The UK government has launched a review into the business rates system for pubs and hotels in England and Wales, aiming to address concerns that the current valuation method is unfair and disproportionately impacts these businesses. The review, set to be led by business rates expert Jerry Schurder, will examine the 'Fair Maintainable Trade' (FMT) valuation methodology, which ties business rates to a property's turnover.
This contrasts with the floor area basis used for many other business types. Pub and hotel groups have argued that the FMT system leads to significantly higher rates bills when turnover increases, creating a burden that hinders their ability to operate. The Treasury announced that Schurder, a former business rates policy lead at Newmark UK, will report his findings in March 2027.
"We need a rethink of valuations – so that we can build a fairer system for the future," stated James Murray, financial secretary to the Treasury. Business owners in the affected sectors are being encouraged to participate in the review process to share their evidence and experiences. Schurder intends to "assess how the current valuation methodologies for pubs and hotels operate in practice and whether they remain fit for purpose," emphasizing that stakeholder engagement will be crucial for developing recommendations.
The hospitality sector has faced numerous challenges, with the British Beer and Pub Association reporting that 161 pubs closed in England, Scotland, and Wales in the first quarter of 2026, leading to approximately 2,400 job losses. While rising business rates are cited as a contributing factor, increased employer national insurance contributions and minimum wage hikes have also driven up staff costs.
Emma McClarkin, chief executive of the British Beer and Pub Association, welcomed the review, stating that pubs have "paid a disproportionately higher business rates bill which has ground down their ability to keep the doors open." She added that the review is "sorely needed and hugely welcome."
However, some groups are calling for broader reforms. Craig Beaumont, executive director of the Federation of Small Businesses, urged the government to consider exempting more small businesses by increasing the rates relief threshold. Tom Ironside, director of business and regulation, while welcoming the review for pubs and hotels, stressed that the needs of retailers should not be overlooked.
The Real Rates Reform Alliance, a coalition advocating for fundamental changes, expressed disappointment that the review is narrowly focused on pubs and hotels. Ros Morgan, chair of the alliance, argued that "any lasting solution for pubs and hotels must be part of a wider overhaul" to create a more sustainable system for the modern economy.
In July, the government announced a 20% cut in business rates for pubs, social clubs, and live music venues in England, effective from April 2027. Labour has indicated plans for further reforms, including small business rates relief, to be outlined in October's Budget.