Business rates relief axed for Welsh pubs and restaurants

Business rate relief for Welsh businesses will be slashed next spring, in a move that will serve as a death blow to pubs, shops, and restaurants across the country.

As part of Welsh Labour’s new £21bn budget for the financial year 2024-25, Retail, Hospitality, and Leisure (RHLR) Relief will be dramatically reduced.

The changes, which will come into effect on April 1, will see qualifying firms have their government discount lowered from 75% to 40%. The money will instead be used to fund the country’s struggling health service. In England, the scheme is set to continue into 2024-25.

Commenting on the decision, Finance Minister Rebecca Evans said: “We have had to take some really difficult decisions to radically redesign our spending plans to focus funding on the services which matter most to the people of Wales”.

Business rate woes to worsen for Wales

Business rates are a tax charged by local authorities in order to finance public services. The scheme has come under criticism in the past few years, representing a significant expense for cash-poor SMEs to contend with during the turmoil of the past half decade.

To support firms during the COVID-19 pandemic, business rate relief programs including RHLR were announced in the March 2021 budget. The program has since provided a much-needed lifeline for small businesses navigating the current economic downturn.

However, business rates are set to increase by 6.7% in April 2024 under the government’s “multiplier”, which is linked to inflation.

Business leaders in Wales had previously warned that firms will face an extra £80m on their bills from next spring unless business rates are frozen for the next 2024-25 financial year.

In a publicly shared letter, 15 Welsh business representative groups and industry bodies implored the Finance Minister to “freeze the headline business rate multiplier – which is already at a 24-year high and the highest in Great Britain – in the coming financial year.”

At the time of writing, it remains unclear whether the increase will go ahead. Certainly, without the RHLR relief, the imperative for support will be even greater.

No relief for hospitality industry

The retail and hospitality sector has faced a bitter cocktail of challenges during the past five years. Following mass closures during the pandemic, the industry has reopened to a rotation of hiked energy rates, staffing shortages, and reduced consumer spending.

Adding further insult to the injury of losing RHLR, the UK government announced immigration law changes last month which will make it more difficult for companies to plug hiring gaps with foreign talent.

Under the new rules, the earning threshold for a skilled worker visa will rise to £38,700. This represents an increase of almost 50%, and is far above the average weekly earnings for a hospitality worker in September 2023 (£305).

The result is thousands of small businesses on their knees, with closure an increasingly real threat for many. The Altus Group, a commercial real estate analyst which monitors pub closures, says 386 pubs in England and Wales closed in 2022.