Industrial firms to face £685m property tax hit after energy support pledge
Industrial firms are to be hit with nearly £700 million in new property taxes, offsetting some of the Government's move to slash their energy bills to boost competitiveness, experts have warned.
Just a week after the Government's industrial strategy revealed electricity costs for about 7,000 energy-intensive businesses would be cut by scrapping green levies, estimates suggest many of the larger firms are set to see their business rates bill soar.
Around 4,300 large-scale industrial properties in England – across manufacturing sectors such as automotive, aerospace and chemicals – will face a new business rates levy costing them around £685 million a year, according to tax and software firm Ryan.
The levy, which comes into effect in April, is part of next year's business rates revaluation and is being used to fund tax breaks for high street retail, leisure and hospitality sectors, Ryan said.
Alex Probyn, a practice leader of property tax at Ryan, said that while the industrial strategy move to reduce energy bills was welcome, 'it's perverse to then ask those very same businesses to foot the bill for high street tax cuts through higher business rates from 2026, a year before the energy support will come into effect'.
He added: 'If the goal is to boost UK competitiveness, we need a coherent strategy that tackles the total burden of fixed costs — not one that gives with one hand and then takes with the other.'
It follows Sir Keir Starmer's 10-year industrial strategy, which includes a measure to cut bills by up to 25% to help firms compete with foreign rivals.
Under the new plans, a new British Industrial Competitiveness Scheme from 2027 will cut costs by up to £40 per megawatt hour for over 7,000 manufacturing firms by exempting them from levies on bills including the renewables obligation, feed-in tariffs and the capacity market.
Around 500 of the most energy-intensive firms, including the steel industry, chemicals and glass-making, will also see their network charges cut. They currently get a 60% discount through the British Industry Supercharger scheme, which will increase to 90% from 2026.
But Ryan is calling for more coherence in strategy from the Government, cautioning that any benefit from lower energy bills risks being undermined by increased property taxation.
UK firms already face the highest property taxes in the developed world and more than double the European Union average, according to the firm.
Mr Probyn said: 'We're seeing two opposing policies rolled out simultaneously. One aims to support industry by reducing energy costs.
'The other increases a key fixed operational cost — property tax — on the very same businesses to subsidise other sectors.
'There is no coherent strategy; it's a contradiction.'
A government spokesperson said: 'We are making it easier and quicker for businesses to invest and grow by cutting British industrial electricity costs with unprecedented new support which will cut electricity costs by around 20-25% for thousands of businesses.
'Our reform to the business rates system will also create a fairer business rates system that protects the high street, supports investment and levels the playing field.
'A new, permanently lower business rates in 2026 will benefit over 280,000 retail, hospitality and leisure business properties and will be sustainably funded by a new, higher rate on the 1% of most valuable business properties.'
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