UK retailers have welcomed targeted business rates relief in the Chancellor’s Budget, but the British Retail Consortium (BRC) warns that rising employment, property and energy costs will continue to squeeze the sector.
The British Independent Retailers Association (Bira) described the business rates measures as a win for independent retailers. The BRC, by contrast, argued that the Budget fails to offer sufficient relief from the wider costs threatening jobs, investment and growth.
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Business rates relief welcomed
The Budget introduces changes designed to reduce business rates for qualifying retail, hospitality and leisure properties in England.
From April 2027, the threshold for 100% Small Business Rates Relief will rise from £12,000 to £18,000, while the threshold for tapered relief will increase from £15,000 to £21,000. The government expects the changes to take around 70,000 additional high-street businesses out of business rates.
Qualifying properties will also benefit from a two-year real-terms freeze on business rates bills in 2027–28 and 2028–29, with increases capped by CPI inflation.
Bira chief executive Andrew Goodacre welcomed the measures, saying: “This is a real win for independent retailers.”
However, the association would have preferred a complete freeze on business rates and intends to continue campaigning for further reductions.
BRC warns of mounting costs
The BRC took a more critical view, arguing that the Budget does not adequately address the pressures facing retailers.
BRC chief executive Helen Dickinson said: “Today’s Budget will see retail costs keep climbing as the Chancellor failed to provide the breathing space he promised.”
The trade body estimates that retailers will face £41bn in business taxes in 2026. It also says more than 120,000 retail jobs have been lost over the past two years, while one in seven shops remains vacant.
According to the BRC, changes to business rates will add £250m to retailers’ bills in April 2027. It also expects electricity bills to rise by £440m in 2026, despite stable consumption.
The BRC estimates that the Budget will add £2bn to retail employment costs, following an additional £6.5bn in costs over the previous two years.
The figures highlight the gap between the targeted support welcomed by independent retailers and the broader cost pressures affecting the sector.
Minimum wage rises add pressure
Retailers will face higher wage costs from April 2027, when the National Living Wage for workers aged 21 and over rises by 3.9%, from £12.71 to £13.21 an hour.
The National Minimum Wage for workers aged 18 to 20 will also increase by 3.9%, reaching £11.27 an hour. Rates for younger workers and apprentices will rise by the same percentage.
Higher wages support workers’ incomes but increase payroll costs for retailers, particularly businesses that employ large numbers of people and operate on tight margins.
Although employer National Insurance rates will remain unchanged, the wage increases add to the pressures retailers must manage alongside property, energy and other operating expenses.
Online marketplace VAT rules change
The Budget also introduces changes to VAT collection for online marketplace sales, due to take effect in October 2027.
Under the new rules, online marketplaces will become responsible for collecting VAT on qualifying sales of goods by UK businesses when the goods are in the UK at the point of sale and are sold to consumers.
The rules will cover VAT-registered businesses and non-VAT-registered businesses whose annual sales through an individual marketplace exceed £90,000. For non-registered businesses, the threshold applies separately to each marketplace.
The changes are intended to tackle VAT non-compliance and reduce the scope for non-compliant sellers to undercut businesses that meet their tax obligations. The government also expects the measure to help fund support for high-street businesses.
Targeted relief, wider challenges remain
The Budget offers meaningful support to qualifying independent retailers and other high-street businesses in England, but leaves the wider sector facing significant employment, energy and operating costs.
Business rates relief is a welcome step, but it falls short of addressing the broader pressures on retail profitability. The outlook will depend partly on whether consumer spending strengthens enough to offset rising costs and give businesses greater confidence to invest and recruit.
