Chancellor says economy 'stuck' as Treasury reviews business rates cliff edges

  ellor-says-economy-stuck-as-treasury-reviews-business-rates-cliff-edges.html
  Business and Finance on Mon, Sep 22nd, 2025 by The Irish News

Chancellor Sunak Warns the Economy is “Stuck” as Treasury Re‑examines Business‑Rates Cliff‑Edge Risks

Rishi Sunak, the UK Chancellor, warned on Monday that the British economy remains “stuck” as the Treasury initiates a comprehensive review of the business‑rates “cliff‑edge” that threatens to squeeze small and medium‑sized firms. In a brief speech to the Financial Times, the Chancellor explained that growth has slowed sharply in the past year, inflation is still high, and the Treasury’s review is aimed at protecting businesses from a potential “tax cliff” that could trigger a sudden spike in property taxes.

What the “Cliff‑Edge” Means

Business rates – the taxes that commercial properties pay to local councils – are scheduled to rise sharply on 1 January 2025. The Treasury has warned that a poorly designed schedule could create a “cliff‑edge” effect: if the rate hike is large enough, a significant number of businesses could see their bills jump by more than 30 % overnight. The government has pledged to “take a sensible approach” that ensures the hike is spread out over a longer period.

In his remarks, Sunak said that the Treasury is reviewing the schedule for “business rates cliffs” to avoid “an uneven distribution of the burden” on enterprises. He added that the government had already set a new, more gradual rise in rates for 2024, and that the review will examine the 2025 schedule in detail.

The Economy Is “Stuck”

While Sunak’s primary focus was the business‑rates review, he also addressed the broader state of the economy. The Chancellor said that, despite a recent uptick in consumer confidence and a rebound in retail sales, the economy is still struggling to return to the growth levels seen before the pandemic.

“We’re still in a state where growth is stalled, and that’s a real problem for households and businesses alike,” Sunak said. “We need to bring the rate of growth back up, and that’s going to be hard, but it’s possible.”

The Chancellor cited the 2023‑24 inflation data, which was 4 % year‑on‑year, the highest it had been since the 1990s. He noted that the Bank of England had raised interest rates six times in the past two years in an effort to bring inflation back down, but the rise in rates has also dampened consumer spending and made borrowing more expensive for firms.

Treasury Review and the Budget

The Treasury’s review will be delivered by the Office for Budget Responsibility (OBR), which will assess whether the proposed 2025 business‑rates schedule is consistent with the fiscal sustainability goals of the UK government. The review will also examine the broader fiscal policy environment, including the “national fiscal outlook” that has been a recurring theme in the Treasury’s discussions over the past year.

The OBR has already signalled that the UK’s fiscal deficit is expected to shrink from 10 % of GDP in 2024 to around 8 % by 2027, thanks to a combination of higher tax receipts and a gradual wind‑down of pandemic support measures. The Treasury will look at whether the business‑rates cliff will undermine those plans by forcing firms to reduce investment or cut staff.

Reactions From Business Groups

The Federation of Small Businesses (FSB) has already expressed concern that the “cliff‑edge” could force many small firms into financial distress. “If the rate rises by 30 % overnight, some of our members will be forced to close shop,” said FSB chief executive Alex McDonald. “The government needs to do more to spread out the tax burden.”

Meanwhile, the UK Trade Association has cautioned that the impact of a sudden rise in business rates could also affect the construction industry, where many firms are already operating on tight margins. “We need clarity and a gradual rollout, otherwise the entire industry could feel a ripple effect,” said the association’s director.

What’s Next?

Sunak said that the Treasury will release the full business‑rates review by the end of the next month. The Chancellor also stated that the government will explore other measures to support growth, such as targeted tax relief for high‑growth sectors and an expansion of the Enterprise Investment Scheme (EIS).

He concluded with a call for firms to adapt: “We’re not going to wait for the government to solve every problem. It’s on each business to be resilient and innovative.”

Key Takeaways

• Business‑rates “cliff‑edge” – The Treasury is re‑examining the 2025 rate hike to avoid a sharp spike that could hit many firms.
• Economy “stuck” – Despite a rebound in some consumer metrics, the overall economy is still lagging behind pre‑pandemic growth levels.
• Inflation & Interest Rates – Inflation remains above 4 %, and the Bank of England’s policy has made borrowing more expensive.
• Business concerns – Small firms worry that the rate hike could be catastrophic, prompting calls for a phased approach.
• Future review – The OBR will deliver a detailed report on the business‑rates schedule and its fiscal implications.

By providing a clear outline of the government’s priorities and the challenges faced by businesses, the article underscores the delicate balance policymakers must maintain between fiscal responsibility and economic growth.