Government urged to extend business rate relief as commercial rent rises

The Federation for Small Businesses (FSB) has called for the UK government to extend the 75% business rates relief discount for retail, hospitality and leisure businesses to help struggling SMEs.

The FSB is calling for an extension beyond the April 2024 cut-off date in England and an increase in the threshold for Small Business Rates Relief (SBRR) from £12,000 to at least £25,000 – which, it says, would remove more than 250,000 small businesses from the rates system.

Significant support could also be achieved by widening the tapering to cover a higher range of rateable values, the FSB suggests.

Pubs close at alarming rate

The call comes ahead of yet another expected interest rate rise next week by the Bank of England, which currently stands at 5.25%, and is predicted to hit 5.5%.

The risk of an end to the business rate relief and another imminent interest rate is devastating news for SMEs across the UK who are already struggling to keep their doors open. Surging commercial rent and sales prices, energy bills and a tough financial climate for customers are all contributing factors.

New data by commercial real estate analysts Altus Group found that the number of pubs in England and Wales that permanently closed rose sharply in Q1 and Q2, with 383 pubs folding – almost the same number for the whole of 2022, when 386 closed.

The hospitality industry was one of the hardest hit by pandemic-era restrictions, and would especially benefit from an extended business rate relief period as they battle the rising cost of ingredients and a challenging hiring environment.

“The government needs to bring about a sea change when it comes to business rates,” says Martin McTague, national chair at the FSB. “Small firms have taken on huge cost burdens in recent times and the Chancellor has an opportunity here to take action on business rates, while enabling small businesses to grow.

“For many small businesses on the high street and town centres, the current relief is a lifeline. In April, this is due to end, creating a cliff edge that will be hugely damaging to thousands of businesses. Ensuring the relief is maintained for those businesses that need it most will be key to their survival.”

Commercial rent rises

The rising rent costs of residential properties have widely been reported on – and so too has the value of homeowners’ properties dropping.

According to new research published by Hamptons, higher interest rates have put greater upwards pressure on rents than they have downward pressure on house prices. They say that higher rents reflect additional financial costs alongside the increased burden of wages and building materials.

All of these factors have an impact on commercial rent costs, too. In May, research by Sirius Property Finance found that the average commercial rent secured across Britain sat at 42% higher than the pre-pandemic market and was up 9.7% year-on-year – a huge additional financial burden for SMEs in particular.

And of course, those same business owners struggling with increased commercial rents will also have to contend with higher residential rents or mortgage rates for their own living circumstances, creating a double-whammy crisis of financial pressure.

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Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, TNW, UKTN, The Business Magazine and Maddyness UK. She also works closely with agencies such as CEW Communications to develop content for their startup and scaleup clients.