Reeves vows business rates overhaul as she says UK economy 'feels stuck'

Chancellor Rachel Reeves said the UK economy “feels stuck” and pledged to reform the business rates system to ease pressure on high-street firms as the government prepares for a Budget on Nov. 26.

Reeves said getting growth going was her “number one mission” and that Treasury officials were looking at changes to the tax on business properties to cut red tape and remove punitive "cliff edges" that can deter expansion and investment by small businesses.

The review will consider how business rates are calculated and whether reliefs such as improvement relief can be enhanced to make it easier for firms to invest in premises. Officials are also examining rules that can lead firms to lose small business rates relief when they open a second property unless they meet specific criteria.

The move comes amid calls from retailers, hospitality groups and major high-street chains for a wider overhaul of business rates. Reeves said the review forms part of the government’s commitment to examine the system more broadly after the Valuation Office Agency was merged with HM Revenue & Customs.

Business groups welcomed the announcement but urged clarity on implementation. Kate Nicholls, chief executive of UKHospitality, said the business-rates system has “unfairly punished hospitality businesses” and that removing cliff edges would reduce barriers to investment. Helen Dickinson, chief executive of the British Retail Consortium, described the system as “outdated, overly complex and economically damaging” and pressed for details on how a promised permanent reduction in rates for retail, hospitality and leisure premises will be delivered. Dickinson noted that retailers account for around 5% of the economy but pay more than 20% of the total business rates bill.

Chancellor Reeves has framed the review as a growth measure while confronting a significant fiscal challenge ahead of the autumn Budget. Government officials and media reports say she faces a potential shortfall in the public finances that could be as large as £50 billion, increasing scrutiny of tax and spending decisions.

The announcement follows earlier changes that already increased bills for some firms. A temporary discount on rates for retail, hospitality and leisure properties was cut from 75% to 40% in April, a move that raised liabilities for many operators. Business leaders including executives from major chains reportedly held talks with Reeves in recent days to press for a shake-up of the system.

Reeves also linked the reforms to wider tax policy, saying fairer reliefs and the removal of disincentives to expand were “vital to driving growth” and would help small firms move into new premises. The Treasury said it will publish further detail on any changes at the Budget.

Analysts and businesses said clarity on design and timing will be crucial. Retail and hospitality firms said uncertainty over long-term reliefs and the mechanics of any new rules had already held back investment decisions, and that definitive measures in the November Budget would be needed to restore confidence.

Any changes to business rates are likely to have distributional consequences across sectors and local authorities, which rely on the tax for revenue. The Treasury has signalled it will seek to balance those considerations while pursuing measures intended to reduce barriers to growth for smaller firms.

Reeves' intervention underscores the political and economic priority she has placed on reviving growth, even as the government prepares for potentially difficult fiscal choices later this year. The Budget will be watched closely by businesses that say the current business-rates regime has constrained expansion and investment across the high street.