Energy Cuts vs. Property Tax: A Corporate Tug‑of‑War
In a bid to keep the UK’s factories from turning into pickle factories, the government announced a generous reduction in electricity bills for over 7,000 businesses.
Tax experts—who normally wear monocles and tight‑fitted suits—have dubbed the plan “strategically incoherent.” Apparently, it’s a bit like getting a free coffee only to be asked to pay extra for the table you sit on.
The New Business Rates “Levy”
- Who’s at stake? About 4,300 large industrial sites in England, all valued above £500,000, will face a new business rates “levy” starting in April 2026.
- Why it matters? Those sites collectively carry a rateable value of £5.64 billion, potentially rising 20 % next year. Adding a 10p supplement on the standard multiplier could generate a whopping £685 million extra cost each year.
- Who’s funding it? The money will fund tax breaks for high‑street retail, leisure, and hospitality (RHL) sectors—thanks to the new Non‑Domestic Rating (Multipliers and Private Schools) Act 2024.
Industry’s Dilemma
Alex Probyn from Ryan says the energy relief is a welcome gesture for electricity‑intensive manufacturers like those in automotive, aerospace, and chemicals. But he warns:
“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 argues that if the goal is to boost UK competitiveness, a coherent strategy is needed—one that tackles the total burden of fixed costs, not one that gives with one hand and takes with the other.
Competitive Edge in the Spotlight
Manufacturers in the UK paid an average of £258 MWh in 2023, compared to £178 in France and £177 in Germany. This puts UK factories at a disadvantage, and the government claims the electricity cuts will help level the playing field.
Yet, business leaders warn that any savings may be swallowed by rising property taxes.
Reality Check: UK’s Property Tax Landscape
UK businesses already face the highest property taxes among developed nations, with a property‑tax‑to‑GDP ratio of 4.1%—more than double the EU average.
Probyn sums it up: “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.”
So while the government is trying to give a chuckle to energy‑hungry factories, the tax countdown will likely keep them on their toes.
