CBI Calls for Urgent Business Rates Reform to Boost UK Investment

The Confederation of British Industry (CBI) is advocating for a comprehensive overhaul of the UK's business rates system, identifying it as a significant barrier to investment and economic growth. This call for reform comes at a crucial time, as the government aims to achieve the highest growth rate among G7 nations.

CBI members consistently rank business rates as one of their top concerns. The current system, characterized by its complexity and perceived unfairness, is viewed as a deterrent to business expansion and property improvements. This is particularly problematic given that the built environment contributes to 40% of the UK's carbon footprint, highlighting the need for incentives to enhance energy efficiency.

The organization has conducted extensive consultations with its members across various sectors, including retail, hospitality, logistics, and manufacturing. Their findings reveal a system that is overly complex, unpredictable, and often unfair. Businesses face significant financial challenges when expanding, with unexpected costs arising from what the CBI describes as "vast cliff-edges" in the rates structure.

The valuation process for commercial properties is another area of concern. The Valuation Office Agency (VOA) employs three distinct methods for calculating property values, each with its own set of evolving rules. This approach often results in similar buildings receiving vastly different valuations, further exacerbating the sense of unfairness within the system.

To address these issues, the CBI proposes several key reforms:

• Implementing a progressive tax system similar to income tax bands, including a zero band for smaller properties.
• Enhancing transparency in the valuation process by requiring the VOA to publish reasons for valuation changes.
• Transitioning to annual revaluations by 2029 to better align with economic cycles.
• Introducing incentives for property improvements, particularly those focused on energy efficiency.

The CBI suggests a "green super-deduction" with a capital allowance rate of at least 120% to encourage investments in energy-efficient upgrades. This proposal aligns with the UK's commitment to achieving net-zero carbon emissions by 2050.

"Right now nothing is more important for the strength of our economy and for the growth we need to create a more prosperous future for our people and our country, than Government and business working together, using public money to drive private investment."

Recognizing that comprehensive reform will take time, the CBI also calls for interim measures. These include freezing standard and small business multipliers until after the 2026 revaluation and providing targeted support for the most affected sectors.

As the UK government prepares its upcoming Budget, the CBI urges policymakers to prioritize business rates reform. By addressing these longstanding issues, the government has an opportunity to create a more competitive business environment, stimulate investment, and drive economic growth across the nation.