The Bill That Grows With the Trade

The Treasury launched an independent review this month into how pubs and hotels are valued for business rates. The review, led by chartered surveyor Jerry Schurder, will examine whether the methodology used to assess their rateable values remains fit for purpose. It is expected to report by March 2027.

The decision to launch the review followed years of pressure from the sector, and sits alongside the 20 percent rates cut for pubs and live music venues confirmed in late July. Both measures are welcome. Both come with a limit.

How pubs are rated

Most commercial premises are valued for business rates on floor area. A retailer pays on square footage. So does a cafe. So does a restaurant. You occupy a space, the Valuation Office assesses what a tenant would pay for it in rent, and that number becomes the basis for the rates calculation.

Pubs are done differently.

Pubs in England and Wales are assessed on Fair Maintainable Trade. FMT is an estimate of what a reasonably efficient operator could generate in turnover from those premises. The methodology is meant to capture the economic value of the pub as a trading entity, not just the floor it occupies.

The practical consequence is that a pub that does well pays more. Its turnover rises. Its rateable value, assessed against what it could make, rises with it. A successful bar generates a higher bill than a struggling one in equivalent premises. The rates system, in the case of pubs, is structured to tax performance.

What the review will look at

The question Schurder's review will examine is whether the FMT methodology still reflects economic reality. The argument from operators is that it has not for some time: the cost of generating each pound of turnover has risen sharply, through energy, payroll, employer NI, food inflation, and everything else the last four years added to the stack. The turnover figure the assessment is built on does not account for what it costs to produce that turnover. The margin underneath the trade the system counts is a different number from what the trade figure suggests.

The review will report to the Treasury by the end of March 2027. Any recommendations that survive into policy would be applied at the next full revaluation, which is due in 2029. Between now and then, the existing methodology continues.

The room the review did not enter

Restaurants are not included.

The review covers pubs and hotels. The relief announced in July covers pubs, social clubs, and live music venues. Restaurants, cafes, and similar food-led premises are assessed on floor area, like retail. They sit outside both the relief and the review.

This is not because food-led venues face fewer pressures. Employer National Insurance contributions rose in April for every business in the sector. Food inflation has run at the same level across the whole industry. Energy costs, rent, the wages floor: those numbers do not adjust based on whether the room runs alcohol or food as its primary trade.

We run kitchens across Sussex: the Castle Inn, Tollgate, the Bull on the Green, the Berwick. Some of those rooms earn significantly through food. None of them are inside the scope of the review that launched this week.

The Morning Advertiser reported on August 24 that the rates review will not solve pub cost pressure. The timeline alone explains part of that: reporting in March 2027, applied at the earliest in 2029. But the same point applies with equal force to the kitchen next to the pub, which was not invited to the review at all.

What the review changes tonight

Nothing.

The fixed costs under every cover served in August 2026 are unchanged by a review that will report in seven months. The rates bill that landed in April was calculated on the methodology now being examined. It will run at the same level through to March 2027 at the earliest.

A seat left cold in September carries the same cost it carried in March. It carries it regardless of whether the premises are valued on turnover or floor area, and regardless of whether the Treasury has commissioned a review of the method.

Around 4pm, when the shape of the evening becomes clear, venues release on Halfseat the tables they expect to lose. Food at half price. Drinks at full price. A real cut of the booking fee going directly to the venue. The review does not fill those seats. The bill that landed in April does not pause while the review runs.

The methodology is being examined. The empty chair earns nothing while it waits.