Pubs could have to fork out £1k a month for business rate bill by 2028

UKHospitality is warning of steep business rates hikes over the next three years as the detailed analysis of the impact of the Autumn Budget is shared.

While the Chancellor did announce a reduced multiplier and transitional relief for business rates, the hospitality body is claiming that the average pub business will still see a 15% rise in their rates bill next year, amounting to an extra £1,400.

This figure is also set to increase each tax year, meaning, in total over the three years, an average pub will pay an extra £12,900.

What did the Chancellor announce for hospitality businesses?

The minimum wage rise of 4.1% was confirmed though this came as no surprise – nor was the re-commitment to licensing law reforms. However, for the majority of businesses in the hospitality industry, the laser focus was on business rates.

There has long been dissent that these rates are crippling businesses; with big names, including Co-op, warning of potential closures and job losses if reform was forthcoming.

In July, the CEO of pub chain, Greene King, urged the Government to rethink how it enforces business rates, and urged for a switch to business rates taxes charged on profits, rather than on property.

This didn’t come to pass. Instead, the Government is to levy a business rate surcharge on large commercial properties. This was blocked earlier this year but is now set to become law.

It will impact commercial properties worth over £500k and will be paid by larger firms, like warehouses and supermarkets. The Government also announced that it will fund a permanent discount for over 750,000 smaller retail, leisure and hospitality (RLH) properties.

What does this mean for businesses?

UKHospitality has crunched the numbers and says that, despite the discounts and relief, hospitality businesses are still in for higher business rates.

It honed in and says that in 2027/28, an average pub’s rates will be £4,500 higher than today, and in 2028/29 £7,000 higher. This is a 76% increase. There are reports too that this is a conservative estimate.

ITV News quoted one west London pub owner who said that his costs “…will increase from around £2,500 to more than £20,000 per year, while another said he will have to pay 92% more in business rates than last year”.

For hotels, it is bleaker with a 115% hike. A hotel will be paying an extra £28,900 in rates next year. In 2027/28, it will be £65,000 higher than today and in 2028/29 £111,300 higher. In total, over three years, an average hotel’s rates bill will increase by £205,200.

The hospitality association argues that businesses with huge spaces – like online retailers and supermarkets – will actually be hit less severely.

“The rates bill for a distribution warehouse, the likes used by online giants, will have only increased by 16%, an office building will have only increased by 7% and a large supermarket by only 4% by 2028/29”, it reports.

What do hospitality businesses want?

UKHospitality is urging the Chancellor to increase the level of business rates discount from 5p to 20p, and says this was previously proposed and would be permitted by law.

Kate Nicholls, Chair of UKHospitality, explained: “The Government promised in its manifesto that it would level the playing field between the high street and online giants. The plan in the Budget to achieve this is quickly unravelling, and will deliver the exact opposite.”

She continued: “We repeatedly warned the Treasury ahead of the Budget that hospitality would be uniquely impacted by significant increases to rateable values, due to the pandemic impacting previous valuations. This had to be factored into the level of business rates discount it offered the sector.”

While business owners now sit down to face what potential costs are incoming, they will be hoping that the Chancellor takes heed and revisits the reforms; as many are concerned that they have not gone far enough to save a beleaguered industry.