The Confederation of British Industry (CBI) has urged the government to urgently reform business rates, describing the current system as a “growth killer” that penalises investment and stifles economic expansion.
Survey Reveals Widespread Impact on Investment
A new survey of nearly 700 CBI members found that 32% of businesses have cancelled, reduced, or delayed property investments due to business rates. The tax, based on the value of a firm’s property, has seen bills soar after recent revaluations, making it the highest property tax level in the OECD. According to the CBI, the UK’s property tax as a share of GDP is more than four times higher than in Germany.
As many as 76% of respondents said higher business rates suppress investment, while over half (53%) cited uncertainty around future bills as a barrier to long-term investment commitments.
Businesses Would Reinvest Tax Savings
The CBI argues that reforming business rates would free up capital for reinvestment. Three in ten businesses surveyed said they would reinvest 90-100% of savings from lower rates into new projects. Firms indicated they would use the savings to boost productivity, automation, property improvements, and recruitment.
The current system acts as a “tax on improvement,” according to CBI members, because bills often rise after refurbishments, expansions, or sustainability upgrades. Companies also struggle to predict how property changes will affect their tax bills, hampering long-term planning.
Call for Fundamental Reform
Louise Hellem, the CBI’s chief economist, said: “That uncertainty is a growth killer, with vital projects being delayed, scaled back or cancelled.” The CBI has called on the government to remove the rule requiring any business rates reform to maintain total revenue neutrality. Reform must “deliver real relief, not simply shuffle costs from one sector to another,” the body said.
The CBI also urged improved transparency in bill calculations and the removal of “cliff edges” within the system. Hellem concluded: “Business rates are no longer just a cost of doing business – they’re a major tax on ambition and one that effectively penalises investment. Reform of the business rates system is no longer a ‘nice to do’, it’s an economic necessity.”
