Why Business Rates Need Reform for Northern Ireland’s Hospitality Sector

In my regular day dreaming about careers that I’d far rather be in than my own, owning a bar is always up there. Admittedly, it’s a romanticised idea of hard, but rewarding, graft while having plenty of craic along the way. I fear the dream died, off the back of the recent rates fiasco that would have massively increased business rates bills in the hospitality sector.

Ask anyone running a pub or restaurant in Northern Ireland how things feel right now and you’ll hear a common answer: they’re busy, but it’s tough to make it work. While many places might be full, wages, energy bills, insurance and so on have eaten away at margins. Many operators are working harder than ever just to stand still.

That is the backdrop to the entirely justifiable anger about business rates. Reading about some of the increases the sector was facing before the Minister changed tack makes it difficult to avoid the conclusion that the system is no longer aligned with economic reality. Seatons of Sailortown, for example, has seen its Net Annual Value (NAV) rise from £10,000 to £38,000. The Slieve Donard’s NAV has increased from £406,000 to £1.25 million.

Rates for pubs and restaurants are based on NAV. In simple terms, valuers look at how much a venue turns over, average that over a few years, and use it as a guide to what the property is worth for rates purposes. In this revaluation, that typically means examining around three years of trading from 2021 to 2024.

That methodology possibly made sense when turnover, costs and margins moved broadly together. They no longer do.

The underlying assumption is straightforward: if a place is doing more trade, it must be in a stronger position to pay tax. That assumption does not bear close scrutiny.

Turnover has recovered since Covid but costs have not fallen back. In many cases they have reset permanently higher. Labour costs are up. Energy remains volatile. Insurance has jumped. Debt taken on during the pandemic now has to be serviced.

So what does higher turnover actually mean in practice? Often it means longer hours, fuller rooms and more pressure. It is not translating to more profit or a greater ability to pay massively increased rates.

A busy pub today is not necessarily a healthy pub. It may simply be a stretched one.

The problem with the current rates system is that it treats “busyness” as success. If a venue is visibly busy, the system assumes it can carry a higher tax bill. But anyone inside the business knows that busyness is now often what keeps the doors open, not what creates a cushion.

This is not an argument for turning rates into a tax on profits. That would be impractical, open to abuse and administratively unworkable. But we cannot pretend that turnover on its own still tells us what we need to know. In practice, valuers already exercise judgement. The issue is that the framework they are working within hasn’t caught up with how hospitality now operates.

A three-year average smooths out volatility, but it still locks in a picture of recovery at a time when the sector is more fragile than it looks. It assumes that recent trading patterns are a reliable guide to future capacity. For hospitality, that is a risky assumption.

This is why rates bills can rise sharply even as businesses feel increasingly exposed. From the outside, it looks like success being taxed. From the inside, it feels like recovery being penalised.

The system also confuses visibility with viability. Busy venues look robust; struggling ones fade quietly. But closures are not signs of market correction - they are signs of fixed costs overwhelming thin margins.

A system that taxes visible busyness rather than sustainable capacity will quietly accelerate closures, even while venues appear full.

None of this requires dismantling the rates system, but it does require adjustment.

In practice, that means continuing to use turnover, but stopping short of treating it as the final word. It means recognising that higher takings do not automatically translate into greater capacity to absorb fixed costs. It means phasing in large increases over a period of time, rather than relying on temporary reliefs that come and go.

Pausing revaluation may buy political time. It does not resolve the underlying misalignment between how hospitality now operates and how it is taxed. Without reform, the same pressures will resurface in the next cycle, under a different minister and a different headline.

Above all, it means grounding rates in sustainable capacity rather than surface-level activity.

The choice now is simple: redesign how we measure capacity to pay, or accept that every revaluation will end the same way — with political retreat after economic damage. Because in today’s hospitality economy, being busy is no longer a sign of success. It is often just the price of survival.