The UK's struggling high streets are facing a critical juncture as a powerful new coalition demands urgent action from the Labour government to implement an online sales tax. The Real Rates Reform Alliance, comprising prominent business organisations, is advocating for a 2% levy on all digital transactions, which it estimates could fund a 37% reduction in business rates for physical shops and premises – a potential lifeline for high streets across the country.
Chaired by Ros Morgan, the alliance includes influential bodies such as UKHospitality, the Institute of Directors, the Association of Town and City Management, the Music Venue Trust, and the British Independent Retailers Association. The coalition's primary focus is to address what it describes as a 'broken and unsustainable' business rates system, which disproportionately burdens bricks-and-mortar businesses compared to their online counterparts.
New polling, commissioned by the Heart of London Business Alliance, highlights the escalating economic pressure on businesses. Conducted by market research company Savanta, the survey reveals that almost half (47%) of businesses have seen their business rates bill increase since April 2026, with only one in ten experiencing a decrease. A staggering 55% now consider business rates a major or moderate cost to their operations.
The impact of these rising costs is already being felt by consumers and the economy. The survey indicates that nearly one in three (31%) businesses have raised prices for customers in direct response to higher business rates, while almost one in five (19%) have delayed investment, and around one in six (17%) have reduced staff numbers – pointing to a squeeze on growth and employment.
The proposed 'hybrid business rate solution' aims to rebalance the tax system to better reflect the modern digital economy. The alliance believes this reform is crucial for protecting high streets, stimulating investment, and fostering a fairer competitive environment. While some government figures have acknowledged the unfairness of the current system, the alliance is pushing for more comprehensive action.
The Labour Party's manifesto included a commitment to reform business rates to level the playing field between online and physical businesses. The Real Rates Reform Alliance is now pressing the government to act on this pledge, presenting a 'practical, credible solution' that they believe will support communities and ensure the long-term viability of physical retail and leisure businesses across the country.