Manufacturers face £1 billion business rate hike putting 25,000 jobs at risk
Britain’s manufacturing sector is staring down the barrel of a nearly £1 billion increase in annual business costs, piling pressure on an industry already strained by rising energy bills and rising employment costs.
An analysis by Make UK, the manufacturers’ association, of official data on estimated value changes between 2023 and 2026 estimates that the sector will carry an extra £939 million a year in business prices from this month. The statistics revealed a huge imbalance: while manufacturing consumes about 10 percent of the economy, it accounts for more than a fifth of all corporate income.
Make UK’s companion survey paints a bleak picture on the shop floor. Nearly nine out of ten manufacturers reported an increase in their prices in April, with two-thirds seeing a 20 percent increase. Worryingly, nearly one in five companies face increases of 20 to 50 percent, while a small but significant minority, 3 percent, have seen their prices increase by 100 percent.
The timing couldn’t be worse. The price hike comes in the same month that almost half of manufacturers will renegotiate their energy contracts, including 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Verity Davidge, director of policy at Make UK, described the current system as outdated and called the increase a blow to some of the government’s most important sectors. For many companies, he warned, survival itself has become a symbol of success.
The survey reveals how much business values weigh on the sector’s finances. Almost a quarter of manufacturers rank them as their second largest cost, while one in ten say prices represent their biggest cost. Make a UK model suggests the cuts could put up to 25,000 jobs at risk as firms consider downsizing more people to take on the role.
At the heart of manufacturers’ frustration is a rating system based on square footage instead of business performance. Under the current model, a small or medium-sized business occupying a large factory site can be classified as a high-value location despite low profits and a modest workforce. This structural problem means that more than half of the sector’s billable prices exceed £100,000, and one in five producers live in a property valued at more than £500,000, pushing them into a high-value multiplier bracket that effectively penalizes past investment.
This system also creates a perverse disincentive for producers who want to be green. Installing renewable energy infrastructure increases the value of the plant and, with it, its tax bill, an unacceptable contradiction at a time when government policy encourages industries to become inactive.
At the other end of the scale, only six per cent of manufacturers hold a chargeable value of less than £20,000, leaving the majority locked out of services such as the small business rate relief scheme.
Act UK is now pushing the government to fundamentally overhaul the system. Among its proposals, the organization wants other models that link prices to business size, type or profit instead of physical measures, ensuring that the prices reflect who lives in the area rather than just how big it is. It also calls for a 12-month notice period before new rates come into force after any review, supported by a large temporary relief in the first year. Finally, it says that local authorities should publish impact reports showing how the income of business rates is reinvested in local communities, a move designed to give firms a clear sense of value for money.
In an industry surrounded by tax uncertainty, global supply disruptions and domestic spending conditions that grow more hostile by the quarter, the message from the producers’ lobby is unmistakable: the current price system is broken, and without changes, the consequences will be measured in lost jobs, retail investment and reduced competition.
