Continuing our Budget blog post series, Ros Morgan of the Heart of London Business Alliance makes the case for real business rates reform
When the Chancellor Rachel Reeves stands to deliver her second Autumn Budget on 26 November, London’s businesses should sit tight and brace for a rates shock that’s been years in the making. Unless something changes, the capital faces an estimated £2 billion tax hit – the result of a new surcharge on high-value properties and a national revaluation that will hit London hardest.
But this isn’t just a London story. It’s a warning for every business in Britain. Because what starts in the capital soon spreads nationwide — through reduced investment, slower recovery, and a weaker tax base for local government. A broken business rates system doesn’t just hold back London’s growth; it holds back everyone’s. When the capital’s high streets, theatres, hotels and restaurants struggle, the supply chains that serve them – from manufacturing to logistics to tech – feel it too.
Business rates were designed for 1990, when the size of your premises reflected the scale of your business. Three decades later, that link is broken. Retail and hospitality generate 10% of GDP but shoulder 33% of all business rates – a clear sign of a tax divorced from economic reality. The result is slower recovery, lost investment and empty shopfronts across our towns and cities.
Successive governments have tried to paper over the cracks – freezing multipliers, offering temporary retail, hospitality and leisure reliefs, and capping rate rises through transitional relief. They’ve layered on small-business exemptions, enterprise-zone holidays, Crossrail and other supplements, and even local charges such as the tourism tax and night-time levy. Each may have good intentions, but together they form a confusing, costly patchwork that rewards short-term political wins over long-term economic reform. Businesses face uncertainty and complexity instead of clarity and confidence.
Now, a proposed 40% permanent discount for high-street firms risks repeating the same mistake. It will cost an estimated £4 billion, funded by higher multipliers for everyone else. Furthermore, our analysis shows just over 16,000 large businesses will pay the new higher rate (for properties with a rateable value over £500,000), with one-third in London. Yet they’ll contribute nearly half of the £2.2 billion the Treasury expects to raise. That’s not reform – that’s redistribution by stealth.
We don’t need another sticking plaster. We need surgery. That’s why Heart of London Business Alliance has developed the Combined Business Rate – a simple, fair and future-proof solution. It keeps the property-based element but adds a small 2% levy on all online sales, spreading the contribution across the whole economy. The levy would exclude transactions however that drive people into our city centres and high streets – such as theatre tickets, restaurant reservations and hotel bookings – to ensure it supports place-based growth rather than penalising it.
This reform would: cut business rates to their 1990 level – a 40% reduction for every ratepayer; provide a stable, sustainable funding stream for local government; and level the playing field between physical and digital business models. A tax system fit for the economy we have – not the one we used to.
Chancellor Reeves has made stability and growth her mission. Real rates reform delivers both. It would boost confidence, unlock investment and empower our high streets and city centres to thrive again.
London is ready to lead that change – but this is a national cause. From Aberdeen to Plymouth, every business that pays rates deserves a system that’s fair, predictable and built for today’s economy. We need Government to act – and we need business voices united behind us.
Heart of London Business Alliance is calling on business leaders, investors and policymakers to stand together for a fair, modern and sustainable system. Join our campaign, amplify the call, and make your voice heard. Together, we can turn a £2 billion warning into the moment real reform begins.