Prospective Prime Minister Andy Burnham plans to scrap business rates for over 140,000 small businesses in his bid to save the UK’s high street – but the move would cost the government around £880 million a year, new analysis finds.
Burnham’s proposal to expand Small Business Rates Relief would also shift the tax burden onto larger businesses, a gap he plans to plug by raising business rates on large warehouse developments like Amazon.
For high street retailers and hospitality businesses that have been struggling to keep their doors open, this news should come as welcome relief. Yet, with the price tag just shy of a billion pounds, it raises fresh questions about what the trade-off may be for larger businesses.
Burnham’s business rates tax cut could cost around £880m a year
After a tumultuous few years for brick-and-mortar businesses, Makerfield MP Andy Burnham has pledged to tackle the decline of the high street head-on by overhauling business rates.
His proposals, which were first outlined during the Makerfield by-election campaign, include raising the threshold for 100% small business rates relief in England by 50%, allowing more small firms to qualify for the tax break.
Forecasts from global tax firm Ryan suggest this policy could prevent over 140,000 additional small businesses from paying business rates altogether. It would also extend the upper threshold at which firms receive tapered relief from £15,000 to £21,000, at a total estimated cost of £880 million a year.
When speaking to LBC this week, Burnham justified his proposal, explaining: “I believe there is a case for higher business rates on warehouses and the major developments we see on the outskirts of our cities, so that we can cut business rates for pubs… and lift some high street businesses out of business rates altogether.”
He added that the government should “prioritise and reward the businesses that bring social benefit,” including high street staples such as pubs, restaurants, cafés and hairdressers.
Central to Burnham’s mission is the idea that online retail giants like Amazon should shoulder more of the burden, in an effort to try and level out the playing field between e-commerce and traditional high street businesses.
Who will really cover the bill for Burnham’s proposed business rates cuts?
On paper, Burnham’s funding plan is already accounted for. In April, the government added an extra charge of 2.8p onto business rates for properties worth over £500,000.
Since this levy already exists, tax experts argue that ministers could raise it as high as 10p without needing to create a brand new tax.
Yet, Ryan’s analysis flags a significant catch. The surtax isn’t just a warehouse tax: it also applies to offices, manufacturing sites, data centres, and larger retail premises.
This means that any blanket hike would land on a much wider range of businesses than just ecommerce, Amazon-style warehouses.
Speaking to this tension, Alex Probyn, a practice leader for property tax at Ryan, said: “Supporting small businesses is a great policy objective. The concern is how that is funded if things have to be revenue neutral.”
“Larger commercial properties are already contributing more through the existing business rates surtax to fund lower liabilities for retail, hospitality and leisure. The obvious question is whether they are now going to be asked to contribute even more.”
Burnham’s proposed changes also land against a backdrop of what business groups are already calling a system under strain.
The Confederation of British Industry (CBI) has warned that the current tax landscape is a “growth killer” for investment, with 32% of firms saying business rates have resulted in them cancelling, reducing, or delaying investment in their properties.
