Why the business rates system needs an overhaul - Beckie Hart

For society to thrive, businesses need the confidence to invest.

If enterprise is stifled, then wage growth stagnates. Opportunities dwindle. Living standards falter.

Now – perhaps more than ever before – growth is essential. Economic ground lost during Covid has yet to be fully recovered, the UK is still adjusting to life beyond the EU, and the climate emergency necessitates seismic shifts in behaviour. None of these challenges can be overcome without business firing on all cylinders.

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That is why we should be doing everything possible to create an environment which helps enterprise to flourish.

The CBI has been joined by 40 trade associations – representing 261,000 businesses and nine million employees – in a joint statement outlining how rates reform could unleash a wave of business investment that this country sorely needs.

Yet right now, an anomaly of our antiquated business rates system is doing the opposite. Instead of rewarding companies which show ambition and progress, we hit them in the pocket – rather than encouraging businesses to invest, we are penalising them.

Put simply, responsible firms investing in solar panels, energy storage systems or green plant and machinery are rewarded by a rise in business rates even before the return on investment is realised. How can that be right?

The system is senseless, unfair and a deterrent for our region’s firms looking to make green investments – and it must be reformed.

With COP26 just weeks away, there will never be a better opportunity. This is the moment when the UK can show the world it’s ready to lead the way on net zero, and for Government to prove it is serious about building the high-wage, high-productivity and high-skill economy we all want.

This all begins with a long-awaited overhaul of a system which sees up to half of business investment potentially subject to business rates. The system has literally become a tax on investment.

Reform remains the number one ask from firms I speak to. The case for change now has cross-party support. Labour set out their plans to eradicate business rates last month and Jake Berry, chair of the Northern Research Group of Conservative MPs, made clear his opposition in a newspaper column last week.

And as firms fight to complete their recovery from the pandemic, to build back better, and to overcome significant barriers to growth, the call for action is getting louder.

So much so, the CBI has been joined by 40 trade associations – representing 261,000 businesses and nine million employees – in a joint statement outlining how rates reform could unleash a wave of business investment that this country sorely needs.

Right now, amid a challenging autumn beset by surging gas prices, labour shortages and global supply chain challenges, many Yorkshire businesses are thinking twice about investment intentions.

Yet the Chancellor can restore the momentum of the summer unlocking when he lays out his Budget at the end of the month. Business will hope he seizes the opportunity to unveil the details behind Government ambitions for growth, as well as the path to achieve it.

That begins with giving business the confidence to invest by removing the threat of incurring a penalty for doing the right thing.

By reducing the overall burden of the business rates system to unlock business investment; by increasing the frequency of business rates revaluations; and by using the system to spur green investment in particular – these reforms will have real-world ramifications for both our local communities and our international competitiveness.

With so much at stake, kicking reforms further into the long grass cannot be the answer.

By Beckie Hart - CBI Regional Director for Yorkshire