Why Cutting Business Rates is the Key to Reviving the High Street

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Posted on 18 December 2025

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Across towns and cities, the story is becoming increasingly familiar; boarded up shopfronts, declining footfall and once vibrant high streets are struggling to survive. While online competition and changing consumer habits are often blamed, one of the most significant and overlooked factors behind this decline is the burden of business rates on firms.

Business rates were implemented to be a fair way for companies to contribute to local services. In practice, they have become a major barrier to investment, growth and even survival, particularly for small and medium sized enterprises present on the high street.

A Tax That Punishes Physical Presence

Business rates are charged regardless of turnover or profitability. This means that whether a business is thriving or barely breaking even, the costs remain constant. In a market where consumer spending is under pressure and footfall is falling, this creates a dangerous imbalance. Raising business rates in such an environment is counter productive. It is the economic equivalent of increasing prices in a shrinking market, a strategy that rarely succeeds. Instead of generating more revenue it pushes businesses out, reduces occupancy and shrinks the tax base itself in the long run. 

The Viscous Cycle of Decline

When business rates rise, landlords often pass those costs onto tenants through higher rents. Retailers and hospitality businesses, who are already operating on thin profit margins, are then forced to make difficult decisions like reducing staff, cut opening times hours or even closing altogether.

Each closure makes the high street less attractive. Reduced footfall leads to lower sales for remaining businesses, increasing the likelihood of further closures. This cycle of decline damages not only local economies but also communities, employment and town centre identity.

Investment Follows Opportunity, not Penalty

In order to actually encourage investment and bring companies back to the high street, policymakers must reduce the cost of entry to markets and reduce operation costs. Lowering business rates would ... 

- Encourage entrepreneurs to open new premises 

- Make it viable for independent businesses to take risks 

- Attract larger employers to town centres

- Increase occupancy rates and footfall 

- Create jobs and strengthen local economies 

- Provide business activity 

- Increase productivity as costs are lower 

In the long term, a broader healthier business rate would generate more sustainable tax revenue than a smaller number of overburdened firms struggling to survive. 

The false economy of higher rates 

Supporters of higher business rates argue that they are necessary to protect public finances and contribute significantly to reducing the UKs huge fiscal deficit, when in reality as businesses close the tax base shrinks. 

Empty properties generate no rates, no jobs or no economic activity which will have a negative multiplier effect whereby not only businesses, but government finances will suffer in the long run. This level of falling tax revenues in extreme cases can result in negative output gaps as there is far less revenue that can be put towards government expenditure, investment, or encouraging consumption rates to increase the economies aggregate demand. There can also be an output gap as business productivity is far lower across the economy as firms close or cut down on costs to accommodate this increase in rates.

It must also be considered that as business rates increase, consumer confidence is likely to fall because businesses will raise prices in order to compensate for their increased costs.

Competing with the emerging global online market

High street businesses already compete with the globalisation of online retailers who benefit from lower overheads, economies of scale and, in many cases, lower effective taxation. Expecting businesses with physical stores to shoulder ever-increasing fixed costs places them at a permanent disadvantage. Reducing business rates is not about giving businesses a 'handout' but is about creating a level playing field that reflects modern trading realities and recognises the social and economic value of town centres instead of forcing firms into increasing their online presence and closing stores, thus making physical shopping unable to compete.

Creating a future built on growth instead of extraction

Economic recovery and regeneration cannot be achieved more from a diminishing pool. History shows that sustainable growth comes from encouraging participation, investment and confidence reliving the pressure in the market. If high streets are to thrive again, policy must shift from short term revenue extraction solutions to long term economic development. That starts with a meaningful reduction in business rates, sending a clear signal that investment, innovation and community-based commerce are not welcome, but encouraged.

Without action, empty shops, lost jobs and hollowed out town centres are inevitable and the impacts will far outweigh any short term gains from higher taxation.

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