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UKH: ‘Business rates relief cap could strangle sector recovery’

Published:  24 March, 2021

UK Hospitality (UKH) has warned that the business rates relief cap will jeopardise the future of thousands of hospitality venues, which will face full rates bills within weeks following the unrestricted opening of the sector planned for June.

Remaining ratepayers will also begin having to pay rates bills “before they are able to afford to do so”, UKH said. 

Almost 8,000 business venues, employing about 343,000 people will be paying full rates in July, despite Budget measures to soften the acute rates burden, according to UKH research.  

Moreover, the research found that a further 1,850 venues would face the same situation before the end of September. 

“This will likely prompt businesses to look at slashing costs, such as closing unviable sites, cutting jobs or holding back investment,” the trade body warned.

The Chancellor announced in the Budget a full business rates holiday for all hospitality businesses for the first quarter of the financial year (Apr-Jun) and then two-thirds off for the remainder of the year (Jul 21-Mar 22). 

However, a cap of £2m on relief available to individual firms means that a significant proportion of the sector will miss out on the benefits.

“While the Budget was broadly positive for the hospitality sector with a range of welcome measures, the cap on business rates support really took the shine off things, by excluding so many potential recipients,” said Kate Nicholls, CEO of UKH.

“The cap comes into effect just days after trading restrictions are due to be lifted and will put a major economic drag on the businesses affected and risk the jobs that they support.

“For all ratepaying hospitality businesses, their bills will begin landing in June, with demands for payment before they are back on their feet. July is simply too early for businesses to be expected to start repaying rates after a devastating year of closure, restrictions and accumulation of debt,” she said. 

As a solution, UKH is calling on the Treasury to extend the period for which the 100% rates relief (uncapped) would apply from three to six months. 

It proposes that this move is balanced by a reduction in the level of relief for the remainder of the year to 50%. The move would support cashflow for all sizes of operation, as well as assisting those businesses that will have limited demand during the summer.

“Hospitality stands ready to play its part in creating new jobs and boosting our communities across the country, but this policy risks strangling the recovery in its infancy,” said Nicholls.

“Our proposed solution can unleash greater economic activity and we urge the Treasury to follow Wales and Scotland’s lead and provide greater relief.”

The new cap will typically affect businesses with either large sites or those companies that have grown to multiple sites, along with businesses in high rental areas such as high streets and city centres. 

It is also likely to penalise operators who have previously invested to improve their sites, therefore resulting in higher rates bills under the current system.