LONDON — A significant proportion of small British businesses plan to cut staff costs and may eventually shut down after business rates rise next month, according to a new survey from the Federation of Small Businesses (FSB).
The research found that 36% of small firms expect to see their business rates increase from 1 April, with 44% of those businesses saying their rates are set to rise by over £1,000.
Of those facing a rise, 55% plan to reduce, postpone or cancel investment in their business. A further 19% of those firms say they will ultimately consider closing down or selling up as a result of the hikes.
Business rates are similar the commercial version of income tax, and are levied on firms including shops, cafes, hotels, and hospitals.
The rate changes are the first re-evaluation of business rates for seven years, and could see up to 500,000 British firms face increases of up to 300% when they are introduced.
Many firms expect to see a fall in rates, but around a third — mainly those in the south east of England — will see rates go up, with 21% expecting an overnight increase of more than 40%.
The government says it has established a transitional fund to help businesses facing a big jump in rates, but Labour’s shadow business secretary Rebecca Long-Bailey said that firms are still facing a “cliff-edge,” and called the changes a “ticking time-bomb.”
Mike Cherry, FSB chairman, said: “Profitability across the UK small business community is already falling. The costs of doing business for small firms are now at their highest levels since early 2014. The last thing we need is a business rates burden so heavy that it threatens the future growth prospects of our entrepreneurs.
“To add insult to injury, those who need to challenge their re-valuation assessment are now faced with a new but rigged appeals system — which will prevent small businesses with genuine concerns about their rateable values from being able to seek justice and redress.”
“The seven year gap between this year’s revaluation and the last has stored-up all kinds of problems for our business community. The solution is for the Chancellor to use his Spring Budget to announce a cross-party commission to propose measures for a replacement business tax system linked fairly to the ability to pay,” he added.
NOW WATCH: A financial risk expert told us out of Trump’s ‘chaos’ comes opportunity for Brexit Britain
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.