Business rates reform must even playing field between high street and online
Bricks and mortar businesses are being unfairly punished by outdated business rates in need of reform, writes Ros Morgan
Promised business rate reform is yet to come
Politicians talk a lot about growth, but continue to increase taxes on those who power the economy.
Nowhere is that contradiction clearer than business rates. My members were thrilled when Labour promised before the election to fundamentally reform an outdated and unfair system, making it fit for the 21st century.
For many years, there have been calls to level the playing field between property-light online businesses, who pay minimal rates, and high street ones which are taxed based on the rateable value of their property.
Instead of this, in November’s Budget the Chancellor simply tweaked the existing system, promising her changes would mean the lowest rates since 1991. The reality has proved very different.
The 2026 revaluation will add an estimated £2bn a year to business costs in London alone. Even when increases are capped, many firms face annual increases of 15 to 30 per cent for several years in a row. This is not a temporary adjustment; it is a structural shock.
Industry estimates suggest business rates will increase by 76 per cent for the average pub and 115 per cent for the average hotel over three years, and our theatres, galleries and visitor attractions, as well as offices and gyms, are all bracing themselves for bigger bills. Businesses on my patch are in uproar.
The question now is what we do about it. Heart of London Business Alliance (HOLBA) wants to engage constructively with the Treasury on how we can avert the looming disaster.
HOLBA’s Hybrid Business Rate proposal offers a practical route forward: a way to keep business rates but modernise them for a hybrid economy. A small levy of two per cent would be imposed on online sales and collected through the VAT system (with some key exemptions), ensuring that the growing number of digital businesses pay their share. That would raise £6bn a year, enabling cuts of around 37 per cent to the business rates paid by bricks and mortar businesses – a huge boost to high streets.
We can’t keep on squeezing more and more money out of an ever-smaller number of businesses. The Hybrid Business Rate proposal would cut bills for many firms, protect public revenues and create a fairer tax base. The political test now is simple: act or continue taxing growth out of the UK’s most productive places.
Tourist tax worsens
Tourism is one of the engines of the British economy, contributing over £250bn a year to GDP and supporting 3.5m jobs.
But the industry is suffering from the last government’s inexplicable decision to scrap tax-free shopping for international tourists, something that had been offered for decades and was a big driver of visitors. The UK is now the only country in Europe not offering VAT rebates and high-spending tourists are increasingly choosing to spend in Paris, Milan and Madrid rather than here. To compound matters, the government has now announced plans for a new levy on visitors paid on top of a hotel room charge. This double hit on one of the most important drivers of economic growth doesn’t make sense.
Bobbies on call
We want people to feel safe and secure in our city, so HOLBA provides an on-call, rapid assistance 24/7 private security team called My Local Bobby, who also operate joint patrols and surveillance with the statutory providers such as the Metropolitan Police. We also collate and share crime intelligence with the local authority, while partnering with them to implement a community policing approach.
A huge congratulations to two of our bobbies, Peter and Charlie, who have each just received a Certificate of Commendation from the Met.
To add to your 2026 to do list
HOLBA’s Scenes in the Square is a film-themed bronze sculpture trail in Leicester Square. It’s a free, open-air celebration of a century of movie icons, with newer additions like Bridget Jones and Dilwale Dulhania Le Jayenge alongside Mary Poppins, Paddington Bear, Batman and my favourite, Gene Kelly in Singin’ in the Rain. People tell us they come from miles around to see the statues, which help to bring the square to life. Time your visit right, and you might see a real-life star arriving for a premiere.
A recommendation
I went to see Les Misérables recently (I will readily admit to it not being my first time) and was reminded why it’s still selling out theatres decades on. There’s something particularly special about a night in the West End: we arrived in time for an early dinner at The Wolseley, were then swept up in the show with a crowd of first timers and lifelong fans and finished with drinks at Mr Fogg’s on St Martin’s Lane. For me, it was a perfect example of how London can seamlessly offer the finest in food, theatre and hospitality.
Ros Morgan is chief executive of Heart of London Business Alliance