Budget 2017

Chancellor Philip Hammond has been warned by senior grocery figures that the business rates system is ‘broken’

UK food and drink trade bodies have written to Philip Hammond calling on him to reform the “broken” business rates system as they steel themselves for a £1.1bn tax hike from next April.

Chief executives of the British Retail Consortium, Association of Convenience Stores, and British Independent Retailers Association are among the 12 signatories of a letter urging the Chancellor to “take action to alleviate this damaging increase”.

In the letter seen by The Grocer, the signatories say the current system is at “tipping point” and the increase will “discourage growth and investment”.

“Our members, representing diverse sections of the economy, firmly believe that an increase in excess of £1bn is unsustainable and will only compound the negatives of the existing system,” they wrote.

“Let there be no doubt, this sharp increase will have a negative impact on business investment.”

The mammoth hike comes after September’s Retail Prices Index (RPI) reached 3.9%.

The government plans to switch the calculation of business rates from the RPI to the lower rate Consumer Price Index (CPI) from April 2020.

But the signatories say “more needs to be done” due to the “uncertainty in the economy” and have urged Hammond to freeze rates or to implement CPI from April 2018 to prevent the rise.

The letter adds: “What is abundantly clear is that when the UK’s commercial property tax is far higher than elsewhere in Europe and across the OECD it places British business at a distinct disadvantage.”

ACS chief executive James Lowman said: “The business rates system is in urgent need of review to ensure that the system is fairer for everyone and that businesses are not unnecessarily penalised for investing and improving their offer to customers. We are urging the Chancellor to reform the rates system so that it incentivises investment and removes the threat of significant annual increases like the one scheduled for April 2018.”