Why predictable tax reform, not reactive policy, is essential to restoring business confidence and investment growth.

Across the UK, businesses are mired in uncertainty. September’s Purchasing Managers’ Indexes for the construction and services sectors show contracting or stagnant activity, with survey respondents citing November’s Budget as a key source of unease.

But hopes of clarity the day after Chancellor Rachel Reeves’s speech are surely misplaced. The UK policy landscape requires deep, structural reform across several fronts. The business rates system is among the most urgent, and the government knows it. It is currently consulting on wide-ranging changes, and the consultation itself acknowledges that the existing model is complex, outdated and increasingly unfit for purpose, creating barriers to investment at the very moment the economy needs it most.

For those unfamiliar with the system, business rates are a property tax applied to most non-domestic buildings – shops, offices, warehouses, factories, and more. The tax is calculated by multiplying a property’s rateable value (its assessed annual rental value, set by the Valuation Office Agency) by a government-set multiplier. The multiplier, adjusted each year for inflation, determines the pence-in-the-pound figure businesses pay. For example, with a multiplier of 55.5p, a property with a rateable value of £1 million faces an annual bill of £555,000. While there are reliefs for smaller firms and certain uses, large occupiers typically shoulder the full cost – a structure that can feel both arbitrary and inflexible, particularly when economic conditions shift faster than revaluations can keep pace.

The government’s own interim report identifies the weaknesses business leaders have long warned about – from the need to replace the blunt "slab" system with a fairer "slice" model, to shortening the valuation cycle so rates reflect market reality, and extending "improvement relief" so upgrades aren’t punished with higher bills.

Yet, the timing of these proposed reforms does little to inspire confidence. Rateable values will not be confirmed until late November, just months before new bills take effect the following April, leaving businesses unable to forecast with certainty. These are welcome ideas – but without earlier publication dates and greater clarity on implementation, they remain aspirations, not actions.

I work with dozens of businesses each year and see the economic costs first hand. One client with a large industrial premises in the North West is being forced to consider exercising a time limited break option earlier than planned, due to the risk of significantly higher rate liabilities suggested by recent government announcements for his property. Multiply that kind of decision across hundreds of firms, and the national impact becomes clear: investment delayed, expansion deferred and regional economies left weaker at a time when stability should be driving growth.

Setting an achievable roadmap to 2029 would be a good start, as that's when the next revaluation takes place. It should focus on practical, mid term reform rather than overnight fixes. The Treasury will not forgo tens of billions in revenue instantly, so progress must be phased. The goal is to provide businesses with enough visibility to plan with confidence.

Granted, the government’s consultation makes an effort to provide businesses with greater certainty. Under the current system, valuations completed in April 2024 will take effect in April 2026, and the government has proposed cutting that gap to a single year. While that’s a popular move, a better solution would be to commit to giving businesses a full year’s advance notice of their new valuations. That approach would give occupiers enough time to budget and plan investments with confidence, rather than reacting to figures made available just a few months before they come into force. In addition, reducing the multiplier to a more sustainable level – closer to 30p in the pound – would bring the UK into line with international norms and provide a clear, long-term signal that the system supports, rather than penalises, productive investment.

The Valuation Office Agency should also evolve from a defensive role into more of an auditor – building trust through self assessment and verification rather than lengthy appeals. Together, these steps would make reform achievable within existing fiscal limits while restoring confidence in a system that underpins investment.

The government has shown willingness to listen to industry. The Treasury may move to take large retail premises out of the highest bracket after a recent tense meeting with chief executives on the issue, the Financial Times reported earlier this month, but it could and should go further. Until rates are affordable, and set on a predictable, transparent basis for all businesses, the investment the government wants to attract will remain on pause. A roadmap with defined milestones, advance notice, and a commitment to stability would not just ease pressure on businesses – it would help deliver the growth this government has staked its reputation on.

This article first appeared on CoStar.