Fed welcomes business rate changes for small shops but says cost of business remains too high after Budget

(Pictured: Hemanshu Patel, the Fed’s National President, who called on the government to support small shops ahead of the Budget)

The Fed has welcomed a campaign win following an announcement in Wednesday’s Budget that the Government would increase eligibility for Small Business Rates Relief (SBRR), but has warned that the cost of running a small shop remains too high.

In Chancellor John Healey MP’s Budget statement, it was confirmed that the threshold for 100% SBRR would increase from £12,000 to £18,000 in rateable value from April 2027, following lobbying by the Fed in recent months. This follows concerns raised after April’s revaluation that small businesses, including Fed members, were being brought into the scope of business rates, pushing up costs at an already challenging time.

The threshold for tapered relief will also rise from £15,000 to £21,000. The Government estimates that a further 70,000 retail, hospitality and leisure businesses will pay no business rates as a result of the changes.

The Government has also announced a two-year real-terms freeze on business rates bills for qualifying retail, hospitality and leisure properties in England in 2027/28 and 2028/29, alongside an extension of transitional support for some small businesses.

The budget statement also confirmed that vape shops in England will lose eligibility for SBRR from April 2027. However, the Fed has received assurances from HM Treasury that this change will not apply to retailers selling vaping products as part of a much wider range of goods. The Fed will continue to engage closely with HM Treasury and other government departments to ensure the changes are implemented fairly and that the position of independent convenience stores is understood.

The announcement came alongside confirmation of a further increase in the National Living Wage, which the Fed commented on earlier on Wednesday. It also comes at a time when commercial costs, including energy bills, remain high. While the Budget included energy support for households and certain energy-intensive businesses, independent retailers continue to face significant pressure from their energy costs and other operating expenses. Employer National Insurance Contributions also remain an important part of the cost of employing staff.

Commenting, the Fed’s National President Hemanshu Patel said: “The increase in the Small Business Rates Relief threshold is a positive step and reflects an issue the Fed has raised with the Government ahead of the Budget. We called for the threshold to increase from £12,000 to £18,000, so we welcome this announcement and the recognition that smaller businesses need support.

“However, we must be clear that this does not remove the wider cost pressures facing independent retailers. Business rates, wages, employer National Insurance and energy bills continue to put pressure on already tight margins. Our shops are important employers and a familiar face in the communities they serve, but they need a sustainable environment in which to operate.

“We will continue to work constructively with the Government to ensure that the needs of independent retailers are understood and that further decisions on business rates and business costs reflect the realities of running a small shop.”

His comments followed earlier remarks about the increase in the National Living Wage, in which he said: “For many independent retailers, these are not simply figures on a spreadsheet. They affect decisions about whether they can afford to take on new staff, offer hours to younger workers or maintain their existing workforce. We are concerned that, without proper consideration of the cumulative costs facing employers, the Government risks making it harder for young people to find work and for independent retailers to continue providing jobs in their local communities.”

The Fed also welcomed measures to maintain the 5p-per-litre fuel duty cut until July 2027 and the temporary suspension of import tariffs on selected food products, which is intended to help ease costs for consumers.

Other Budget announcements included an extension of the reduced VAT rate on household electricity bills until July 2027, plans to abolish standing charges on domestic gas bills, and a two-percentage-point increase in tax rates on income from property and savings interest from next April.

The Fed will continue to engage with the Government on the Budget and other measures affecting independent retailers, pressing for policies that recognise the vital role small shops play in employing people, supporting local communities and keeping high streets thriving.