Business organisations are calling for the Welsh Government to use new powers to reform business rates.
The Senedd is due to vote on the 2025/26 Welsh Government Budget on March 4. The Draft Budget includes a cap on the business rates multiplier increase, and the extension of 40% business rates relief for hospitality and leisure businesses.
The Local Government Finance (Wales) Act 2024 means that, from April, the Welsh Government will have the ability to adjust how business rates are calculated and to tailor reliefs and exemptions to specific sectors.
Business organisations say the changes mean that by the time it comes to consider the 2026/27 Budget, the Welsh Government could go further by using the powers granted via the Act to introduce variable multipliers to support small businesses and certain sectors.
Writing for Business News Wales David Chapman, Executive Director of UKHospitality Cymru, says:
“Reforming business rates using the new powers introduced last September is an essential step, and it is a step that must be taken boldly.
“Hospitality businesses are taxed at levels far beyond what their turnover justifies. By some estimates, they pay up to three times what they should under a fair system. Meanwhile, online businesses and out-of-town retail centres do not shoulder a proportionate share of the burden. This disparity distorts the market and makes it harder for bricks-and-mortar businesses – pubs, restaurants, hotels – to compete and thrive. The current system has left too many businesses surviving on the back of relief schemes, rather than a sustainable, reformed rates structure.”
The Federation of Small Businesses (FSB) is also calling on the Welsh Government to use the run up to the next Budget – 2026/27 – to set out how it will utilise the new powers to vary the multiplier used to calculate business rates to support small businesses, drive growth and encourage entrepreneurship.
Ben Cottam, Head of Wales at the FSB, welcomed moves in the Draft Budget for 2025/26, saying:
“The Welsh Government’s Draft Budget commits to a much-welcomed extension of the business rates relief for retail, leisure and hospitality businesses and a 1% cap on the multiplier used to calculate rates for all businesses.
“Delivery of this key lifeline will be crucial for many businesses in a context of razor-thin margins and soaring employment costs. It demonstrates an understanding of how challenging the economic climate remains for so many small businesses.”
He added that the FSB was calling on the Welsh Government to set out how they would use the new powers to deliver a business rates framework that aligns with a “forward-looking mission to drive prosperity by the 2026-27 Budget”.
“The Welsh Government can also help businesses reposition themselves for the next stages of economic recovery and gear the economy towards growth by reforming business rates to drive prosperity, delivering on their commitment to improve the planning process, and growing business support funding in areas which could drive up productivity,” said Ben.
“It must use the next few months to identify how it will use its new powers to vary the multiplier to meet its economic objectives. This includes revitalising our town centres by addressing the imbalance between our small-town centre retailers and large out-of-town developments, and creating a system that encourages micro and small businesses to grow into medium businesses.”
Sara Jones, Head of the Welsh Retail Consortium, said:
“The Welsh business rates multiplier is at a 25-year high, higher than in England and Scotland. This is a significant barrier to greater investment and jobs on Welsh high streets.
“Wales needs a more ambitious approach. UK Ministers acknowledge the rates burden on retail is disproportionate and will implement a permanent rates reduction for the sector in England from 2026. We need to see similar recognition here along with a permanent cut to business rates for all retailers in Wales, otherwise stores here risk being left behind and put at a further competitive disadvantage.”
Speaking in the Senedd on February 18th on business rates, Mark Drakeford, Cabinet Secretary for Finance and Welsh Language, said:
“We can't use a split multiplier in this year, because the power to do so…doesn't become available to the Senedd until 1 April. At that point, we will, of course, be considering whether that split multiplier possibility can be used to the advantages of businesses in Wales.”
