Fury as London pubs, hotels, and shops hammered by business rates soaring by tens of thousands of pounds
UK businesses are preparing for what many experts describe as an “unavoidable double hit” in 2026, as rising inflation combines with the next national business rates revaluation. New analysis indicates that these two forces together could increase business rates payments by around £2.5 billion, creating substantial financial pressure for companies across multiple sectors.
Inflation Trends Are Pushing Costs Upward
Inflation has been steadily increasing since late 2024. By July 2025, the Consumer Price Index (CPI) recorded a 3.6% annual increase, while the Retail Price Index (RPI) reached 4.8%. RPI plays a key role in uprating various government-linked costs, and its rise signals that the average cost of goods and services continues to outpace incomes—tightening financial conditions for both households and businesses.
Looking ahead, UK CPI inflation is expected to reach around 4% in late 2025, driven by rising food and energy prices, before gradually easing during 2026 as post-Covid supply pressures improve. However, services inflation is forecast to remain stubbornly high, with the OBR predicting a peak of 3.8% in July 2025 before moderating from 2026 onwards.
Inflation Combined With Revaluation Will Drive Up Business Rates
According to analysis from Ryan, the combination of elevated inflation and the scheduled 2026 business rates revaluation will significantly increase business rate liabilities. Their figures suggest that inflation alone could add £1.11 billion to the business rates burden in England.
From April 2026, property valuations used for business rates will be updated to reflect market values as of April 2024. Although revaluations are intended to be revenue neutral at a national level, individual bills will vary—sometimes dramatically—depending on the performance of specific regions and sectors within the property market.
Government Commitments and Calls for Reform
The 2024 Labour manifesto pledged to overhaul the business rates system to create fairer competition between high street businesses and major online operators, address empty property issues, and better support investment and entrepreneurship. This pledge follows years of temporary reliefs granted to smaller retail businesses, including the current 75% relief for retail ratepayers in the 2024/25 financial year (capped at £110,000 per business).
Industry voices continue to call for a long-term solution. In October 2024, the British Retail Consortium coordinated a letter signed by 71 major retail CEOs urging the government to cut retail business rates by 20% from April 2025, arguing that the sector bears a disproportionate share of the total business tax burden.
Local Authority Funding at Stake
Local authorities currently retain around £13 billion per year from business rates. Any significant reduction in business rates revenue would lead councils to seek alternative funding sources—potentially affecting local services already under financial strain.
New Legislation to Support High Street Businesses
Recent legislation introduced by the Labour government aims to allow permanent business rates cuts for retail, hospitality, and leisure properties from 2026. To fund these reductions, the top 1% of highest-value commercial properties—such as large online distribution warehouses—will face increased rates.
Under the proposed changes:
- From 2026, qualifying high street properties will benefit from permanent business rates relief.
- In the meantime, 250,000 RHL properties will receive 40% relief on their bills (up to £110,000 per business) to ease the transition.
- Additional support through the frozen small business multiplier and Small Business Rates Relief forms part of a £1.6 billion support package for 2025–26.
Preparing for 2026
With inflationary pressures persisting and the upcoming revaluation set to redistribute rate liabilities, many businesses—particularly those reliant on physical premises—are likely to see significant increases in their business rates. Understanding these changes early and preparing a strategic response will be essential for managing rising costs and protecting long-term financial stability.
(The Standard)
