Business rates shock to small business growth prospects

A significant proportion of small businesses across Britain are preparing to reduce investment and staff costs once business rates rise next month, according to a new survey.

The research from the Federation of Small Businesses (FSB) finds that more than a third (36%) of small firms expect to see their business rates increase from April 1.

Of those facing a rates rise, a substantial proportion (44%) of FSB members say their business rates will eventually rise by more than £1,000 per annum. And one in five (21%) will see their annual bill increase by more than 40%.

FSB said: ‘Such drastic hikes could have massive consequences for the growth of those small businesses hit by this rates bombshell.’

FSB national chairman Mike Cherry commented: “The business rates system is an unfair, regressive tax which hits small firms before they’ve had the chance to make their first £1 in turnover, let alone profit.

“The major win at the latest budget to exclude 600,000 small firms from the business rates system remains hugely important. However, our survey shows the delayed revaluation harms too many small businesses that face unsustainable and unaffordable rises.

“This is particularly true in London, where we urge the Chancellor to raise relief thresholds as part of his Spring Budget. This will help protect hundreds of small businesses currently left out in the cold. A small hardship fund designed to assist pockets of firms throughout the country would go a long way to resolving the anxiety felt within the small business community.

“Of the one in three small businesses facing a rise in rates, more than half (54%) expect profits to fall and four in ten (38%) are set to increase prices. Crucially, 55% plan to reduce, postpone or cancel investment in their business, which will hit UK productivity and growth.”

The survey data indicates that of those small businesses facing an increase in their business rates, almost one in five (19%) may ultimately consider closing down or selling their business as a result of the hike in their bills.

Mike added: “While many of these businesses which may have contemplated the possibility of closure will ultimately find a way to carry on, the current level of anxiety within the small business community should worry policymakers.

“Profitability across the UK small business community is already falling. The costs of doing business for small firms are now at their highest levels since early 2014. The last thing we need is a business rates burden so heavy that it threatens the future growth prospects of our entrepreneurs.

“To add insult to injury, those who need to challenge their revaluation assessment are now faced with a new but rigged appeals system – which will prevent small businesses with genuine concerns about their rateable values from being able to seek justice and redress. We are concerned that many could turn to cowboy ratings agencies already bombarding business owners with letters promising the earth.

“The seven year gap between this year’s revaluation and the last has stored-up all kinds of problems for our business community. The solution is for the Chancellor to use his Spring Budget to announce a cross-party commission to propose measures for a replacement business tax system linked fairly to the ability to pay.”

On behalf of FSB, independent research company Verve surveyed 675 FSB members between February 21 and February 23. Responses were received from England, Scotland and Wales. Northern Ireland was excluded from the survey owing to its recent revaluation. 

More information is available at; @fsb_policy

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