One in five firms contemplate closure over business rate hike

A significant proportion of small businesses across the West Midlands and other parts of the UK are preparing to reduce investment and staff costs once business rates rise next month, according to a new survey.

Research from the Federation of Small Businesses (FSB) has found 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 said their business rates would eventually rise by more than £1,000 per annum.

One in five (21%) said they would see their annual bill increase by more than 40% and that such drastic hikes could have massive consequences for the growth of those small businesses hit by the increase.

Paul Miles Rogers, chair of FSB Warwickshire & Coventry, said: “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 who face unsustainable and unaffordable rises.

Of the one in three small businesses facing a rise in rates, more than half (54%) expect profits to fall and almost 40% 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.

“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,” added Mr Rogers.

“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.”

He said the seven-year gap between this year’s revaluation and the last had 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,” he said.