Small businesses could be ‘driven out of London’ by rate rise

The average micro business in London will be paying business rates of £17,000 from April according to the FSB

Three quarters of small businesses in London consider rates to be one of the biggest issues affecting them, according to a new survey (Getty)

An increase in business rates is one of biggest issues concerning small businesses in London, easily trumping fears around economic uncertainty and worries relating to recruiting the right talent.

According to a survey by the Federation of Small Businesses (FSB) and trade body Camden Town Unlimited, the average micro business in the city, defined as a company with fewer than 10 employees, will be paying business rates of £17,000 as of April this year under a Government hike.

“London is in serious danger of losing its vital support system of micro and small businesses,” the FSB’s chair for London, Sue Terpilowski, said in a statement.

“We need to realise that the hard costs of operating a business in the capital are starting to outweigh the benefits which simply does not make economic sense – and so tacking these burdens at the spring Budget is critical,” Ms Terpilowski added.

Business rates – which are sometimes referred to as non-domestic rates – are levies that companies occupying commercial properties pay. That tax goes towards covering the cost of services provided by local authorities and the emergency services.

The survey found that close to three quarters – 74 per cent – of businesses consider rates to be one of the biggest issues affecting them, while 36 per cent cited economic uncertainty, and, one third said that the difficulty around recruiting the right staff was their biggest concern.

“The new business rates will drive firms out of London, force some businesses to cut staff or close down altogether,” said Simon Pitkeathley, the chief executive of Camden Town Unlimited.

The survey was conducted between 2 February and 14 February and included responses from 129 businesses.

Friday’s report chimes with criticism voiced by other think tanks and organisations, including the Confederation of British Industry.

Earlier this week, Helen Dickinson, chief executive of the British Retail Consortium criticised the current business rates system, calling it unsustainable.

“At a time when retail is being reimagined and customers seek more engaging experiences, business rates are a disincentive to innovate and invest in physical space,” she said in a statement.

“Further measures to reform business rates are essential to fix an unsustainable system that continues to discourage investment.”

The Institute of Directors has also urged the Government to “level the playing field” to help smaller businesses, after an analysis by business rates specialists CVS showed that high street retailers in parts of the country are facing rises of up to 150 per cent.

“April will serve a ‘hammer blow’ to small shops, and the consideration should now be to ensure that they are in fact paying fair and accurate rates,” said Mark Rigby, chief executive of CVS.