Rachel Reeves' business rates blow 'will hammer' manufacturers - 25,000 jobs at risk
Dire economic conditions mean many firms will be unable to pass costs on to customers, leaving job cuts as one of the only options.
Rachel Reeves's changes to business rates could cost the UK manufacturing sector close to £1bn and put around 25,000 jobs at risk, a leading industry body has warned. Analysis by Make UK, which represents manufacturers, found factories will pay an extra £939m this year after new rules came into force at the start of April. The group said the increase comes at a time when firms are already facing rising energy and employment costs.
It warned that weak economic conditions mean many firms will be unable to pass costs on to customers, leaving job cuts as one of the only options. Around 25,000 roles are estimated to be at risk. Economists have also warned unemployment could rise further due to global tensions following the war in Iran. Investment bank ING has suggested up to 100,000 UK jobs could be at risk as energy costs rise.
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Verity Davidge, policy director at Make UK, said: "This increase couldn't come at a worse possible time and is set to hammer one of the Government's key strategic sectors, which is already facing existential threats from increased energy and employment costs, which are completely out of their control.
"For many companies right now, just to survive the burdens being imposed on them will be an achievement in itself."
Business rates are charged on most commercial properties based on their rateable value, which reflects estimated rental income. Manufacturers say they are hit harder because they operate from larger sites.
Ms Davidge said: "The current system of business rates is outdated and is a blunt instrument that leaves manufacturers paying disproportionately more than other sectors relative to their size."
Under the new system, properties with a rental value above £500,000 face higher rates, affecting many factories, The Telegraph reports. Make UK also warned the rules could discourage investment in green energy, as improvements such as solar panels can increase a property's rateable value.
Industry groups have also pointed out that UK industrial electricity prices are among the highest in Europe, adding further strain on manufacturers.
The changes come alongside a rise in the minimum wage to £12.71 per hour, up by 50p in April. Over the past five years, it has increased by 43%.
Make UK is calling for reform, including linking business rates more closely to turnover and giving firms at least 12 months notice before changes take effect.
