National Chairman, Federation of Small Businesses (FSB)
Small retail firms need the right support to get back on their feet and expand, we feel that tangible changes to the business rates system are a good place to start.
Retail businesses have had an unreliable two years, faced with ever-changing restrictions, staff shortages and rising inflation. Confidence levels in the sector are much lower amongst small firms, with more than four in five small retail businesses now grappling with an increase in the cost of doing business.
Rates reform is long overdue
On top of sky-high energy costs, business rates bills continue to be the thorn in the side of many small businesses, stifling their recovery and growth. Charged on most non-domestic properties and based purely on the value of that property rather than the amount of trade or level of income generated, the tax has long needed reform. Although we had hoped the fundamental review announced by the Government would address this, there remain sizeable challenges ahead for the business rates system.
Our research has shown three in five small businesses find paying business rates a challenge, while only a quarter of small firms believe the tax is ‘fair’. With such a high number of ‘bricks and mortar’ settings, small retail firms that are part of the fabric of our town centre communities, feel the brunt of this outdated tax.
Change is coming, but it is incremental, slow, and will require businesses to do more while getting relatively little in return.
Long-term solutions are needed
Suspending business rates bills for small high street firms during the height of the pandemic was a lifeline. However, longer term solutions must be found. Change is coming, but it is incremental, slow, and will require businesses to do more while getting relatively little in return.
Business rates are one of the biggest blocks on investment in the UK. If you want to add a new production line to a factory, you’ll pay half again in rates over the lifetime of that equipment. The Chancellor rightly recognised the danger this brought to investment in solar panels at last year’s Autumn budget and by introducing a one-year relief for other property investments. Extending that relief to a longer time period would be a gamechanger for small firms.
Measures like expanding Small Business Rate Relief to premises with a rateable value of £25,000, would relieve an additional 200,000 smaller firms from the tax.
We need to see tangible action from policymakers, incentivising growth and investment amongst small businesses, which will lead the way in the economic recovery.