UK manufacturers are bracing for a significant financial blow in 2026, as new business rates are set to add an estimated £685 million in additional property tax burdens. This increase will primarily affect 4,300 of the largest industrial sites in England, according to recent research by the tax advisory firm Ryan. The reform, while designed to support smaller businesses, has sparked controversy for disproportionately impacting major manufacturers already battling sluggish output, layoffs, and rising energy costs.

The government defends the tax shift as part of a broader overhaul to make the business rates system fairer. A spokesperson emphasized that more than 280,000 retail, hospitality, and leisure businesses will benefit from permanently lower rates starting in 2026. The measure is to be sustainably funded through a higher levy on the top 1% of most valuable business properties — many of which are industrial manufacturing sites.

However, experts argue that this approach lacks strategic coherence. Alex Probyn, a property tax expert at Ryan, criticized the reform as contradictory: "We’re seeing two opposing policies rolled out simultaneously. One aims to support industry by reducing energy costs. The other increases a key fixed operational cost — property tax — on the very same businesses."

“If the goal is to boost UK competitiveness, we need a coherent strategy that tackles the total burden of fixed costs — not one that gives with one hand and then takes with the other.”

The timing of the property tax hike adds further tension. The relief on energy bills, part of a revised industrial strategy that removes green levies for certain sectors, won’t kick in until 2027. This means a year of heightened costs for firms already reeling from a 23% drop in production over the three months leading to May, as reported by the Confederation of British Industry (CBI).

Higher employment taxes, rising energy bills, and delayed subsidy timelines are combining into a perfect storm for the sector. Sir Jim Ratcliffe, founder of Ineos, has been one of the most vocal critics. He declared that carbon taxes were “killing manufacturing” and accused the government of failing to adequately support firms investing in decarbonization. Ineos Acetyls, which recently transitioned a major Hull plant to low-carbon hydrogen, said government support would not materialize until 2028 — a delay it described as punishing.

“It feels like, instead of fighting our competitors, we’re fighting our government,” said David Brooks, CEO of Ineos Acetyls, whose division produces chemicals vital for pharmaceuticals and synthetic materials.

The debate underscores a growing divide between government intentions and industrial needs. While small firms and the high street may benefit from the redistribution, large-scale manufacturers — the backbone of the UK’s industrial output — face an uphill battle to remain globally competitive amidst policy shifts that appear to undercut their financial viability.

As the UK navigates a complex economic landscape, industry leaders continue to call for a unified and strategic approach to taxation and subsidies — one that genuinely strengthens, rather than weakens, the manufacturing sector’s role in a sustainable and competitive future.