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Budget 2021: UK firms call on chancellor to reform business rates

Rishi Sunak
The CBI and other businesses called the business rates system 'uncompetitive, unproductive and unfair', saying UK property tax levels are four times higher than Germany’s, and 50% higher than the G7 average. Photo: Ian Forsyth/Getty Images (Ian Forsyth via Getty Images)

The Confederation of British Industry (CBI), along with 41 other trade associations, has called on the chancellor to reform the current business rates system which is “essential for green investment”.

A joint statement from associations spanning the UK economy, including the British Retail Consortium (BRC), UKHospitality and the SMMT, said action from Rishi Sunak at this month’s budget could bring business investment across key government priorities.

This included levelling up the UK economy, as well as helping to reach net zero targets.

“If we as a country are to truly level up and meet our net zero commitments, leading by example in the year we host COP26, then unleashing a wave of business investment should be the focus,” the letter said.

The groups, which represent around 261,000 businesses and 9 million employees, highlighted that the “outdated” current business rate regime, acts as a drag on the government’s goal of a high wage, high productivity and high investment economy.

Read more: CBI calls for more UK action on net zero ahead of COP26

It called the business rates system “uncompetitive, unproductive and unfair”, saying UK property tax levels are four times higher than Germany’s, and 50% higher than the G7 average, as a proportion of GDP.

Up to 50% of business investment is potentially subject to business rates, meaning that the current scheme actively dis-incentivises funding in decarbonisation and wider investments.

“If a business invests in solar panels, or other plants & machinery to improve their property, this increases their rates bill. As these investments take several years to yield a return, the immediate increase in rates often makes the investments unviable”.

It added: “The government has backed business throughout the pandemic with short-term reliefs, but as businesses begin to rebuild, they need the confidence to invest.”

Watch: Top tips for helping the environment on a tight budget

The letter pointed out that the financial burden on firms is high and the 2023 revaluation could see it increasing further.

“Action to get investment flowing into and around the UK is sorely needed to reinforce our recovery,” Rain Newton-Smith, CBI chief economist, said.

“The Government deserves credit for convening the supply chain advisory group to unblock temporary challenges, but as we’re seeing with energy prices, there is no substitute for longer-term planning and investment.”

He added: “The Chancellor has an opportunity to fix this, starting with fundamental business rates reform at the Budget and Comprehensive Spending Review. By setting out an approach which attracts investment, he can equip the UK with the tools it needs to secure the high wage, high productivity and high skill economy of the future.”

Read more: CBI backs Labour's pledge to scrap business rates

Meanwhile, Helen Dickinson, chief executive of the BRC, said: “Sky high business rates are closing stores up and down the country and preventing new ones from opening. A recent BRC survey found that four-in-five retailers will be forced to close shops unless the rates burden falls following the government’s upcoming Fundamental Review.

The comment comes ahead of the COP26 conference, which is being held between 1 and 12 November.

It will be the largest summit the UK has ever hosted, and will have dozens of world leaders in attendance, bringing together representatives from nearly 200 countries, including experts and campaigners.

It was originally scheduled for November 2020 but was delayed by a year due to the coronavirus pandemic. It has been described as the most significant climate event since the global Paris Agreement was secured in 2015.

Watch: COP26: Boris Johnson told to 'get a grip' ahead of climate summit instead of 'touring the beaches' on holiday