The UK's manufacturing sector faces a significant financial headwind. Analysis of Chancellor Rachel Reeves' recent business rates reforms suggests manufacturers will pay approximately £940 million more per year once the changes are fully implemented. This figure reflects shifts in eligibility criteria, relief thresholds, and property valuations that disproportionately affect industrial operators already navigating post-pandemic cost pressures.

For founders running manufacturing operations—whether in precision engineering, food production, chemicals, or advanced manufacturing—understanding the mechanics of this change is critical. Business rates represent a material operating cost that directly impacts cash flow and expansion decisions. This article breaks down what has changed, who is affected most, and what steps manufacturers should take now.

The £940m Burden: What the Numbers Reveal

The £940 million annual figure reflects cumulative impacts across multiple policy adjustments introduced by the current government. Unlike other tax changes that affect a narrow cohort, business rates shifts hit a broad base of manufacturers because the tax applies to all occupied non-domestic property—factories, warehouses, processing facilities, and ancillary operations.

This estimate is derived from sector-level analysis comparing the previous business rates regime with the new framework, accounting for:

• Revaluation effects: The Valuation Office Agency (VOA) periodically revalues commercial property. The most recent revaluation cycle, completed in April 2023, reassessed industrial property valuations across England and Wales. Some manufacturing facilities saw increases reflecting post-pandemic market shifts and inflationary pressures on construction costs.
• Relief threshold changes: The government has adjusted or wound down temporary relief measures that previously cushioned manufacturers from rate rises. Small business rate relief schemes and transitional relief arrangements have been modified or expired.
• Rate multiplier adjustments: The rate multiplier—the pence in the pound applied to rateable value—has been adjusted in line with inflation and fiscal policy.

The Manufacturing Institute and the Federation of Small Businesses (FSB) have highlighted these cumulative pressures, though individual manufacturer impact varies significantly by region, property size, and current rateable value.

Which Manufacturers Are Hit Hardest?

Business rates reform does not affect all manufacturers equally. The impact depends on several factors:

Rateable Value and Property Size

Manufacturers occupying properties with rateable values above certain thresholds lose access to small business rate relief. In 2024–25, the small business rate relief scheme was available to properties with a rateable value of up to £15,000 in England (with regional variations in Scotland, Wales, and Northern Ireland). Properties above this threshold pay the full business rates multiplier, currently around 51p per £1 of rateable value in England for 2024–25.

For a manufacturing facility with a rateable value of £25,000—typical for a small-to-medium engineering workshop or food processing unit—the exposure to rate increases is substantially greater than for operations under the relief threshold.

Regional Variation

Business rates bills depend on local authority assessment and rateable value. Manufacturing hubs in the Midlands, Greater Manchester, and Yorkshire have seen property valuation increases that outpace national inflation. Conversely, some rural or post-industrial areas experienced lower revaluations, limiting rate rises there.

Scottish manufacturers operate under a separate system administered through local authorities in Scotland, with different relief thresholds and multiplier rates. Welsh manufacturers similarly follow Welsh Local Government Association guidance. The £940m figure primarily reflects impacts in England and Wales.

Sector-Specific Pressures

Food and drink manufacturers, which occupy large facilities with significant industrial infrastructure, often carry higher rateable values and thus face larger absolute increases. Similarly, advanced manufacturing and aerospace suppliers—which occupy purpose-built facilities with specialised equipment—are proportionally affected.

By contrast, micro-manufacturers or craft producers operating from smaller units or shared industrial space may experience smaller bill increases in cash terms, though the percentage impact on margins can still be material.

The Policy Backdrop: Reeves' Fiscal Framework

The £940m impact must be understood within the context of broader fiscal and industrial policy announced by the current government. Chancellor Rachel Reeves has sought to rebalance the tax system and raise revenue for public services. Business rates—a tax on commercial property occupation—have been part of this approach.

Key policy announcements affecting manufacturers include:

Temporary Relief Measures Expiry

During the pandemic and immediate recovery period (2020–2023), the government introduced temporary business rates relief for certain sectors and paused rent revaluation for a period. Many of these measures have now expired or been phased out. Manufacturers that benefited from these temporary cushions now face the full impact of the underlying rate and valuation regime.

Revaluation Cycle Implementation

The VOA's April 2023 revaluation cycle was the first full revaluation since 2017. Property valuations, including industrial property, reflect market conditions as at April 2021 (the reference date for the 2023 revaluation). Increased construction costs, energy price inflation, and land values in some regions drove higher assessments.

According to VOA guidance, approximately 30% of all properties saw rateable value increases of more than 20% following the 2023 revaluation, with industrial property experiencing particularly significant reassessments in areas with supply chain infrastructure demand.

Rate Multiplier and Inflation Indexation

The business rates multiplier is indexed annually to inflation (specifically, the Consumer Price Index in December of the preceding year). As inflation remained elevated through 2022–2023, the multiplier increased accordingly. This mechanically increases the bill for any property with an unchanged rateable value.

Relief Schemes: What's Still Available to Manufacturers

While the overall business rates burden on manufacturers is rising, several relief schemes remain available. Understanding these is essential for cash flow planning:

Small Business Rate Relief (England)

Manufacturers with a rateable value of up to £15,000 receive 100% rate relief in 2024–25 (full relief). Those with a rateable value between £15,000 and £28,000 receive tapered relief, with the relief percentage declining as rateable value rises. The scheme is administered by local authorities, and eligibility is determined by the VOA's valuation assessment.

Action for founders: If your rateable value is in the taper band (£15,000–£28,000), confirm your exact position with your local authority's rates team and ensure your property is assessed at the correct value. Challenge assessments if you believe they are incorrect.

Disabled Occupier Relief

If your manufacturing operation is specifically designed to employ disabled workers or is occupied by a disabled person, relief of up to 100% may apply. This is rarely utilised by mainstream manufacturers but can be relevant for social enterprises or specialist producers.

Charities and Community Interest Companies

Charities and registered Community Interest Companies (CICs) may qualify for mandatory relief of up to 80%. If your manufacturing operation is structured as a CIC or operates within a charitable framework, relief may apply.

Enterprise Zone and Local Authority Discounts

Some manufacturing facilities located within government-designated Enterprise Zones or supported sites may benefit from additional local authority discretionary relief schemes. These vary by region and authority. Check with your local economic development team to identify available support.

The gov.uk business rates guidance for manufacturers provides official information on current reliefs, though the guidance should be supplemented by direct contact with your local authority rates department, as schemes and eligibility thresholds change annually.

Calculating Your Likely Exposure: A Practical Framework

To estimate how the £940m burden might translate into your specific bill, use this framework:

1. Find your rateable value: This is issued by the VOA. If you don't have a recent bill, contact your local authority's rates department or search the VOA's online ratings assessment tool.
2. Establish your relief eligibility: Are you below the £15,000 threshold (full relief in England)? In the taper band (£15,000–£28,000)? Or above it (no small business relief)? This determines your baseline liability.
3. Apply the multiplier: Multiply your rateable value (or the taper-adjusted value) by the current multiplier. In England 2024–25, the multiplier is approximately 51.2p per £1 of rateable value. This figure is adjusted annually and is set by the government in the Spring Statement.
4. Compare year-on-year: If your rateable value has increased due to revaluation, or if the multiplier has increased, your bill will rise accordingly. The cumulative effect across all manufacturers is captured in the £940m estimate.

Example: A mid-sized engineering manufacturer with a rateable value of £35,000 (no small business relief, having exceeded the taper band) would owe approximately £17,900 annually at the 2024–25 multiplier (51.2p). If the previous rateable value was £30,000, that represents a £2,560 annual increase due to revaluation alone. Add multiplier inflation over time, and the year-on-year cost rises quickly.

Strategic Responses: What Manufacturers Should Do Now

The business rates increase is now embedded in the system, but manufacturers have limited tactical levers to reduce exposure:

Challenge Your Rateable Value Assessment

The most direct action is to challenge your VOA assessment if you believe your rateable value is incorrect. You have rights under the Business Rates Appeals (Procedure) Regulations 2023. If your property has suffered physical deterioration, your site has reduced trading potential, or comparable properties are assessed at lower values, a formal appeal is justified.

The process involves submitting a check or challenge within four years of the valuation date (for the 2023 revaluation, the deadline is April 2027 for the effective date 1 April 2023, though specific cut-off dates apply). The VOA will review evidence such as comparable property sales, lease agreements, and condition reports. A successful challenge can reduce your rateable value and thus your bill.

Cost-benefit note: If your rateable value is modest (under £20,000), professional appeal costs may outweigh gains. For larger assessments, appointing a surveyor or business rates specialist is typically worthwhile.

Ensure You Claim All Available Relief

Verify that your local authority is correctly applying all eligible reliefs. Small business rate relief, discretionary relief for businesses in difficulty, and any local economic development schemes should be confirmed in writing. Local authority systems are sometimes slow to update, and eligible manufacturers occasionally miss relief they are entitled to claim.

Engage with Local Authority Discretionary Relief Schemes

Many local authorities retain discretion to award additional business rates relief to businesses meeting hardship criteria or contributing to local economic priority goals. Manufacturers operating in areas with economic development targets or facing genuine financial difficulty may be eligible. Contact your local authority's business support team directly to enquire.

Plan Your Property Footprint

If you occupy multiple sites, consolidation or disposal of underutilised space reduces rateable value exposure. Similarly, if you are considering expansion, the rateable value of a new property should be factored into site-selection decisions. A facility in an area with lower property valuations or in an Enterprise Zone may be materially cheaper in rates terms.

Consider Structural Tax Efficiency

Business rates are levied on occupation, not ownership. If your manufacturing operation can be restructured so that property is held in a separate company or through a leasing arrangement, tax advice may reveal efficiencies. This is specialist territory and requires professional guidance, but companies like integrated aerospace and automotive suppliers sometimes optimise their property tax position through group structuring.

Broader Context: Manufacturers and UK Tax Competitiveness

The £940m increase places additional pressure on UK manufacturers at a time when global manufacturing competition is intense. Comparable EU and US manufacturers do not face equivalent business rates burdens. In the EU, property taxes on industrial sites are generally lower and more variable by member state. In the US, property taxation is fragmented by state and locality but industrial property often benefits from lower effective rates in manufacturing hubs.

For UK manufacturers considering investment decisions—whether to expand existing UK capacity or invest overseas—the business rates increase tilts the economics. This is particularly relevant for founders evaluating whether to scale their manufacturing operation in the UK or to establish production facilities in lower-cost or lower-tax jurisdictions.

The Confederation of British Industry (CBI) and the Manufacturing Institute have raised this concern with government, noting that sustained competitiveness requires either business rates relief for manufacturing or structural tax reform. However, government fiscal constraints mean such relief is unlikely in the near term, and manufacturers should plan accordingly.

Sectoral Variations: Food, Aerospace, and Advanced Manufacturing

The £940m impact is distributed unevenly across manufacturing sub-sectors:

Food and Drink Manufacturing

Food processors and beverage manufacturers occupy large facilities with significant infrastructure (cold storage, processing lines, packaging equipment). These properties often have high rateable values. The sector has been particularly vocal about business rates as a cost pressure, especially as supply chains have tightened and input costs have risen post-pandemic.

Aerospace and Automotive Suppliers

Precision manufacturing facilities, particularly those serving aerospace and automotive sectors, often occupy purpose-built industrial properties with high rateable values. The rateable value reflects the specialised nature of the property. For these operators, business rates represent a material fixed cost in an already capital-intensive sector.

Chemicals and Pharma Manufacturing

Specialist chemical and pharmaceutical manufacturers similarly occupy facilities with high rateable values reflecting their specialised fit-out and infrastructure requirements. The business rates increase directly impacts cost of goods sold for these operators.

Textiles, Engineering, and Craft Manufacturing

Smaller-scale manufacturers in sectors like textiles and precision engineering often operate from less capital-intensive facilities. These may be below or within the small business relief threshold, meaning the £940m impact affects them less directly. However, as they scale and rateable values rise, they will face the cliff edge of the relief taper.

Forward Look: Planning Beyond 2026

The £940m increase is now baked into the system for 2024–25 and beyond. Looking ahead, manufacturers should prepare for:

Next Revaluation Cycle (2027–2028)

The VOA is required to conduct a full property revaluation every five years. The next cycle will be effective April 2027, based on valuations as at April 2025. Depending on inflation, industrial property demand, and construction costs between now and April 2025, the next revaluation could see further increases or, in some regions, decreases. Manufacturers should monitor property market trends and begin gathering evidence (comparable sales, lease agreements, condition reports) to support appeals if the next revaluation is unfavourable.

Multiplier Inflation Link

The multiplier is indexed to inflation. If inflation cools (which is the current government's aim), multiplier growth will slow, providing some relief year-on-year. Conversely, if inflation remains elevated, the multiplier will continue rising, layering additional cost on top of any revaluation increases.

Possible Further Policy Changes

The government's fiscal position remains constrained. Further business tax changes are possible. Manufacturers should remain alert to Spring Statements and Autumn Statements that may announce relief schemes, threshold changes, or other adjustments. While the £940m is already being paid in aggregate, targeted relief schemes could still reduce exposure for specific sub-sectors.

Supply Chain and Competitiveness Debates

As UK manufacturing faces headwinds (business rates, energy costs, labour inflation, post-Brexit border friction), political pressure for manufacturing support may grow. Any future government may reconsider business rates treatment of industrial property. For now, plan on the assumption that current rates are structural, but remain open to the possibility of policy reversal if political winds shift.

Conclusion: Navigating the New Reality

The £940 million annual increase in business rates bills for UK manufacturers is a material cost headwind. For individual operators, the impact varies dramatically by property size, location, and relief eligibility, but the overall effect is clear: manufacturing just became more expensive to undertake in the UK.

For founders and operators, the response must be multi-layered. First, understand your specific exposure by obtaining your rateable value and calculating your likely bill. Second, challenge your assessment if warranted, and ensure you are claiming all available relief. Third, incorporate the higher property tax into your long-term financial planning and site-selection decisions. Fourth, consider whether your manufacturing operation can be optimised through consolidation, restructuring, or relocation.

The UK remains a hub for advanced, high-value manufacturing, and for sectors with strong intellectual property or supply chain integration, the higher business rates cost may be tolerable within a broader investment case. But for price-sensitive manufacturing or labour-intensive operations, the rates increase strengthens the case for overseas investment or outsourcing arrangements.

Manufacturers should also monitor ongoing policy developments. The government's commitment to UK industrial strategy and any announcements of future relief schemes could modify this landscape. In the meantime, adapt to the new cost environment, but do not accept the initial assessment of your property as final—challenge it, and preserve your competitive position through careful footprint planning and tax-efficient structuring.