The latest figures from the Office for National Statistics (ONS), released on Wednesday 16 October, showed the headline rate of inflation had risen by 1.7% in the 12 months to September 2024, down from 2.2% in August.
As September’s inflation figures are used to calculate the annual uplift to business rates, a rate of 1.7% means a "likely increase" of £48m for hospitality businesses, UKHospitality (UKH) estimated.
On top of this, if the Government does not extend the current business rates relief in the upcoming Budget, firms could also face an additional £866m rise in bills, taking the overall hit to the sector in April to £914m, according to UKH.
Dreadful prospect
UKH chief executive Kate Nicholls said. “These inflation figures confirm hospitality is set for an eye-watering £914 million tax bill in April, if the Chancellor doesn’t act at the Budget.
“Business rates must be addressed, or venues at the heart of communities will see their rates bills quadruple and find themselves making awful decisions about whether to shorten hours, close more days, lay off staff, or even close their doors for good.”
The trade body added a large pub or restaurant could face a £33,500 increase in its rates.
“A lower rate of business rates for hospitality would avoid this dreadful prospect and keep hospitality at the centre of our high streets.
“Measures in the Budget could be an investment in our high streets, creating new jobs driving local economic growth and securing the future of the venues that people love”, Nicholls continued.
In addition, food costs were found to have made one of the largest upward contributions to the figure, rising 1.8% during the period, up from 1.3% in August. The increase was largely driven by the price of milk, cheese, eggs fruit and soft drinks, according to the ONS.
A spokesperson for the BBPA said "While food and drink inflation remains higher, this is an indication that some cost pressures faced by brewers and pubs are easing, and we look forward to a corresponding fall in interest rates this quarter from the Bank of England.
Host of pressures
"However, the fact remains that brewers and pubs face a host of cost pressures and, to deliver on the pre-election five point plan for pubs, the Chancellor must use the Budget to maintain the 75% business rates relief and cut beer duty. Only then will many pubs be able to keep the doors open and the pint remain affordable for all.”
Data from commercial real estate intelligence firm Altus Group further demonstrated the pressure faced by firms in the wake of September's inflation rate.
Coupled with the potential loss of the 75% business rates discount, more than 250,000 retail, hospitality and leisure firms in England could see a 300% rise in business rates next April. It means the average pub premises with a rateable value of £31,567 could see bills rise by more than 300%.
Altus Group president of property Alex Probyn urged the Chancellor to use the autumn Budget on Wednesday 30 October to act “decisively”.
He said: “The Chancellor must not only set stringent targets for the clearance of tens of thousands of outstanding challenges to facilitate the return of years of overpayments, allowing firms to invest money and grow their businesses, but also look at ways of permanently ending the policy of increasing tax rates by inflation annually and how to lower the burden once and for all rather than leaving firms on this an annual cliff edge.”
