Britain’s manufacturing sector is staring down the barrel of a near-£1 billion increase in annual business rates, piling further pressure on an industry already reeling from surging energy bills and escalating employment costs.
Analysis by Make UK, the manufacturers’ organisation, of official data on rateable value changes between 2023 and 2026 estimates that the sector will shoulder an additional £939 million a year in business rates from this month. The figures lay bare a stark imbalance: while manufacturing accounts for roughly 10 per cent of the economy, it contributes more than a fifth of all business rates revenues.
A companion survey by Make UK paints a bleak picture across the shopfloor. Nearly nine in ten manufacturers reported an increase in their rates for April, with two thirds seeing rises of up to 20 per cent. More troublingly, almost one in five companies face increases of between 20 and 50 per cent, and a small but significant minority, three per cent, have seen their rateable values climb by as much as 100 per cent.
The timing could scarcely be worse. The rates increase arrives in the same month that around half of manufacturers will renegotiate their energy contracts, compounding the impact of higher national insurance contributions and other employment-related burdens that came into force at the start of the tax year.
Verity Davidge, policy director at Make UK, described the current system as outdated and called the increase a hammer blow to one of the government’s priority sectors. For many companies, she warned, survival itself has become the benchmark of success.
The survey reveals just how heavily business rates weigh on the sector’s finances. Nearly a quarter of manufacturers rank them as their second-largest cost, while one in ten say rates represent their single biggest expense. Make UK’s modelling suggests the squeeze could put approximately 25,000 jobs at risk as firms consider reducing headcount to absorb the hit.
At the heart of manufacturers’ frustration is a rating system based on square footage rather than business performance. Under the current model, a small or medium-sized enterprise occupying a large factory floor can be classified as a high-value property despite modest turnover and a modest workforce. This structural quirk means that more than half of the sector’s rateable values exceed £100,000, and one in five manufacturers occupies a facility valued at more than £500,000, pushing them into a new high-value multiplier bracket that effectively penalises past investment.
The system also creates a perverse disincentive for manufacturers seeking to go green. Installing renewable energy infrastructure increases a facility’s value and, with it, its rates bill, an unwelcome contradiction at a time when government policy is urging industry to decarbonise.
At the other end of the scale, just six per cent of manufacturers hold a rateable value below £20,000, leaving the vast majority locked out of reliefs such as the small business rates relief scheme.
Make UK is now pressing the government to overhaul the system fundamentally. Among its proposals, the organisation is calling for alternative models that link rates to business size, type or turnover rather than physical footprint, ensuring that charges reflect who is occupying a property rather than simply how large it is. It also wants a 12-month notice period before new rates take effect following any revaluation, backed by a more generous transitional relief in the first year. Finally, it argues that local authorities should publish impact reports demonstrating how business rates revenue is being reinvested in local communities, a move designed to give firms a clearer sense of value for money.
For an industry navigating tariff uncertainty, global supply chain disruption and a domestic cost environment that grows more hostile by the quarter, the message from the manufacturing lobby is unambiguous: the current rates regime is broken, and without reform, the consequences will be measured in lost jobs, shelved investment and diminished competitiveness.
Read more:
Manufacturers bracing for £1 billion business rates bombshell as April cost crisis deepens
