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British manufacturers have said they will have to pay an extra £940m a year in business rates because of changes by Rachel Reeves that come into effect this month.
Manufacturers face a disproportionate business rates bill because they often have large factory floors, according to analysis by MakeUK, an industry lobby group. It said that factories accounted for a fifth of England and Wales’s property by rateable value, despite manufacturers only accounting for a 10th of economic output.
The chancellor increased business rates at the budget in November. That included companies paying an additional surcharge on buildings of a rateable value of more than £500,000.
The government faced a strong initial backlash to the business rates changes from pubs and live music venues in particular. In January the government made a partial U-turn by announcing £80m in discounts, after warnings that some of the businesses would be forced to close. Retailers also successfully argued against even higher rates.
However, MakeUK argued that the government should also look at ways to help manufacturers as well as retailers and hospitality businesses, at a time when they must also deal with the energy price shock caused by the US-Israel war on Iran. The lobby group said that the government should give a year’s notice before raising rates.
Verity Davidge, the policy director at Make UK, said: “The current system of business rates is outdated and is a blunt instrument that leaves manufacturers paying disproportionately more than other sectors relative to their size.
“This increase couldn’t come at a worse possible time and is set to hammer one of the government’s key strategic sectors which is already facing existential threats from increased energy and employment costs which are completely out of their control. For many companies right now, just to survive the burdens being imposed on them will be an achievement.”
Business rates, which are used to fund essential local government services, are calculated by applying a “multiplier” to the rateable value of property, set every three years by the government’s Valuation Office Agency in England and Wales (or by equivalents in Scotland and Northern Ireland). That means that large properties tend to pay higher rates, regardless of how successful the business is. MakeUK argued that rates should be linked to business turnover, size and type, with discounts for small and mid-sized companies.
Across England and Wales there are an estimated 380,000 manufacturing premises. MakeUK said that property types that include “industrial” and “factories, mills & workshops” were worth £14bn, accounting for more than a fifth of the total rateable value of properties across England and Wales.
A fifth of 132 manufacturers surveyed by MakeUK will pay the “high value” multiplier for properties worth more than £500,000.
