Business rates rise slammed as “madness” by firms

The prospect of a rise in business rates, a property tax on firms, has sparked outrage among London businesses, warning that it could force them to lay off staff and put many out of business.

In a survey by the Federation of Small Businesses(FSB), nearly a third of businesses (27%) said they would cut levels of staff if business rates increased even in line with inflation (projected 2.6%) in April 2013.

Nearly half (44%) said they would not make any capital investment and nearly one in ten (8%) said they would go out of business.

Businesses argue that the rates are disproportionate, having to be paid regardless of whether the company is making a profit or not. Some firms complain that they pay more on rates than rent.

  • One small business owner in Hackney said: “Tenants are up in arms due to the Council changing their policy on rating valuation, even backdating it to 2010. It appears as if Hackney is effectively attempting to shore up their reduced finances by recovering the money from those least able to pay it, non-profit organisations, charities and small businesses.”
  • Michael and Liz who run a small business in Covent Garden said: “Our business rates have increased by 166% whilst rent in the same time frame has increase by 22% - we are still awaiting an explanation!”
  • Katrina Phillips, who runs a shop in Kensington and Chelsea, has been trading for nearly 50 years. She says: “I cannot tell you how punitive the business rates are to the sustainability of small businesses in this area. Frankly, they are just about what the rent ought to be in real terms.”
  • “Despite a flourishing, busy small business, I have only reached a very small profit for the first time since I opened (2004) last year, and have sacrificed my home and my lifestyle to keep the shop alive.”

FSB London chairman Steve Warwick attacked the “madness” of increasing business rates and called on local government to lighten the tax burden on businesses, saying:  

“Current business rate levels are simply unfair. They are bad for business, bad for local employment and bad for our high streets, as firms close unable to pay extortionate rates. In some cases we are seeing the ludicrous situation of rates being similar or even higher than rents – that’s madness and won’t help the London economy to recover. The business rate relief may be of some assistance to small firms outside of the capital but in London where rents are generally higher, many small businesses don’t qualify for support.

“Business rates are not calculated according to ability to pay – they penalise businesses that need larger premises to operate from, so manufacturers and retailers tend to get hit with especially large bills. While it’s quite right that businesses make a contribution towards the cost of the services, current levels are wrecking the local economy. Council tax bills have been frozen – not least for political reasons – so businesses’ share of the bill has been rising. Local authorities should get together to lobby the Government to reduce business rates. Along with prohibitive parking policies, high business rates are the biggest barrier to small firms’ survival – local and central government must do more to help.”

Readers' comments (2)

  • We've just come back from Paris, and even in the smart est parts around the Rue de Rivoli, Place Vendome, St Germain, it's remarkable how many individual shops still remain, compared to London, where all you see are the same brands you see everywhere. I lost track of the scores of bookshops on the Left Bank. I can only assume that rents and taxes are much lower in France which allows these small individual firms to survive and apparently prosper.

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  • The problem with both local and national government nowadays is that they have become self serving to fulfill the ambitions of politicians and not the good of the rate or taxpayers. Such a formula is doomed to eventual failure and collapse

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