Andy Street is Co-Chair of Prosper UK, served as the first Mayor of the West Midlands, and was formerly Managing Director of John Lewis.
The new Prime Minister has taken over the same problem that defeated his predecessor: an underperforming economy with low growth and weak productivity leaving the public finances under permanent strain.
The difficulty is political as well as fiscal. The Parliamentary Labour Party has already shown it is prepared to block reforms needed to put the country on a more secure footing. The previous government’s instincts were right on the welfare bill, only for it to retreat when 126 Labour backbenchers threatened rebellion. A change at the top does not alter the arithmetic.
That is why it matters more than ever that those of us on the centre right make the pro-enterprise case for growth and make it without apology. The country we want to see is one where the reward for investing is a stronger business rather than a bigger tax bill, and where growth, not borrowing, pays for rising wages and decent services.
Over the past year, Prosper UK has travelled the country, from Guildford to Manchester and Birmingham to Edinburgh, asking businesses what is holding them back and business rates came up more than anything else.
That is one of the reasons we recently launched “Rethink the Rates”, our campaign to reform business rates. Pubs and shops have been dominating the headlines, but this is a systemic problem that affects all businesses with physical premises, from manufacturers to professional services and airports.
The tax is outdated, unfair and broken.
Business rates were introduced in 1601 as a tax on property. At the time, almost every trade was carried out from physical premises, so taxing the building was a reasonable proxy for taxing the business. Over four centuries later, the country and business have changed beyond recognition, and the logic simply does not hold any more.
The rates bill does not flex with the success of a business. Perversely, it rises as a company improves its premises, since the valuation goes up and the charge follows – a penalty on the very investment the country needs. And the cliff edges are so steep that a £1 change in rateable value can add £39,000 to a bill. The system also taxes domestic production over imports, so a business making goods here is charged at every stage, while a competitor importing the same goods is not.
Talk to any business and you see just how broken the current system is, held together by a network of short-term discounts, with an army of consultants who make a living advising on them. Valuations arrive through a process most businesses can neither follow nor predict, and disputing one can take years. In the final quarter of last year, 45 per cent of appeals took 12 months or more to resolve. Almost 130,000 challenge cases were opened in the first three months of 2026, and 58 per cent of those resolved end in a reduction.
The impact goes beyond the business that pays the bill, because rates are a fixed cost, met before a single customer walks through the door. Part of every bill ends up in the price of a pint and the cost of the weekly shop, and part shows up in wages that cannot rise and jobs that are never created, so everyone carries a share of a tax few people notice.
When I led John Lewis, business rates were part of decisions about whether to open a new shop or invest in an existing one. As Mayor of the West Midlands, I saw the same barrier facing businesses of every size. They wanted to invest, create jobs and grow, but too often the tax stood in the way.
The CBI found that 76 per cent of the firms affected said higher bills hold back their investment, and three in ten would put almost all of any savings straight back into the business.
At the last election, Labour’s own manifesto acknowledged that business rates disincentivise investment and promised to replace the system. In office, the party has fallen into the same pattern every government before it has followed. This year, bills for pubs and music venues were cut and frozen, a further 20 per cent cut has been promised from April 2027, and the Treasury appointed Jerry Schurder to review how pubs and hotels are valued. The permanent discounts, meanwhile, are funded by a new surcharge on larger premises, so the tax has been added to rather than reformed.
The review is a welcome admission that the valuations are not working, but it looks like another sticking plaster, confined to two sectors and not taking effect until the 2029 revaluation, far too late for a business deciding now whether to invest. Even then, the underlying system looks set to remain unchanged. What business needs is root and branch reform, and no further round of allowances is going to deliver it.
Prosper UK was set up to confront hard questions and to lead with honesty. Changing the system means trade-offs, and there will be winners and losers, but the status quo is unsustainable and reform is needed to deliver growth.
This is the case Prosper UK will set out in full, with proposals published ahead of the Budget. Before then, we want to hear from businesses impacted by this tax – about delayed investment, stalled growth and postponed recruitment. You can tell us here and add your name to the petition.
A government hemmed in by its own backbenchers will not reform this tax unprompted, and so the louder the voice of business becomes, the harder it is to ignore, and the closer we get to a country that rewards the people who invest in it.