Time to finally reform our broken business rates system: Olga Watterich
Business leaders across the country have three key challenges on their mind for 2026: tax, regulation and operational costs.
While there is certainly no shortage of ambition around, there’s also no doubt that these issues are causing real headaches for many business leaders – causing some to have second thoughts about investing in the people, places and technologies that can grow their business in 2026.
With an economy that continues to stutter rather than soar, that’s something we need to address urgently.
The government deserves credit for recognising many of these challenges. The recent rates package to support that much loved, but certainly hard-pressed, British institution – the local pub – can be filed under that category. And while the measures will provide some relief, ask any landlord and they will tell you it’s only part of the puzzle – particularly as energy and staffing costs continue to rise.
It also raises a bigger question about the effectiveness of the business rates system as a whole. Following conversations with hundreds of members across the country, including in Yorkshire and the Humber, the conclusion is inescapable: our business rates system is broken.
Piecemeal reliefs can sometimes be helpful, but they are nothing more than a sticking plaster. They don’t provide long-term certainty and only add complexity when it’s fundamental reform that is needed.
While we speak a lot about the impact on retail, leisure and hospitality businesses, the simple fact is that business rates hit nearly every company in the UK. From accountants in office blocks, to advanced manufacturers working in warehouses, and innovative businesses working from labs.
Major firms that support our critical infrastructure – like airports and utilities companies – are also affected, with one transport operator recently telling us that they faced a four-fold increase in their bills. Another said they had already halted investment in order to cover tripling business rates.
The UK’s business tax burden is already at a 25-year high, with the highest property tax in the OECD – and that’s before big increases kick-in from April 2026. With inflation creeping up once again, on-top of already uncomfortably high costs, firms are facing a perfect storm of challenges that will further squeeze margins and dampen investment – just when the economy needs momentum.
Cliff-edges remain one of the key challenges for business rates – acting as a brake on investment and growth across the country. The government’s commitment to explore a more incremental ‘slice-based’ system, alongside options for improving investment incentives, such as bolstering improvement relief, is hugely welcome.
The new High Street Strategy is another move that business can get behind, helping to increase local jobs and opportunities across the country.
While 2026 may not have started with a bang for the UK economy, those of us working at the coalface of business policy have come back refreshed and ready to drive real and lasting change. From downtrading consumers to fragile business confidence, we need to work with government to arrest the caution that has frozen our economy.
Fundamental reform to the business rates system, rather than further tinkering around the edges, is something we remain utterly focused on. The benefits it could deliver – in terms of investment, competitiveness and economic growth – would be truly transformative.
Olga Watterich is CBI deputy regional director for Yorkshire and Humber