Procurement · 17 February 2017

Business rates review will hit London’s micro businesses hard

Business rates review
The high streets of London will face new financial pressure

A study of the upcoming business rates review by the Federation of Small Businesses (FSB) has shown how worried owners of small firms are in the capital.

With the tax set to be revalued in April 2017, industry body the FSB is calling on the government to introduce a London business rate concession.

In a survey of small businesses, the FSB found that three quarters highlighted business rates were the single biggest issue affecting the company – with the next biggest problem being economic uncertainty at a third.

The business rates review will mean the average micro business in London will pay £17,000 in April 2017 – which equates to a rateable value of approximately £35,000.

FSB London chair Sue Terpilowski said: “London is in serious danger of losing its vital support system of micro and small businesses. The average micro business will have to find £17,000 to cover business rates from April this year. But this increase must not be viewed in isolation as small firms will face an extra £2,600 in additional employment costs from government policy in the 2017/2018 tax year, inflationary increases and a further increase in pensions auto-enrolment costs.”

The FSB believes the best course of action is the introduction of a threshold of a £20,000 rateable value threshold for 100 per cent relief tapering to £23,000.

On the outskirts of London, the FSB suggests the 100 per cent relief be set at £15,000 and tapering to £18,000.

In making these business rates review changes, it would cost the government around £100m – but be small when set in the context of the £28bn that is generated from business rates around the UK.

Simon Pitkeathley, CEO of Camden Town Unlimited, which partnered with the FSB to make the call to government, added: “This research confirms what we have been hearing from the businesses we represent. The new business rates will drive firms out of London, force some businesses to cut staff or close down altogether.

“Given the importance of London’s economy to the rest of the UK, this will have destabilising consequences. Make no mistake, if London’s businesses take a hit, the rest of the country will feel it.”

When asked what the business rates review will mean for their business over the next five years, the most popular responses from micro company owners was cutting capital expenditure (37 per cent), shutting the business (27 per cent) and moving further away from the centre of London (19 per cent).

Based on 2011 data, the FSB believes that the average percentage of properties claiming small business rate relief in London stood at 30 per cent. In Greater London, that figures was 16 per cent – with most of central London in single figures.

If you’re worried about the business rates review, have a look at our other advice-based content on the topic.

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ABOUT THE EXPERT

Hunter Ruthven is the editor of Business Advice. He is also the editor of Real Business, the UK's most-read website for entrepreneurs and business leaders at the helm of growing SMEs. Alongside this, he is part of the team that hosts the Growing Business Awards, First Women Awards and Future 50 initiative. Prior to his role at Real Business, he was editor at competitor website Growth Business and head reporter at M&A Deals. Throughout his career he has interviewed leading entrepreneurs including Alex Chesterman, Lopo Champalimaud, Sarah Wood, James Averdeick and Alex Saint.

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