By Liza Helps, Property Editor, Logistics Matters

IN A letter to the new Prime Minister, the UK Warehousing Association (UKWA) said that higher business rates for distribution and fulfilment centres, which supply goods to shops, pubs and households, would inevitably feed into inflation.

In recent weeks, Burnham has pledged on several occasions to increase tax on warehouses of ‘online giants’, and out-of-town developments. Logistics Matters has already reported that UKWA CEO Clare Bottle is critical of the proposals and the letter  the association sent to Andrew Burnham today, goes further.

“Warehousing is intrinsically property-intensive, making business rates a substantial and unavoidable fixed cost. We were therefore very concerned by your recent suggestion that warehouses and major out-of-town premises might be required to pay higher business rates to fund further relief for pubs and high-street businesses.

“Nearly every major retailer now follows an omnichannel strategy, selling through both shops and online.

“It is therefore not realistically possible to identify consistently, through the business-rates system, which individual warehouses are used by ‘online giants’.

“For third-party logistics operators, additional property costs must ultimately be absorbed through lower margins, reflected in higher prices or recovered through reduced investment and employment. None of those outcomes supports reindustrialisation, productivity, lower consumer prices or thriving high streets.”

Europe’s largest industrial and logistics developer Panattoni’s Head of International Capital Markets Nick Cripps noted: ““Large warehouses and logistics facilities already face some of the highest business rates liabilities of any property type. Increasing the rates burden further would have consequences far beyond the sector itself because these buildings form part of the supply chain for almost every category of goods, including groceries, electrical goods and pharmaceuticals, which already trade on razor-thin margins. The additional cost would ultimately be felt by occupiers, retailers and, of course, the consumer.
“Rates and other taxes are already affecting investment and occupier decision making, making development viability harder to justify and at a time when the Government is actively seeking to attract more private capital and foreign direct investment into the UK, introducing measures that undermine the investment case for modern logistics development sends a contradictory signal to global investors.

“Logistics real estate is fundamental to economic growth, supply chain resilience and national competitiveness. Making investment harder to justify risks reducing the flow of international capital into the sector, slowing the delivery of critical infrastructure and ultimately weakening the resilience of the UK’s supply chains.

“There is a legitimate case for supporting pubs, restaurants and high-street businesses, but the current approach is inconsistent. Pubs have received substantial business rates support over the next three years, while restaurants facing many of the same pressures have not benefited to the same extent. Transferring more of the burden to very warehouses that supply the hospitality sector does not address the underlying problems with the system.

“Many of the measures introduced in April, as well as those now being proposed, are too broad and insufficiently targeted. Before any further changes are made, the government should undertake detailed impact modelling and refine the policy so that it supports struggling businesses without creating wider costs for consumers, discouraging inward investment or weakening the logistics infrastructure on which the wider economy depends.”

Grocers and retailers were up in arms  when the chancellor added a business rates surcharge to properties with a rateable value of £500,000 warning that the surcharge which can be up to 10p above the business rates multiplier would directly fuel food inflation – the chancellor  added a minimal surcharge to avoid this happening.

It is interesting to not that while  Burnham is trying to target the ‘online’ giants – of the top ten most valuable warehouses  only three belong to Amazon, with the others  occupied  by Next, Lidl, John Lewis, Marks & Spencer, Tesco and Sports Direct.

In its letter the UKWA has asked the new prime Minister to ‘confirm that no further warehouse-specific increase will be introduced until the reforms implemented in April 2026 have operated for a full year and the Treasury has published a comprehensive assessment of their effects’.