Small businesses could be ‘driven out of London’ by rate rise

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An increase in business rates is the single biggest issue concerning small businesses in the city of London, easily trumping fears around economic uncertainty and worries relating to recruiting the right talent, the Independent reports.

According to a survey by the Federation of Small Businesses, the average micro business in the city, defined as a company with fewer than 10 employees, will be paying business rates of £17,000 as of April this year under a Government hike.

“London is in serious danger of losing its vital support system of micro and small businesses,” the FSB’s chairwoman for London, Sue Terpilowski, said in a statement.

“We need to realise that the hard costs of operating a business in the Capital are starting to outweigh the benefits which simply does not make economic sense – and so tacking these burdens at the Spring Budget is critical,” Ms Terpilowski added.

Business rates – which are sometimes referred to as non-domestic rates – are levies that companies occupying commercial properties pay. That tax goes towards covering the cost of services provided by local authorities and the emergency services.

The survey found that close to three quarters – or 74 per cent – of businesses consider rates to be the single biggest issue affecting them, followed by 36 per cent who cited economic uncertainty, and, one third who said that the difficulty around recruiting the right staff was their biggest concern.

“The new business rates will drive firms out of London, force some businesses to cut staff or close down altogether,” said Simon Pitkeathley, the chief executive of Camden Town Unlimited, which represents more than 300 businesses in the area.



The survey was conducted between 2 February and 14 February and included responses from 129 businesses.

Friday’s report chimes with criticism voiced by other think tanks and organisations, including the Confederation of British Industry.

Earlier this week, Helen Dickinson, chief executive of the British Retail Consortium slammed the current business rates system, calling it unsustainable.

“At a time when retail is being re-imagined and customers seek more engaging experiences, business rates are a disincentive to innovate and invest in physical space,” she said in a statement.

“Further measures to reform business rates are essential to fix an unsustainable system that continues to discourage investment.”

The Institute of Directors has also urged the Government to “level the playing field” to help smaller businesses, after an analysis by business rates specialists CVS showed that high street retailers in parts of the country are facing rises of up to 150 per cent.

“April will serve a ‘hammer blow’ to small shops, and the consideration should now be to ensure that they are in fact paying fair and accurate rates,” said Mark Rigby, the chief executive of CVS.