Britain’s manufacturing sector is facing a rise in annual business rates of almost a billion pounds, adding further pressure to an industry already suffering from rising energy bills and escalating employment costs.
An analysis of official data on rateable value changes between 2023 and 2026 by Make UK, the manufacturers’ body, estimates the sector will have to pay an extra £939m a year in business taxes from this month. The numbers reveal a glaring imbalance: While manufacturing accounts for about 10 percent of the economy, it contributes more than a fifth of all companies’ revenues.
An accompanying survey by Make UK paints a bleak picture across the workshop. Almost nine out of ten manufacturers reported an increase in their tariffs for April, with two thirds recording increases of up to 20 percent. Even more worryingly, almost one in five businesses are facing increases of between 20 and 50 percent and a small but significant minority, three percent, have seen their taxable values increase by up to 100 percent.
The timing couldn’t be worse. The tariff increase comes the same month that about half of manufacturers will renegotiate their energy contracts, compounding the impact of higher Social Security contributions and other employment-related burdens that took effect at the start of the fiscal year.
Verity Davidge, policy director at Make UK, described the current system as outdated and described the increase as a hammer blow to one of the government’s priority sectors. For many companies, survival itself has become the measure of success, she warned.
The survey shows how much corporate interest rates are putting a strain on the industry’s finances. Nearly a quarter of manufacturers rank them as their second-largest cost, while one in 10 say tariffs are their largest expense. Make UK modeling suggests the shortage could put around 25,000 jobs at risk as companies consider reducing their workforce to absorb the impact.
The reason for manufacturers’ frustration is a rating system based on square footage rather than business performance. According to the current model, a small or medium-sized company that occupies a large factory building can be classified as high-quality real estate despite low sales and a modest workforce. This structural quirk means that more than half of the sector’s rateable values exceed £100,000 and one in five manufacturers occupy a facility valued at more than £500,000, pushing them into a new, high-value multiplier bracket that effectively penalizes previous investments.
The system also creates a perverse incentive for manufacturers to promote greener production. Installing renewable energy infrastructure increases the value of a facility and therefore its tariffs – an unwelcome contradiction at a time when government policy is pushing industry to decarbonise.
At the other end of the scale, only six per cent of manufacturers have a rateable value of less than £20,000, leaving the vast majority ineligible for relief such as the Small Business Tax Relief Scheme.
Make UK is now urging the government to fundamentally overhaul the system. In its proposals, the organization calls for alternative models that tie rates to the size, type or revenue of the business rather than physical space, ensuring fees reflect who occupies a property, not just its size. It also calls for a 12-month notice period before new tariffs come into force following a reassessment, supplemented by more generous transition relief in the first year. It concludes by arguing that local authorities should publish impact reports showing how revenue from business valuations is reinvested in local communities, a move intended to give businesses a clearer sense of value for money.
For an industry grappling with tariff uncertainty, disruptions to global supply chains and a domestic cost environment that is becoming more hostile every quarter, the message from the industry lobby is clear: the current tariff system is broken, and without reform, the consequences will be felt in lost jobs, deferred investment and reduced competitiveness.
