Special Report: Rachel Reeves dashes retailers’ hopes on business rates

Hopes of a government reprieve on hikes in business rates for high street businesses including travel agencies have been dashed by chancellor Rachel Reeves.

Speaking at the World Economic Forum in Davos last week, Reeves appeared to make a U-turn on a U-turn by rowing back on a pledge to consider additional support on business rates for the hospitality sector when questioned about a concession promised to pubs.

She said the government “will be setting out the detail in the next few days” but insisted: “The situation pubs face is different.”

A Treasury official said the government would listen to the concerns of other sectors but insisted: “This package is for pubs.”

Only a week earlier, the chancellor had suggested support would be provided in a “balanced way that particularly supports our pubs and hospitality sector” and officials had indicated the Treasury was considering help for hotels, restaurants and cafes.

On Tuesday (January 27), the government confirmed pubs and music venues in England would be given a 15% discount on their business rates bills from April and will not see increases for two years, with the three-year package estimated at £1,650 for the average pub in 2026-27.

Representatives of the wider retail sector, including Abta, have also called for relief.

Abta chief Mark Tanzer insisted this month that “any changes to business rates must benefit all high street retailers, including travel agents. It can’t be right to only extend help to certain sectors.”

The November Budget promised a lower level of business rates for smaller businesses with a surtax on larger premises to pay for the reduction – although the loss of the remaining 40% Covid-era relief on rates means most businesses will see a hefty increase from April anyway.

However, business newspaper the Financial Times reported: “Supermarkets mounted a ferocious campaign against business rates changes – [these] have stayed broadly the same while rates for smaller high street shops will rise substantially.”

UKHospitality reports pubs face an average 76% rise in rates bills and hotels a 115% rise, pointing out high street businesses face much higher bills proportionally than supermarket chains or online retailers such as Amazon. The British Retail Consortium notes retail makes up 5% of the UK economy but pays more than 20% of business rates.

The government has also delivered a blow to the inbound tourism sector, with the Home Office signalling it plans to raise the cost of an Electronic Travel Authorisation (ETA) for international visitors from £16 to £20 and the fee for a two-year visitor’s visa by £35 to £506.

UKinbound chief executive Joss Croft described the increases as “staggering”, noting: “The ETA has risen by 50% since its roll-out in November 2023.”

Separately, the Scottish government plans to consult from the end of this month on a new Air Departure Tax to replace Air Passenger Duty on flights from Scotland – announced in its Budget on January 13. The tax is due to replace APD from April 2027, with rates and bands the same as APD in 2027-28. Any changes from April 2028 will be set out in the next Budget.