Andy Burnham's plan to reform business rates, aimed at supporting high streets by increasing taxes on large warehouses, is estimated to cost approximately £880 million annually. This reform would enable the complete exemption from business rates for over 140,000 small business premises. Burnham, a potential Labour leader, intends to fund these reductions by raising business rates on large warehouse developments, particularly those used by major online retailers.
Tax specialists and business groups like the CBI have expressed concerns regarding the funding mechanism and its potential impact. Alex Probyn, a property tax practice leader at Ryan, highlighted worries about how the £880 million reduction in liabilities would be funded if the policy needs to be revenue neutral. There are questions about whether larger commercial properties, already subject to a business rates surtax, would be asked to shoulder an even greater burden. The CBI has labeled the current business rates system a "growth killer," with 76% of businesses believing it suppresses investment.
Under Burnham's proposals, the threshold for 100% Small Business Rates Relief would increase from a rateable value of £12,000 to £18,000, and the upper threshold for tapered relief would rise from £15,000 to £21,000. Burnham has emphasized that there is "room for movement on tax" within Labour's existing manifesto, asserting that he would prioritize businesses that bring social benefits and community cohesion. He made clear that he intends to stick to the party's 2024 election manifesto promises of not raising income tax, VAT, or national insurance personal contributions. Critics, like CBI chief economist Louise Hellem, argue that reform must "deliver real relief, not simply shuffle costs from one sector to another."
Logistics operators, retailers, developers and occupiers of large-scale warehouse space are likely to be concerned. The sector already faces increased operating costs, including higher labor, energy, property, and compliance expenses. Government guidance has previously noted that properties with rateable values of £500,000 and above, which include many large distribution warehouses, already contribute more through a higher multiplier introduced in existing reforms. The debate extends beyond just tax, touching on how goods are supplied, how high streets function, and the broader infrastructure of retail and other essential services.
