Business Rates Reform Review Targets UK Pubs, Hotels
A comprehensive review has been launched by the Treasury into the method of calculating business rates for pubs and hotels across England and Wales, potentially paving the way for significant systemic reform. Business rates expert Jerry Schurder has been appointed to spearhead this crucial examination of rate valuations, with a mandate to report his findings by March 2027.
The government is actively soliciting input from landlords, hoteliers, and business owners to inform the review process, acknowledging widespread concerns within the hospitality sector. This initiative follows a recent announcement by Andy Burnham last month of a 20% cut in business rates for pubs, social clubs, and live music venues in England, set to take effect in April, offering some immediate relief.
Pressure Mounts for Fairer Business Rates
By Decode Today News
For years, pub groups have argued they bear a disproportionately higher burden in business rates compared to other commercial enterprises. This sentiment is echoed by broader calls from various business sectors for a more holistic overhaul of the rates system, highlighting its perceived complexity and outdated nature.
The British Beer and Pub Association (BBPA) paints a stark picture of the challenges, reporting the closure of 161 pubs across England, Scotland, and Wales in the first three months of this year alone. This equates to an estimated loss of around 2,400 jobs. Rising business rates are cited as a significant contributing factor, alongside increased staff costs stemming from rises in National Insurance and the minimum wage, impacting overall operating margins.
James Murray, Financial Secretary to the Treasury, affirmed the review's objective to undertake "a rethink of valuations - so that we can build a fairer system for the future." This commitment underscores the government's recognition of the urgent need to address the economic pressures facing these vital community assets.
Understanding the Mechanics of Business Rates and "Punishing Success"
A core contention highlighted by industry bodies like the BBPA is the unique valuation methodology applied to pubs compared to retail venues. Unlike retail spaces, which are typically valued based on floor area, pubs are assessed using a measure known as Fair Maintainable Trade (FMT). This system directly links a pub's turnover to its rates bill, meaning that as a pub's revenue increases, so does its payable business rates.
Emma McClarkin, Chief Executive of the BBPA, strongly welcomed the review, stating, "For years pubs have paid a disproportionately higher business rates bill which has ground down their ability to keep the doors open, so this review is sorely needed and hugely welcome."
Jonathan Lawson, Chief Executive of Butcombe Group, which operates 120 pubs across the south and south-west of England, articulated the profound impact of FMT on the BBC's Today programme. Lawson argued that the use of FMT effectively "punishes for success," as thriving pubs see their rates increase, while large online retailers operating from warehouses are not subjected to revenue-based rates calculations. He emphasized the disparity:
- Online retailers' rates are calculated based on the deemed market rent for their area, with minimal consideration for revenue generation.
- This can lead to "a very large site paying a relatively low level of business rates versus a relatively small pub... paying a very high level of business rates," severely impacting cost efficiency and market valuation.
Jerry Schurder's Expertise and Broader Calls for Reform
Jerry Schurder, formerly the business rates policy lead at advisory firm Newmark UK, brings crucial heavyweight expertise to the Treasury, a point welcomed by Craig Beaumont of the Federation of Small Businesses (FSB). Schurder's review will directly inform the next rates revaluation, scheduled for 2029. While Northern Ireland and Scotland establish their own valuations, Wales currently aligns its methodology with England, making the review relevant for both nations.
However, Beaumont stressed that the government must expand its focus to address the wider business rates system. He advocates for exempting more smaller firms by increasing the rates relief threshold for small businesses, arguing for a more equitable approach to enterprise integration and financial burden.
Jonny Haseldine from the British Chambers of Commerce (BCC) echoed calls for a broader review of valuations. He criticized the government's "piecemeal approach" to reform, highlighting that a "full reform of business rates, promised by the government at the last election, is urgently needed." While the BCC identifies hospitality as the sector most acutely concerned about rates, Haseldine warned that businesses across all sectors are struggling with the system's "complex and outdated" nature, which impacts consumer demand and growth.
Table: Key Stakeholder Perspectives on Business Rates Reform
| Stakeholder Group | Key Concern/Position | Proposed Solution/Impact |
|---|---|---|
| British Beer and Pub Association (BBPA) | Disproportionately higher rates due to Fair Maintainable Trade (FMT); 161 pubs closed in Q1. | Welcome review, need for fairer valuation system to avoid "punishing success." |
| Federation of Small Businesses (FSB) | Wider business rates system issues; impact on smaller firms. | Increase rates relief threshold for small businesses; broader reform. |
| British Chambers of Commerce (BCC) | "Complex and outdated" system; "piecemeal approach" to reform. | Full, comprehensive reform of business rates system as promised. |
| Butcombe Group (Jonathan Lawson) | FMT "punishes success" for pubs; unfair comparison with online retailers. | Valuation reform that considers business model differences. |
Political Reactions and Recent Relief Measures
The announcement has also drawn political commentary. Shadow Chancellor Sir Mel Stride dismissed the review as "far too late for a sector this Labour government has already done its best to kill off." He cited "tax hikes on business premises and jobs, alongside job-destroying regulation in the Employment Rights Act," as factors pushing many hospitality businesses to the brink.
Liberal Democrat Treasury spokesperson Daisy Cooper agreed that reform of business rates was "long overdue." She further called for an emergency VAT cut and a reversal of recent jobs tax changes, which she contended have "hammered hospitality in particular," affecting employment and operational viability.
Amidst these calls for comprehensive reform, there have been some recent relief measures. Last year, under former Chancellor Rachel Reeves, the government initially announced scaling back business rate discounts implemented during the Covid pandemic, with no discount planned from April this year. This, coupled with significant upward adjustments to the rateable values of pub premises, threatened landlords with substantially higher bills.
Following intense criticism from the hospitality industry, the government subsequently cut business rates for pubs and music venues by 15% earlier in 2026. The 20% discount in England, announced in July, is set to apply on top of this existing support, offering additional relief. However, this discount will not apply to the "very largest" live music venues, and some businesses remain uncertain about their eligibility for "pub" classification. Further details regarding eligible businesses are anticipated in Chancellor John Healey's first Budget this autumn.
This ongoing dialogue underscores the critical nature of business rates for economic stability and the viability of key sectors. The forthcoming review by Jerry Schurder is poised to be a pivotal moment in shaping the future financial landscape for pubs and hotels across England and Wales.
