Hotel owner warns of impending business rate hike: A case study in the challenges faced by small businesses
The hospitality industry is facing a storm, and at the eye of the tempest is Stirrups Hotel, a family-run business in Bracknell, Berkshire. The hotel's director, Jason McKelvie, is sounding the alarm over a staggering business rate hike that could cripple his operation and potentially force many others in the sector to close their doors.
McKelvie estimates that Stirrups Hotel's annual rates could soar by nearly £150,000 over the next three years, following the changes announced in the October Budget. This is a devastating blow for a small, independent hotel that has been family-owned for 36 years. With a staff of 35, including students, the hotel is a significant employer in the area, and its struggles are a microcosm of the broader challenges faced by the hospitality industry.
The hotel is currently receiving transitional relief, but this safety net will expire in 2029/30, leading to an additional £7,000 per month in business rates compared to the previous year. McKelvie describes this increase as a "huge hit" that will "sink a lot of people" if no changes are made. The situation is so dire that it has been brought to the attention of the local council, with Cllr Gareth Barnard highlighting the hotel's plight during his state of the borough address.
The root of the problem lies in the Treasury's business rate reforms, which aim to "back the high street" with a £4.3 billion support package. While the reforms include measures to cap bills for businesses that have seen rate increases, they also involve higher tax rates on the top 1% of expensive properties, including many online warehouses. This has led to a 33% higher tax rate for warehouses used by online giants compared to small high street properties, creating an unfair burden on smaller businesses.
McKelvie argues that the industry has been "unduly targeted on taxes" and calls for a VAT cut in hospitality to 10-12%, aligning with the European average. This reduction would provide much-needed relief and confidence for businesses like Stirrups, allowing them to invest and grow. However, the current tax structure is exacerbating the challenges faced by the hospitality sector, which has already endured multiple hits post-Covid, including national insurance, living wage, and energy costs increases.
The case of Stirrups Hotel serves as a stark reminder of the struggles faced by small businesses in the hospitality industry. As the industry continues to grapple with the aftermath of the pandemic, the looming business rate hike could be the final nail in the coffin for many. It is a call to action for policymakers to reconsider their tax strategies and provide much-needed support to small businesses, ensuring the industry's survival and the preservation of local communities that depend on it.
