FWD column: We want fairness, not special treatment

The government must rethink its approach to business rates reform and exempt food and drink wholesalers to ensure they can continue their vital role, says FWD CEO James Bielby

Business rates reform is something governments tend to put in the ‘too difficult’ box. A tax that raises £25 billion each year is not something any government wants to jeopardise, and rates reform creates as many winners as losers. At the same time, all agree that reforming business rates is critical to stimulating growth in the economy.

Current government proposals, designed to ‘protect the high street’, will see a higher rate for properties with a rateable value of £500,000 and above from next year, with adverse impact on wholesalers, particularly those with large distribution warehouses. Bills could increase by as much as 20%.

While the rationale behind this change may be to tax the warehouses of online giants, it is essential to ensure there is a way of differentiating them from business-tobusiness food and drink wholesalers who play a vital role in feeding the nation. As a consequence of the current proposals, wholesalers will be forced into passing additional costs back on to customers – driving food price inflation.

Consequences

The government faces a flood of exemption requests, but food and drink wholesalers stand apart from the rest. We aren’t just another business sector looking for relief. Wholesalers are Critical National Infrastructure, who are central to keeping schools, hospitals and care homes stocked with food and drink.

Unlike other industries, wholesalers have no choice but to operate large warehouses, yet they are being taxed as if they are high-profit online retailers such as Amazon.

Wholesalers run on wafer-thin margins of around 1%, leaving them with no buffer to absorb yet another cost increase. While other businesses can pass on rising costs, wholesalers, who supply thousands of independent businesses and the public sector, cannot pass on costs without devastating consequences for schools, hospitals, care homes and local economies.

When we surveyed FWD members it became clear why wholesalers cannot absorb this tax. Some 80% of wholesalers surveyed have sites exceeding the £500,000 rateable value threshold. Business rates have already risen by 25-30% in the past three years, and another 20% increase is a hit that wholesalers simply cannot afford.

Facing these cost increases, 80% of wholesalers say they will be forced to cut jobs and pause recruitment, compounding pressures on employment. Some businesses estimate cost increases of up to £2 million.

If wholesalers are forced to absorb these costs, the consequences will be severe. Food prices will rise; unlike retailers, wholesalers do not have direct-to-consumer pricing power, meaning cost increases will ripple through supply chains, hurting independent businesses and, ultimately, consumers. Public sector food supply will suffer as schools, hospitals and care homes will see higher costs or reduced availability of essential products. Investment will stall. Many wholesalers are already cancelling expansion projects, meaning fewer jobs and less economic growth.

Fairness

Wholesalers are not asking for special treatment; they are asking for fairness. This policy was designed to target online giants, not the essential businesses feeding the nation. The government must rethink its approach to business rates reform and exempt food and drink wholesalers, ensuring they can continue their vital role in supporting public services, local
businesses and communities.

By granting an exemption, the government can safeguard supply chains, protect jobs and ensure continued investment in a sector that underpins the UK’s food infrastructure.

All businesses wholeheartedly support the government’s mission to drive economic growth. However, as they stand, the business rate proposals are not conducive to creating an environment for why we are urging the government to reconsider these planned changes to protect the UK’s food and drink supply chain.

business rates FWD FWD column Government James Bielby