Cleantech for UK has submitted evidence to HM Treasury’s Call for Evidence on Business Rates and Investment.
Our coalition represents companies and investors deploying growth and infrastructure capital into UK-based projects across energy, agriculture and food systems, materials and chemicals, transport, waste and recycling, and environmental management. Many of these businesses are commercialising capital-intensive technologies that require laboratories, pilot plants, manufacturing facilities and large-scale infrastructure.
As a result, investment decisions are highly sensitive to the cost, predictability and long-term treatment of property and infrastructure within the business rates system.
In our response, we set out five reforms to ensure the business rates system better supports capital-intensive scale-up:
In the clean technology sector, physical improvements, including laboratory fit-out, process plant, electrical upgrades and specialist infrastructure, are typically funded by occupiers rather than landlords.
These investments are often financed through equity, project finance or public funding during pre-revenue stages. Where occupier-funded improvements increase rateable value, companies bear both the upfront capital cost and the resulting increase in recurring business rates. For capital-intensive firms, this can materially alter operating cost projections and investment decisions.
Scaling asset-heavy clean technologies is structurally linked to physical expansion. Companies move from small R&D spaces to pilot facilities and then to commercial-scale manufacturing or infrastructure sites.
Suitable premises are frequently constrained by planning, grid capacity, zoning and the availability of serviced industrial space. In this context, business rates become an unavoidable fixed cost. Where multiplier thresholds are crossed, liabilities can increase sharply at precisely the point companies are attempting to commercialise and grow.
For venture-backed and pre-revenue companies, business rates represent a fixed, non-negotiable cost that directly reduces cash runway during critical growth phases. Decisions are particularly sensitive at the point of lease negotiation and financing, when long-term operating costs must be modelled for investor approval.
Uncertainty around post-improvement rateable values can introduce material ambiguity into investment committee decisions, delay capital deployment and reduce projected returns.
For energy storage and other clean energy infrastructure projects, business rates are explicitly modelled within long-term financing structures. Where valuation methodologies lack clarity or predictability, this can increase perceived risk and potentially raise the cost of capital for strategically important infrastructure.
Business rates are rarely the sole determinant of investment decisions. However, for asset-heavy, early-stage industrial businesses, they form a significant and recurring component of long-term operating costs.
Evidence from our coalition shows that anticipated rates exposure has, in some cases, delayed expansion, influenced cross-regional siting decisions, and materially affected the viability assessment of relocation or consolidation.
Reforms that improve proportionality, predictability and alignment with staged industrial growth would support capital formation in clean technology and strengthen the UK’s attractiveness as a destination for scale-up investment.
We welcome continued engagement with HM Treasury on how the business rates system can better support capital-intensive innovation and industrial growth.
