Small firms facing business rates hike expect hit to profits, survey shows

Most small companies facing hikes in business rates when they are revalued from April expect their profits to fall and are planning to cut investment, a survey suggests.

The Federation of Small Businesses (FSB) research suggested more than a third (36%) of small firms expect to see their rates increase, with 44% expecting bills to eventually rise by more than £1,000 a year, and one in five (21%) expecting to see their bill hiked by more than 40%.

Of the firms expecting a rise in rates, more than half (54%) expect profits to fall and more than a third (38%) will increase prices.

The majority (55%) of those facing increases plan to reduce, postpone or cancel investment, which the FSB said would hit UK productivity and growth.

Nearly a fifth (19%) of those facing an increase may ultimately consider closing their firm down, according to the survey.

FSB national chairman Mike Cherry 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."

He went on: "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."

Following pressure from business groups, the media and some Tory MPs, Communities Secretary Sajid Javid last week announced extra help for small firms facing increases, to be announced in the Budget on March 8.

The Government has already established a £3.6 billion transitional fund to help businesses facing sharp increases when the property-based levy is updated for the first time since 2010, with new rates coming in from April.

Ministers insist that almost three-quarters of firms will see rates decrease or stay the same, while 600,000 of the smallest businesses will be taken out of the tax altogether.

The FSB survey comes as it prepares to join an emergency roundtable hosted by the Labour Party to discuss the issue on Monday.

Labour has called for an emergency transitional fund worth £150 million a year for three years for small and medium-sized firms, and long-term reform to ease the burden on high streets and town centres.

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