Major supermarkets are already rethinking their investment programmes from 2026 after plans to add hundreds of millions to their collective business rates bill got a second reading in Parliament on Monday.
The business rates reform bill paves the way for the Treasury to introduce one or more higher tax rates from 2026, to apply to larger properties with a rateable value of £500,000 or more.
While the extent of the rise is to be determined in next year’s budget, the bill permits the Treasury to add up to 10p in the pound to the tax.
A source at a major supermarket told The Grocer the vast majority of its stores were above the higher tax threshold and the 10p rise would add tens of millions to its own bill while heaping hundreds of millions on the sector.
“I think it’s inevitable that the proposed high multiplier will hasten the closure of some stores and wreck the business case for others in the pipeline,” said the source.
“Having spoken to people here about some of the developments we’ve been looking at, this makes the business case for some in the pipeline much more difficult.”
As revealed by The Grocer last week, figures from property consultancy Colliers suggest 1,900 hypermarkets and superstores fall above the £500,000 threshold. They already face a property tax rate – known as the business rates multiplier – of 55.5p for every £1 of rateable value for the financial year 2025-26.
Figures also supplied by Colliers suggest the combined rateable value of those 1,900 hypermarkets and superstores in 2023 was £2.3bn. It means the permitted 10p in the pound business rates hike would add up to £230m to their combined annual tax bill.
It is understood the data on the numbers of stores implicated is seen as conservative, and supermarkets are keen the government should not underestimate the full impact.
The Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-25 also allows the Treasury to establish up to two new lower tax rates for retail, leisure and hospitality properties below the £500,000 threshold. These can be up to 20p lower than the small business multiplier, which would take it from 49.9p to 29.9p.
The supermarket source said: “The discount for stores below £500,000 is welcome, but if that’s funded by an increase in the multiplier of stores over £500,000, that’s a big net increase for us and for other bricks & mortar supermarkets.
“Labour talked a lot before the election about levelling the playing field with online giants and this clearly does not do that. It puts us at an even greater disadvantage.
“They then evolved that language by saying this will also impact larger out of town stores which draw people away from the high street. It’s disappointing language because clearly the larger stores away from the high street are doing an awful lot around employment, access to fresh food and the range of services they provide.
“But also, many supermarkets are on the high street.”
The Public Bill Committee is inviting interested parties to submit views on the bill, ahead of a first sitting on 11 December and a report on its findings on 17 December.
The supermarket source said: “Discussions are going in the diary but officials have been quite clear that the higher multiplier is off limits. There will be a short discussion about it but the focus of the meeting will be to talk about comes next.
“Whereas for us, the immediate issue is the higher multiplier.”
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