Andy Burnham‘s plans to hike taxes on warehouses to pay for business rates cuts for pubs and shops could backfire and raise costs for high street businesses, industry figures have warned.

The UK Warehousing Association (UKWA), a trade body representing retailers including Amazon, Co-op and John Lewis, has written to the new Prime Minister urging him to rethink hiking taxes for warehouses. 

In the letter, seen by City AM, UKWA chief executive Clare Bottle warned Burnham that these tax hikes would “make a bad situation worse”. 

She wrote: “Business rates have become grossly complex, prone to unpredictable swings and now act as a major inhibitor to investment. 

“Endless tweaking of thresholds and reliefs, supposedly paid for by warehouses of ‘online giants’, will only mean higher costs for the consumer.”

Burnham has said he would cut business rates for pubs, clubs and music venues by 20 per cent, funded by imposing higher rates on warehouses. 

Retail and hospitality groups have said that radical reform to business rates is necessary to save high street businesses.

But the trade body has told the Prime Minister it is “very concerned” by this proposal.

The companies which store and distribute goods for retailers operate on thin margins, meaning that tax hikes for these companies could raise costs for high street retailers, Bottle said.

Warehouses’ business rates bill rose by nine per cent in April, and by more than a fifth for 23 per cent of sites, UKWA said. 

‘Not possible’ to target online warehouses

The trade body pointed towards another recent change to the business rates system which meant that large warehouses pay a 50.8p multiplier while small retail and hospitality firms pay 38.2p. 

The Treasury said this change was designed to target “online giants” like Amazon. But UKWA warned Burnham that almost every major retailer uses warehouses to stock stores and sell products online, meaning “it is not realistically possible” to target online sellers through business rates.

“The same warehouse may support high street shops, online orders, pubs, restaurants, hospitals and manufacturers,” the trade body said.

In 2024, high street retailers occupied 97m sq ft of warehouse space while online retailers took up only 69m, according to a report by Savills.