BT warns £1.5bn economic risk from business rates reform

BT is investing around £5 billion annually to enhance digital connectivity in the UK. This investment aims to support millions of households, businesses, and public services while facilitating economic growth.

Over the decade, BT has committed over £24 billion, with plans to direct more funds into infrastructure projects. However, proposed changes to UK business rates could slow infrastructure investment, affecting discussions with the Valuation Office Agency (VOA) and decisions expected during the upcoming Budget on November 26.

Business rates are often viewed as outdated and unfair. They not only tax commercial properties but also impact physical assets essential for connectivity, such as fibre cables and mobile masts. The existing property tax system places a higher burden on UK businesses compared to their European counterparts, raising concerns about competitiveness.

The government’s recent proposal to dissolve the VOA and transfer its functions to HMRC may provide an opportunity for a more transparent system. Nevertheless, the ongoing revaluation of commercial properties by the VOA has raised concerns regarding its transparency and potential to hinder economic growth.

Additionally, a new reform proposes charging higher rates for businesses with properties valued over £500,000 to support lower taxes for retail and hospitality sectors. However, this reform could result in infrastructure providers facing disproportionate costs, potentially up to £400 million annually, which may limit their investment in critical sectors.

Amid these changes, large distribution warehouses associated with online retailers may contribute only £250 million annually, which could result in the burden falling heavily on infrastructure sectors. This could further perpetuate tax implications on UK infrastructure, contrary to the nation's investment needs.

The higher business rates could lead to decreased business investment by £1.4 billion over five years and a permanent reduction in the UK's economy by £1.5 billion annually. This outcome contradicts the intention of being revenue-neutral, imposing an estimated annual cost of £600 million on the government.

BT advocates for reforms that genuinely assist high street businesses without stalling critical investment in infrastructure. Suggestions include targeted reliefs for small businesses, exemptions for infrastructure providers, or capping rates for the largest properties to protect investments while supporting street-level commerce.

Reform of the business rate system has become crucial for assisting the high street while ensuring that essential infrastructure investment continues.