UK answers industry calls to lower retail business rates and promises to fight “online giants”

British finance minister Rachel Reeves will lower business rates for brick-and-mortar stores to “level the playing field” with online shops. In the recent budget plan, Reeves says that from 2026-27, the government will permanently lower tax rates for retail, hospitality and leisure properties.

The plan will be funded by introducing a higher multiplier for the most valuable properties, including distribution warehouses used by “online giants.” 

The announcement follows leading British retailers’ call for the UK government to cut business rates by 20% to help their bottom line.

Over 70 retail CEOs wrote a letter pleading for the government to “level the playing field” for retail properties. The British Retail Consortium recently told Personal Care Insights that assisting UK retailers is essential since the region has been losing 1,000 shops a year.

Chancellor Reeves says: “The previous government created a cliff-edge next year, as temporary relief ends, so I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26, up to a cap of £110,000 (US$142,743)per business.”

Reeves claims the public spending problems she inherited were worse than previously thought. She says the £22 billion (US$28.57 billion) “black hole” left by the Tories in this year’s finances showed they “hid the reality of their public spending plans.” The new budget raises taxes by £40 billion (US$51.9 billion).

Previous promises

When elected, the UK Labour party promised to help retailers revive town centers and reform the business rates system to boost the shopping culture in England. The party said the current system disincentivized investment, created uncertainty and placed an “undue burden on [the] high streets.”

When previously asked about the prospect of Reeves changing financial rules, a Treasury spokesperson said, “The chancellor has vowed to lead the most pro-growth, pro-business Treasury in the country’s history.”

According to the British Retail Consortium, the retail industry pays 7.4% of all business taxes, £33 billion (US$43.03 billion), 1.5 times greater than its share of the overall economy (5% GDP).