Business rates are holding back British industry and stifling investment, one of the country’s largest car makers has warned.
Bosses at Vauxhall said the tax punishes firms which want to create more jobs and boost productivity.
In a highly unusual intervention, it hit out at rates for charging businesses extra when they expand or buy equipment to make a factory more efficient.
It follows widespread fears that massive rates bills are killing trade by wiping out shops’ profits.
Bosses at Vauxhall said the business rates punish firms which want to create more jobs and boost productivity
Helen Foord, Vauxhall’s head of government relations and public policy, said: ‘We’ve tried to push for wholesale manufacturing business rates reform for a while. We’ve lost some investments because of it.
‘Business rates impact business decisions on whether or not to invest in this country because it is a fixed cost.’
The rates are based on the estimated rental value of a property.
If a building’s occupiers invest in making it more productive or bigger, this increases the likely rental value and rates go up.
Adding machinery such as an air conditioning unit or indoor crane also pushes up rates. Manufacturers claim this stifles investment because improvements mean they are immediately stung with a higher bill.
Foord said: ‘Around 20 per cent of our business rates bill is linked to our plant and machinery, and when we invest in this our business rates go up. That is wholeheartedly a disincentive to invest.’
International firms’ factories such as the 1,900-worker Vauxhall site in Ellesmere Port, Cheshire, must compete against other countries for new business, such as the right to make the latest model of car.
These decisions are often finely balanced and high business rates can tip the scales against Britain, meaning the investment and jobs go elsewhere.
Foord said that Vauxhall’s German owner Opel tried to bring a major supplier to Ellesmere Port, adding: ‘We were going to bring a company over to supply us and others. It was a very close call but business rates tipped the decision the wrong way.’
The plea for reform comes as politicians seek to end a productivity crisis which is holding back pay growth.
Research has found many companies are reluctant to invest in more efficient machinery that would allow their workers to produce more goods and could boost wages.
The EEF manufacturers’ association believes business rates are part of the problem. Chris Richards, head of business environment policy, said: ‘You might start thinking about foreign locations where you can get a better return.
‘It’s a perverse concept – you invest in kit to improve your productivity, then your business rates go up because of it.’
The taxman is expected to rake in £30.8billion from business rates in this financial year.
Coupled with housing and inheritance charges, this gives Britain the highest property taxes of any country among the OECD economic group of developed nations.
A Treasury spokesman said: ‘We’ve introduced more than £10billion of business rates support to help British businesses, including those in the motor industry.’
Food chain held back
John Vincent, boss of high street food chain Leon has demanded reform.
Vincent, 47, married to BBC Proms presenter Katie Derham, said his chain which has more than 45 UK stores, was being held back.
He said: ‘Business rates have slowed us down in terms of openings.
The Government needs to say ‘We got this wrong, we’re killing the industry and we are going to fix this.