Hospitality industry gives muted reaction to business rate reprieve

The hospitality industry has given a muted reaction to the chancellor’s 11th hour climbdown on the decision to raise business rates by 5%.

The 5% rise – which would have hit the hospitality industry with a tax bill rising into the hundreds of millions – was due to come into effect today.

But, in the House of Commons last night, Alastair Darling told MPs that businesses need only pay 2% more this year and could spread the remaining 3% increase over the next two years.

The move followed a concerted campaign led by the retail sector, which highlighted the unfairness of the 5% rise, given that it was based on last September’s inflation rate.

Business rates paid by hotels are based on around 4-5% of turnover, which currently works out between £480m and £600m (official overall turnover is £12b), and adding 5% in April would have meant an extra £24m-£30m for the sector. Restaurants would also have faced a “significant” rise in costs, experts warned.

Jeremy Hill, director at property agent Christie & Co, said: “We welcome this last-minute move by the Government to back down on what could have been a crippling increase in business rates for small businesses during what is already a very challenging climate.

“However, due to the last-minute nature of this decision, many small businesses will be left with more red tape in order to agree revised payment plans with their local councils.”

The British Hospitality Association was also cautious. A spokesman said: "The concession will help the cash flow problem but it only defers the additional payment to future years. 
 
"What we were wanting was the increase to be abandoned altogether in a time of such recession, which the Government has refused."

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By Daniel Thomas

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