The independent review, led by business rates specialist Jerry Schurder, will consider whether the current valuation system properly reflects trading conditions for hospitality businesses.
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It is expected to report back to the Treasury by the end of March 2027, with any changes intended to feed into the next revaluation in 2029. However, the review will not affect rateable values already set for this year.
Financial secretary to the Treasury James Murray said pubs and hotels were “vital for communities” and said a rethink of valuations would help build a “fairer system for the future”.
The move follows the Government’s announcement last month that pubs, social clubs and live music venues in England will receive a 20% business rates cut from April next year.
Fresh research from money.co.uk business loans suggested the median pub in England could save £1,795 a year from the discount, while live music venues could save £2,502 and social clubs £936.
A survey of 500 hospitality business owners also found 57% planned to reinvest the saving directly back into their business, while 43% said the cut would make them more likely to borrow to fund growth.
Budget action
UKHospitality chief executive Allen Simpson welcomed the review, but said it would not solve the immediate pressure facing operators.
He said: “I’m pleased the Government is looking seriously at the valuation methodology for pubs and hotels. When you have rateable values doubling or tripling at a revaluation, that is the clearest sign yet that the system is broken and in need of proper reform.
“While this much needed review is positive, it is medium term reform that will not solve the immediate financial challenges caused by rising business rates bills.”
Simpson said the average hotel was facing rates bills rising by 110% over the next three years, while restaurants were seeing rises of 54%.
He added: “While I support the Government’s independent review to improve the system to better reflect trading realities, this must be coupled with fiscal action at the Budget to reduce the entire hospitality sector’s tax burden, of which business rates represent a significant proportion.”
CAMRA chairman Ash Corbett-Collins also described the review as “another promising step” from the Government.
He said: “Our pubs have suffered for far too long under the current ratings system, which punishes bricks and mortar businesses, and creates the ridiculous situation where global giants pay less per square metre for warehousing than a licensee does for their pub.
“An independent review is a great way to look at this, and we will definitely be taking part on behalf of beer drinkers and pubgoers. As always, the real difference will be dependent on the results. Hopefully, there will be fundamental changes to the out of date ratings system and publicans will have the certainty and incentive to grow their businesses.”
Ordinary drinkers want their locals open, busy, and at the centre of communities. Tackling our unfair business rates system will help if the review delivers lower and fairer bills.
Ash Corbett-Collins
British Institute of Innkeeping (BII) chief executive Steven Alton said independent pubs had long prioritised lower business rates bills as part of reducing the sector’s “unfair tax burden”.
He told the Morning Advertiser (MA): “The current system penalises pubs in particular as their turnover, a key factor in valuation for pubs, now no longer reflects profitability, with only one in four of our members currently making a profit despite strong sales.
“We welcome the Government’s commitment to tackle this long standing issue for pubs, which must actually deliver long term lower bills for our members. A new system must take into account the tangible social value that pubs deliver as has now been recognised by the Prime Minister.”
Alton said the planned 20% reduction in current bills was welcome, but warned pubs were “under extreme pressures right now” and needed short term support to prevent further failures.
Providing an immediate fair VAT rate of 10% on all pub sales would provide a vital boost for pubs, which will result in further skilled jobs, drive investment and deliver essential growth in all areas across the UK.
Steve Alton
Pub valuations
Pub operators have long argued the sector is treated unfairly because pubs are valued differently from many other commercial properties.
Pubs are valued using fair maintainable trade, which is the level of trade a pub could reasonably be expected to achieve if run in a reasonably efficient way. Operators have warned this can mean successful pubs face higher rates bills as sales rise, even when costs are also increasing.
Greene King chief executive Nick Mackenzie said “fundamental reform” was urgently needed, adding the current system had “barely changed in three decades” and did not properly reflect how markets and customer habits had changed since the 1990s.
British Beer & Pub Association chief executive Emma McClarkin said pubs had paid a “disproportionately higher business rates bill” for years, which had reduced their ability to keep trading.
She said the review was “sorely needed and hugely welcome”, adding the sector wanted a valuation method that was “transparent, predictable and fair”.
The review comes after rateable values for pubs reportedly rose by an average of 30% this year, alongside the end of Covid era business rates relief.
It comes ahead of Chancellor John Healey’s first Budget on 28 October, with operators continuing to call for wider support on VAT, business rates and employment costs.
