Hospitality could face business rates 'cliff-edge' as inflation rises

Hospitality operators could face a huge rise in business rates next year following another jump in inflation, an advisory firm has warned.

The property tax is due to increase next April based on inflationary figures recorded in September.

Consumer Prices Index (CPI) inflation rose to 10.1% last month, up from 9.9% in August, according to the Office for National Statistics (ONS).

This could see the overall business rates bill for hospitality firms, shops, offices, and factories rise by £272b from next April without intervention from the government, according to real estate adviser Altus Group.

UKHospitality’s chief executive Kate Nicholls said such an increase could prove “fatal” for many hospitality businesses.

“With the September inflation figures traditionally being used to set tax changes and rates for the following year, there is a real risk that hospitality businesses will face an enormous cliff-edge in April if these numbers are used to hike the business rates tax level,” said Nicholls.

"With hospitality inflation contributing heavily to the overall inflation rate, we now risk an inflationary spiral where our higher costs lead to higher taxes which lead to even higher prices."

Food and non-alcoholic drink price inflation rose 14.6% in September while prices in restaurants and hotels increased 9.7%, according to the ONS.

Increases in the price of bread, cereals, meat, milk, cheese, and eggs were the largest drivers behind the rise.

Nicholls said many businesses would be “fighting to survive the winter” and it was “critical” business rates relief for hospitality firms was extended.

Robert Hayton, UK president at Altus Group, said: “With more than one in 10 UK businesses now reporting a moderate-to-severe risk of insolvency, the time has come to end this ridiculous policy of annually increasing upwards rates revenue by inflation through a renewed focus on growth to drive local taxation revenues instead.”

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