Fashion retailers brace for limited reforms as business rates overhaul hangs in the balance

As UK retailers prepare for the Autumn Budget 2025, the fashion sector is bracing for what could be another round of partial, short-term measures rather than the sweeping reform it has long demanded. Business rates, widely regarded as one of the most structurally damaging costs for physical retail, remain at the centre of industry concerns.

Jacqui Baker, partner and head of retail at RSM UK, summarises the mood across the high street: “The number one plea from retailers is for the government to deliver on its pledge to overhaul the business rates system… retailers want to see decisive, wide-spread change such as a lower, permanent multiplier, not tinkering at the sides.”

For fashion businesses, particularly those operating large stores or multi-site portfolios, the current rates burden continues to erode margins already hit by rising labour and logistics costs. According to the British Retail Consortium, business rates account for more than two billion pounds in annual charges for the sector, with fashion and department stores among the hardest hit due to sizeable footprints.

Yet expectations for full reform remain low. As Baker notes, the industry may have to settle for “short-term fixes like increased or expanded targeted reliefs… a small step in the right direction, [but] not enough to fix structural challenges which continue to weigh on retailers’ ability to grow and invest.”

Rising wage pressures and inflation risk

The fashion industry is also monitoring potential changes to the national minimum wage (NMW), following April’s sharp increase in employment costs. Many brands rely on large store teams, seasonal staff and warehouse labour, making wage policy a key sensitivity.

Baker warns that a further rise, combined with the government’s consideration of removing age bands for NMW, could pose a dual challenge: “not only would this acutely impact retailers, but it could also fuel inflation.”Higher inflation would keep interest rates elevated, further dampening consumer confidence.

Recent consumer research cited by RSM shows that cost-of-living caution persists. Even with an unexpected £1,000 windfall, 34 percent of Gen Z consumers say they would save or invest it rather than spend, underlining the fragility of discretionary demand—a core driver for fashion.

Uncertainty clouds the Golden Quarter

Fashion retailers traditionally rely on a strong final quarter to balance the year, but the ater-than-usual budget has introduced new unpredictability. Baker notes that ongoing speculation about post-budget tax rises is already affecting behaviour: “some consumers [are] holding off from spending in the lead up to the budget,” while future tax increases could further reduce discretionary apparel and accessories sales.

Footfall trackers from Sensormatic and Springboard indicate mixed performance heading into November, with luxury and premium destinations faring better than mid-market high streets—another sign that confidence is fragmenting.

Tourism spending still lagging

Despite strong demand in London's luxury hotel market, fashion retailers remain frustrated by the absence of tax-free shopping—long viewed as a competitive disadvantage compared with France, Italy and Spain. Baker notes that while international visitors are returning, **“tourists are holding off from splashing out on designer goods until they reach other European destinations, meaning retail is losing out.”

Fashion houses active in tourism-heavy areas such as Bond Street, Sloane Street and Bicester Village continue to lobby for a reversal, arguing that reinstating the VAT Retail Export Scheme would stimulate fashion spend and broader hospitality income.

Possible tightening of low-value customs relief

Industry attention is also fixed on rumours that the Chancellor may close the duty relief currently applied to small packages under 135 pounds. Baker says the measure could “curb the flow of cheap goods flooding the market, allowing UK retailers to compete on a level playing field,” particularly relevant for apparel and accessories where low-value imports have grown sharply since 2020.

However, she also warns that “care must be taken to ensure the changes don’t go too far that they create friction at the border.” Increased customs checks or delays could impact fashion e-commerce fulfilment, especially during peak season.

As the Autumn Budget approaches, UK fashion retailers are hoping for clarity, but preparing for compromise. Whether the government delivers a meaningful reset on business rates or merely another series of temporary reliefs may determine how well the sector can invest, hire, and compete in 2026.