The UK government has been accused of imposing a “stealth” £1.5bn increase in business rates, intensifying criticism of Wednesday’s Budget from retailers, hospitality groups and other high-street businesses.

The dispute centres on the treatment of business-rates relief. Ministers presented an extension of relief as a measure protecting smaller firms, but critics say changes elsewhere in the system will leave many businesses facing higher bills.

Relief extension under scrutiny

The extension is expected to keep about 70,000 small shops, restaurants, cafés and gyms outside the scope of the tax. However, business groups argue that the wider package will shift a significant burden onto companies that do not qualify for the most generous support.

The accusation adds to concerns that the Budget’s headline measures understate the pressure facing employers. Firms are already contending with weak consumer demand, elevated wage costs and higher financing expenses, making property-related taxes a particularly sensitive issue.

High-street pressure

Business rates are calculated using the rateable value of commercial property and are a major fixed cost for retailers and hospitality operators. A rise in the tax can weigh on investment, staffing decisions and the viability of marginal sites, particularly where sales have not recovered fully.

Industry representatives are expected to press the government for greater clarity over the distribution of the burden and for measures that protect businesses outside the relief threshold. The debate also highlights the difficulty of reforming a tax system that raises substantial revenue while attempting to support town centres.

Political and economic stakes

The controversy comes as the government faces wider scrutiny over its fiscal assumptions and the outlook for living standards. The Office for Budget Responsibility is reported to have reduced its growth forecasts to 1.2% for 2026 and 1.0% for 2027, while projecting higher borrowing and debt paths.

For ministers, the business-rates row risks undermining the Budget’s message that support is being targeted at smaller enterprises. For employers, the immediate concern is whether the final tax bill will rise faster than revenues, leaving more firms to absorb costs through lower investment, reduced hiring or higher prices.