UK Manufacturers to Pay £940m More Annually in Business Rates Under New Changes
British manufacturers are set to face an additional £940m per year in business rates due to policy changes implemented by Chancellor Rachel Reeves, which took effect this month. According to analysis by the industry lobby group MakeUK, manufacturers often bear disproportionate business rates bills because they typically operate large factory floors.
Disproportionate Burden on Manufacturing Sector
MakeUK's analysis reveals that factories account for approximately one-fifth of the total rateable property value in England and Wales, despite manufacturers contributing only about a tenth of the overall economic output. This discrepancy highlights a significant imbalance in the current business rates system.
The chancellor increased business rates during the November budget, introducing an additional surcharge for companies with properties valued at more than £500,000. This change has sparked concerns across various sectors, with initial backlash notably from pubs and live music venues.
Government Response and Industry Concerns
In January, the government partially reversed course by announcing £80m in discounts following warnings that some businesses might be forced to close. Retailers also successfully advocated against even higher rates. However, MakeUK argues that manufacturers deserve similar consideration, especially as they grapple with energy price shocks stemming from geopolitical tensions.
Verity Davidge, policy director at MakeUK, emphasized the challenges facing manufacturers. "The current system of business rates is outdated and is a blunt instrument that leaves manufacturers paying disproportionately more than other sectors relative to their size," she stated. "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."
How Business Rates Are Calculated
Business rates, which fund essential local government services, are determined by applying a multiplier to the rateable value of a property. This value is reassessed every three years by the Valuation Office Agency in England and Wales, with equivalent bodies in Scotland and Northern Ireland. Consequently, larger properties typically incur higher rates, regardless of the business's profitability.
MakeUK advocates for reforming the system to link rates more closely to business turnover, size, and type, with specific discounts for small and mid-sized companies. The lobby group also recommends providing at least a year's notice before implementing rate increases to allow businesses time to adjust.
Statistical Overview of Manufacturing Properties
Across England and Wales, there are an estimated 380,000 manufacturing premises. Property categories including "industrial" and "factories, mills & workshops" hold a combined rateable value of £14bn, representing over one-fifth of the total rateable value of all properties in these regions.
A survey conducted by MakeUK found that one-fifth of 132 manufacturers will be subject to the "high value" multiplier for properties exceeding £500,000. This underscores the widespread impact of the new rates on the manufacturing sector, which is already contending with rising operational costs and economic uncertainties.
