Welsh business leaders are grappling with three persistent pressures: tax, regulation and operating costs. Ambition remains strong across the business community, but uncertainty is holding many firms back.
Increasingly, businesses are pausing or rethinking investment in people, premises and technology – not because they lack confidence in Wales, but because the environment feels unpredictable. With an economy that continues to stutter rather than soar, that should worry us all.
Both the UK and Welsh Governments understand the challenges businesses are facing, even if action has not always matched the scale or urgency of the problem. In recent weeks, the Chancellor stepped in to provide business rates relief for pubs across England – one of the first major interventions of the year.
Because business rates are devolved, those measures do not apply in Wales. But the intervention provides a timely opportunity to look more fundamentally at how the system works, and whether it is fit for purpose. Based on extensive conversations with businesses across Wales, one conclusion is unavoidable: the business rates system is no longer working.
Short-term reliefs can help at the margins, but they do not give businesses the certainty they need to plan and invest with confidence. Too often, they add complexity to an already burdensome system. For many firms, business rates are only part of the challenge, alongside sharply rising energy costs, persistent labour pressures and fragile margins.
While retail, leisure and hospitality tend to dominate the debate, the reality is that business rates affect almost every sector of the economy. Professional services firms in office blocks. Advanced manufacturers operating out of warehouses. Innovative businesses working from labs. Major employers that underpin our infrastructure – from transport operators to utilities – are also heavily exposed.
We hear regularly from members facing dramatic increases in their rates bills. One transport operator recently told us their costs had risen four-fold. Another has already paused planned investment simply to absorb a tripling of rates. These are not isolated cases, and they have real consequences for growth, jobs and competitiveness.
All of this comes at a time when the UK’s overall business tax burden is already at a 25-year high. The UK has the highest property taxes in the OECD, even before further increases take effect from April 2026. With inflation edging up again and operating costs already uncomfortably high, many firms are facing a perfect storm just when the economy needs momentum.
Cliff-edges in the business rates system remain one of the biggest barriers to investment, acting as a brake on growth across the country. The UK Government’s commitment to explore a more incremental, slice-based approach – alongside stronger incentives for investment such as improved relief for property improvements – is a welcome step. It is essential that the Welsh Government either follows that example or works closely with UK counterparts as part of the same conversation.
While 2026 has not begun with a surge in economic confidence, those of us working closely with businesses are clear about what is required. Confidence is fragile, consumers are cautious, and decision-making is being delayed. Reversing that trend will require closer collaboration between business and government, at both UK and devolved levels.
Fundamental reform of the business rates system – rather than continued tinkering around the edges – must now be a priority. The case for change is overwhelming, and the prize is significant: higher investment, stronger competitiveness and renewed economic momentum. For Wales, the potential benefits would be transformative.
The time to act is long overdue.
