The UK's proposed warehouse tax hike is facing scrutiny from industry bodies, who warn that it could inadvertently raise costs for high street businesses and consumers. The Prime Minister's plan to fund business rates cuts for pubs and shops by imposing higher taxes on warehouses has been met with a stark warning from the UK Warehousing Association (UKWA), which represents major retailers including Amazon, Co-op, and John Lewis.
Clare Bottle, chief executive of UKWA, stated in a letter to the Prime Minister that the tax increases would "make a bad situation worse" by adding complexity and unpredictability to an already challenging business environment. She highlighted the existing issues with business rates, which she believes hinder investment, and argued that continuous adjustments to thresholds and reliefs funded by targeting 'online giants' through warehouse taxes would ultimately lead to higher consumer prices.
The Prime Minister's plan involves a 20 per cent reduction in business rates for pubs, clubs, and music venues, financed by imposing higher rates on warehousing facilities. While retail and hospitality groups have long called for radical business rates reform to support struggling high street businesses, the UKWA has expressed "very concerned" about the specific funding mechanism proposed.
UKWA points out that companies involved in storing and distributing goods often operate on thin margins, making them vulnerable to significant tax increases. Any hike in warehouse taxes is likely to translate into higher operational costs for high street retailers they serve, which could have a knock-on effect of increasing consumer prices.
A recent nine per cent rise in warehouses' business rates bills in April has left many sites facing increased costs. Over a fifth of these sites experienced increases exceeding 20 per cent, highlighting the urgent need for reassessment. UKWA challenges the feasibility of targeting only 'online' warehouses, as most major retailers utilise them to stock both physical stores and fulfil online orders.
A 2024 report by Savills revealed that high street retailers occupy 97 million square feet of warehouse space, compared to 69 million square feet for online retailers. This underscores the integrated nature of modern retail logistics, where a single warehouse can support a diverse range of operations, including high street shops, online sales, pubs, restaurants, hospitals, and manufacturers.