Inflation pressures could push business rates increase up to £3m

Southwold on a busy summer's day - but the town's High Street has seen some of the biggest hikes in business rates between 2010 and 2017, leading to an outcry from the businesses affected. 
Picture: James Bass.

Southwold on a busy summer's day - but the town's High Street has seen some of the biggest hikes in business rates between 2010 and 2017, leading to an outcry from the businesses affected. Picture: James Bass.

Archant Norfolk © 2016

Norfolk companies are facing a collective hike in business rates of almost £3m next year as inflationary pressures push up rates.

And without urgent government intervention that could mean firms each having to stump up hundreds of pounds extra, business rates specialists have warned, after the retail prices index (RPI) inflation figure rose to 3.9% in September.

Business groups to call for action from the chancellor Philip Hammond in his Autumn Budget, with demands ranging from a freezing of future rates rises to an acceleration of the switch to the consumer prices index (CPI) measure.

The way the uniform business rate (UBR) is calculated is tied to September’s RPI inflation each year. In the past 12 months it has increased by almost 100%, from 2% to 3.9% – the highest level in nearly six years.

It means the 10,024 businesses across Norfolk could have to pay an additional £2,957,836 to the government in 2018 – equal to an extra £295 each.

Meanwhile rates for Suffolk’s 6,508 businesses could rise by a staggering £12,129,418 after the anticipated rise takes effect on April 1 – equal to an extra £1,864 each next year.

But CVS found the struggle to pay is already too great for some.

Last year 819 Norfolk businesses – around 8% of the county’s total – were brought before magistrates for non-payment of their business rates tax, leading to claims that the current system is criminalising struggling businesses.

In the first six months of the 2017 financial year, a further 360 have been summoned to court.

In Suffolk, 329 businesses (around 5%) ended up in court over non-payment of rates last year.

Mark Rigby, chief executive of CVS, which has compiled the figures, said: “Property taxes in Britain are already the highest of any European nation both as a percentage of GDP and overall taxation.

“Brexit is driving inflation and businesses are holding off from investing because of the current economic climate of uncertainty. Insolvencies are expected to rise over the next two years.

“To plough ahead with such rate rises would be foolhardy and the chancellor must be bold in his vision with a freeze.”

He also urged businesses to check their assessments were “fair and accurate”.

In his spring budget Mr Hammond announced a £300m discretionary rate relief fund for the hardest-hit businesses, of which Norfolk was due to receive £4.5m and Suffolk £3.2m.

Salena Dawson, Federation of Small Businesses (FSB) East Anglia regional chair, said the counties’ councils “should be commended” for their work to implement the relief measures. “In that sense, at least, the picture here is rosier than it is across many areas of the country,” she said.

“But we continue to believe that the business rates scheme needs to be fundamentally reviewed. While most of our small firms saw their bills fall through the latest revaluation, many, in places like Southwold, were left facing the prospect of long-term increases that they can scarcely afford at a time when the costs of doing business are rising.

“To add insult to injury, firms are now faced with bill increases according to the outdated Retail Prices Index measure of inflation. We need to see the switch to CPI-indexation brought forward to April 2018, an end to the unfair staircase tax and a commitment to more frequent rates revaluations.”

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