The very nature of London’s high streets is under threat
24 January 2018
Business rates revaluations across the UK, which will come into effect on 1 April, will have a huge impact on SMEs, with the Mayor of London Sadiq Khan warning “the very nature of London’s high streets is under threat.”
And although Chancellor Philip Hammond’s Spring budget did offer some relief, there will be many SMEs that will be faced with steep increases.
Khan has given a particularly stark warning about London. Personal stories from business owners paint a harsh financial picture of what the revaluations mean to SMEs – a chocolatier in Westbourne Grove has said they will see the rateable value of their premise increase from £52,000 to £87,500, while an owner of three retail stores on Shoreditch High Street has said they are likely to see an increase from £7,200 to £18,000, and face a 60 per cent rise by 2021.
SMEs make up over 99 per cent of all businesses in the UK and account for 60 per cent of all private sector employment in the UK. It is vital that they continue to be driving forces of the economy. Given the uncertainty surrounding Brexit, as well as predictions that growth in consumer spending could drop to a four-year low in 2017, is it really a good time to put more financial pressure on SMEs?
The SMEs that will see some relief will only be the ones that have a rateable value of £12,000 and below. They will receive 100 per cent relief, with those with a rateable value between £12,000 and £15,000 receiving tapered relief. This is said to account for 600,000 SMEs. At the start of 2016 there were 5.5 million private sector businesses in the country.
Those businesses that the revaluation will see come out of Small Business Rate Relief will also get some help. They will have their bill increased next year by no more than £50 a month.
The government has also announced other relief measures for SMEs, such as a £300million discretionary relief hardship fund which will be made available to local authorities, although it will be at the discretion of the council as to who receives the relief. Those SMEs which in areas where property values have gone down will see their rateable value also go down.
But the real issue will be those SMEs whose rateable value is out of these categories. They will be left with a hefty bill, which some have said may see them forced to cut staff or even close their business.
There has also been criticism of the relief earmarked for public houses by the government. Hammond announced that pubs that have a rateable value of up to £100,000 will be set to get a £1,000 business rate discount, but international property consultant Gerald Eve has said that due to state aid limits the proportion of pubs likely to benefit nationally is just 60 per cent.
How they cope with the business rate revaluations is a going concern going forward for SMEs. Small businesses make up such a large percentage of UK employers, so if they start to struggle more than they already are, what will that mean for the overall economy?
This article was published in our Business Reporter Online: SMEs.