significant increases in rateable values for both sectors this year, largely due to the ending of pandemic-era valuations.
The government has called in Jerry Schurder, former business rates policy lead at advisory Newmark UK, to report back so that any changes can be applied before the next revaluation. The government says it is concerned that current valuations do not 'reflect the realities' of the current landscape and wants to make the system 'fair and transparent,' so pubs and hotels can 'plan better for the future.'
Call for evidence launched
The government is also launching a call for evidence from landlords, brewers, hoteliers, and business owners. This comes after a 20 percent cut to business rates bills was announced to ease cost pressures on pubs, social clubs and live music venues from April next year.
The move was largely welcomed, but there have been calls to apply the relief to a wider range of businesses and to go further with broader changes to the system. Number 10 has said it will look to set out further reform, including small business rates relief, at the Budget.
Industry reaction
Financial Secretary to the Treasury James Murray said: “Pubs and hotels are vital for communities and bringing growth to every postcode. Last month, we announced tax cuts for pubs to give them the breathing room they need. Today we’re going further with a rethink of valuations – so that we can build a fairer system for the future.”
Mr Schurder said: "I look forward to hearing from businesses, representative bodies and valuation professionals as we assess how the current valuation methodologies for pubs and hotels operate in practice and whether they remain fit for purpose. Stakeholder evidence and engagement will be central to informing the review's recommendations."
Emma McClarkin, chief executive of the British Beer and Pub Association, said: “For years pubs have paid a disproportionately higher business rates bill which has ground down their ability to keep the doors open, so this review is sorely needed and hugely welcome.”
Nick Mackenzie, the CEO of Greene King, said 'fundamental' reform was 'urgently needed' as 'the current system has barely changed in three decades and overlooks how markets and customer habits have altered since the 1990s.'
Further calls for change
Allen Simpson, Chief Executive of UK Hospitality, said: "I'm pleased that the Government is looking seriously at the valuation methodology for pubs and hotels. Business rates remain a significant burden for hospitality businesses and the system needs to better reflect the trading realities for the sector."
Neal Jones, EMEA president at Marriott International, said “The current valuation methodology creates a significant burden for hotels, and it is right that the system is being examined to ensure it is fair, transparent, and reflective of today’s market realities.”
Shadow chancellor Sir Mel Stride said the impact of the move, which would see the recommendations implemented at the next 2029 business rates revaluation, would come too late. He said: “Tax hikes on business premises and jobs, alongside job-destroying regulation in the Employment Rights Act, have left many hospitality businesses on the brink.”
The Liberal Democrats' Treasury spokesperson Daisy Cooper said: “This can’t be an excuse for not taking bolder and more urgent action to save our high streets now. Fundamental reform of business rates is long overdue, but every day high street businesses are deciding whether they can keep the doors open.”
