Business rates are killing dreams, and Wales can do better

Franck Banza

For the past few months, I have been exploring what makes the Welsh economy tick, and what holds it back.

My writing and podcasting have taken me from the high streets of Swansea to the heart of local communities, listening to people who are creating something of their own: cafés, bakeries, creative ventures, family-run shops, and social enterprises.

These are not abstract ideas; these are real lives, aspirations and dreams. Yet time and again, I hear the same barrier: the cost of actually running a business in Wales is simply too high.

History offers a warning we would do well to remember. The Romans understood that taxation, when disconnected from reality, does not strengthen a society, it destroys it. Ubi tributum opprimit, ibi civitas deficit: where tax oppresses, the community fails.

Civilizations collapse not merely because of invasion or internal decay, but because the systems meant to support them strangle productive activity.

Today, Wales risks a similar trap. Business rates, as they currently stand, quietly do to small businesses what rigid taxation did to ancient societies: discourage productivity, suppress ambition, and deprive our communities.

What are business rates?

Business rates are a tax on non-domestic properties, intended to help fund local services. They are not based on how much a business earns, but primarily on the physical characteristics and rental value of the property it occupies.

The Valuation Office Agency (VOA) assesses each commercial property and assigns it a rateable value, which is broadly based on the estimated annual rent the property could command on the open market, taking into account factors such as size, location, layout, and use. Larger properties, or those in central or high-footfall areas, are therefore given higher rateable values regardless of whether the business operating inside is profitable or struggling.

Local authorities then apply a nationally set multiplier to that rateable value to calculate the amount owed. Councils are also responsible for collecting payments and administering a range of reliefs and exemptions, such as small business rate relief. While these reliefs are intended to soften the impact, they often depend on thresholds, applications, and periodic revaluations.

In practice, this creates a complex and inflexible system. A small independent business can face rising bills simply because property values increase, even if footfall falls or turnover declines. Navigating revaluations, appeals, and relief applications can be time-consuming and confusing, particularly for sole traders and micro-businesses without specialist support. As a result, many small businesses find themselves paying tax based on the space they occupy, not the economic reality they face.

I have Seen the Damage First-hand

I meet people every day who are ready to create jobs, provide services, and strengthen their communities. They have ideas, passion, and drive, yet they hit a wall: their businesses face property taxes so high that survival itself becomes a gamble.

Relief schemes do exist and they do offer some protection, but they are far from straightforward. In Wales, support such as Small Business Rates Relief, which can provide up to full relief for the smallest properties before tapering as rateable values rise, alongside targeted help for retail, leisure, and hospitality, is intended to ease pressure on businesses.

In practice, however, these reliefs are not applied automatically and must often be requested every financial year, introducing uncertainty and additional strain for entrepreneurs already operating on tight margins and long hours. Time that should be spent serving customers, developing new ideas, or growing a business is instead absorbed by navigating forms, deadlines, and eligibility rules, all while facing the constant risk of outgrowing the thresholds that determine support.

The result is a system that offers limited help at the margins but ultimately creates more complexity than clarity, encouraging very small, low-risk operations while discouraging the growth of larger, sustainable enterprises that could employ more people and bring real variety and vitality back to our town centres.

For local authorities, this system also comes at a cost. Staff are required to process relief applications, review eligibility, and manage appeals year after year. And for landlords, the rules have unintended consequences: to help tenants qualify for relief, properties are often divided into smaller units, creating a patchwork of tiny shops that can barely accommodate customers. Instead of vibrant, diverse high streets with cafés, restaurants, and larger retail spaces, we see a proliferation of takeaway shops, and more recently, shops that exploit these small units to sell illegal goods.

In Swansea city centre, Gorseinon, Pontarddulais, Morriston, and Uplands, operations by Swansea Council and Trading Standards have uncovered a worrying trend. “Operation Ceecee” and “Operation Marvel” targeted illegal cigarettes and vapes, resulting in nine closure notices for premises, 11 arrests, hundreds of counterfeit goods seized, and even cannabis confiscated. While some of this activity is criminal, it thrives in part because legitimate businesses cannot afford the spaces small enough to access relief, leaving the doors open for those willing to exploit the system.

In addition to this, I have had conversations with many people that have shared the view that our city centres increasingly feel flat and uninviting, marked by empty units, long rows of charity shops that automatically qualify for 100% mandatory relief and therefore pay no business rates, and Betting shops operated by large chains that can absorb the cost of rates but often add little to the long-term health of local communities.

None of these exist in isolation, and the unintended consequence of the current system is that our town centres become dominated by uses that limit diversity and economic dynamism. Instead of a bustling city centre with independent retailers that create jobs and draw people in, we are left with streets that feel hollowed out. This is a clear illustration of how tax policy shapes behaviour and, unintentionally, the very character of our communities.

Property values, rates thresholds, and multipliers interact in a way that distorts markets. Landlords and businesses make decisions not based on what the community needs or what customers want, but on how to minimise the rates bill. The outcome is predictable: high streets crowded with tiny shops, struggling to provide services, while vacancies and economic inactivity persist.

Research also shows that high property taxes actively influence behaviour. Lockwood, Simmler, and Tam (2021) demonstrated that effective reductions in tax rates can meaningfully reduce vacancy, supporting the idea that tax policy can directly impact whether businesses survive or fail. Reliefs are working, but only where they are applied and managed — which is far from ideal.

Why Abolishing Business Rates for Small Businesses Makes Sense

The solution is clear: business rates for small businesses should be abolished in their current form and replaced with a fairer model based on turnover or employment, not property size and opaque relief mechanisms. This approach would remove administrative stress for entrepreneurs, reduce costs for local authorities, and encourage landlords to provide larger, more versatile spaces that support a diverse mix of businesses. High streets could once again be full of hospitality units, shops, and creative enterprises rather than takeaway chains or tiny units exploited for illegal trade.

A Wales that abolishes business rates for small enterprises is a Wales that nurtures ambition, retains talent, and spreads economic activity across cities, towns, and communities. It is a Wales where entrepreneurship is encouraged, not penalised, and where the local economy thrives because people are free to take risks, innovate, and invest in their communities.

Building a High Street That Works for Everyone

Supporting small businesses properly is not just about lowering costs. It is about shaping a local economy that works for the people, not just the tax system. Jobs stay local, communities flourish, and economic activity spreads beyond Cardiff Bay. Families and young entrepreneurs see that Wales is a place where dreams can be realised, not crushed by paperwork or punitive taxation.

Business rates, as they stand today, quietly strangle opportunity. But by abolishing rates for small businesses, we can turn high streets into centres of innovation and community life once again. We can build a Wales where ambition thrives, where local enterprise is valued, and where every small business has a fair chance to succeed.