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Businesses Face Rates Hike Challenge

The business community has been vocal this week in its opposition to the Government’s proposed changes to business rates.

The Government has sought to allay fears about the effect that the changes will have, claiming that ‘80 percent of council areas will see an average fall in their business rates bills due to revaluation before inflation’, as well as denouncing concerns as ‘scaremongering’. However, many entrepreneurs and business owners may face difficulties due to what have been described as "the largest changes to business rates ... in a generation" by real estate firm Colliers International.

Plans released by the Communities Secretary, Sajid Javid MP, reveal that from 1 April businesses across the country will face revised rates for the first time in seven years as the Government adjusts the value of business rates to reflect recent changes in the property market.

The announcement resulted in a stern backlash from Conservative MPs who fear the damage that business rate increases could do to businesses in their constituencies. MPs were also displeased by ‘misleading’ figures used by the Government to justify the policy.

It has been estimated that a quarter of firms will face significant rises and analysts have estimated that for some the increases could be as high as fourfold. Businesses in London and the South East are expected to be affected particularly badly and many entrepreneurs with high street presences in those areas may find the viability of their premises challenged. Conversely, the changes could provide an incentive in some regions – such as the north of England – where falling rents mean that businesses could have their rates reduced significantly.

Former Housing Minister, Grant Shapps MP, said: “It has been suggested by Government this is fiscally neutral but it raises £1bn. Better just to say that, rather than spin it out as something which actually saves businesses money when it doesn't."

Retail expert, Mary Portas, who in 2011 was commissioned by the Government to lead and author a review of the future of British high streets, has said that the changes represent “the single biggest blow to independent shops since the financial crisis”. She also estimated that “a least a third of them will die off” and will be replaced by chain stores.

These concerns were echoed by business leaders, as Helen Dickinson, chief executive of British retail Consortium warned: “More businesses will decide to close in those areas that are not doing so well. The system is just not fit for purpose in the 21st century.”

Entrepreneurs and business owners should monitor this situation, as for many, the cost of doing business could soon be going up.