A review into the way business rates are calculated for pubs and hotels in England and Wales is getting underway and could lead to an overhaul of the system.
The Treasury says business rates expert Jerry Schurder will lead the review of rate valuations and report in March 2027, and the government will ask for the views of landlords, hoteliers and business owners to be incorporated into the process.
Last month, Andy Burnham announced a 20% cut in business rates for pubs, social clubs and live music venues in England, which would come into effect in April.
Pub groups have argued they face disproportionately higher rate bills, but other businesses have called for wider reform of the rates system.
According to the British Beer and Pub Association (BBPA), 161 pubs closed in the first three months of this year in England, Scotland and Wales, equivalent to the loss of around 2,400 jobs.
Rising business rates are cited as one of the problems facing the sector, although there have also been complaints that increases in National Insurance and the minimum wage have made staff costs more expensive.
James Murray, financial secretary to the Treasury, said the new review would seek to “rethink valuations, so we can build a fairer system for the future.”
Emma McClarkin, chief executive of the BBPA, said: “For years, pubs have paid disproportionately higher business rates, reducing their ability to keep their doors open, so this review is much needed and very welcome.”
The BBPA says pub prices are valued differently to retail establishments. Instead of being based on square footage alone, they are judged by a measure called Fair and Maintainable Trade (FMT), which means that when a pub’s turnover increases, so do its rates.
Jonathan Lawson, chief executive of Butcombe Group, which has 120 pubs in the south and south-west of England, told the BBC’s Today program that the use of FMT meant pubs were effectively being “punished for success”, while large online retailers operating from warehouses were not subject to revenue-based tariff calculations.
Their rates, he said, “are calculated based on what is considered market rent for that area, and take very little into account in terms of revenue generated through that site.”
“You can have a very large venue paying a relatively low level of business rates versus a relatively small pub… paying a very high level of business rates.”
Schurder was head of corporate rates policy at advisory firm Newmark UK, and his review will contribute to the next rate revaluation in 2029.
Northern Ireland and Scotland set their own assessments, while Wales currently chooses to align its methodology with that of England. As the same approach is used in England and Wales, the review will seek responses from both nations.
Schurder’s appointment was welcomed by Craig Beaumont of the Federation of Small Businesses (FSB), who said he would bring “crucial heavy business rates experience to the Treasury”.
However, Beaumont said the government needed to address the wider business rates system and exempt more smaller businesses by increasing the rates relief threshold for small businesses.
Jonny Haseldine of the British Chamber of Commerce (BCC) also said the review of valuations should be broader.
“The full reform of business rates, promised by the government at the last election, is urgently needed. This continuous, gradual approach to reform is the wrong approach,” he said.
While the BCC said hospitality was the sector most concerned about rates, Haseldine warned businesses across all sectors were struggling with a “complex and outdated” system.
Shadow chancellor Sir Mel Stride said the review was “too late for a sector that the Labor government has already done everything it can to eliminate”.
“Business and employment tax increases, along with job-killing regulations in the Labor Rights Act, have left many hospitality companies on the brink,” he said.
Liberal Democrat Treasury spokeswoman Daisy Cooper said business rates reform was “long overdue” but also called for an emergency VAT cut and reversing employment tax changes “which have hit hospitality particularly hard”.
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