Business rate increases could put more firms at risk
Business rates are set to climb even higher in 2019, potentially putting more businesses under financial strain, according to new analysis.
According to property consultant Atlas, an estimated half a million work premises could pay tax rates of 50% by April 2019.
The prospect of further rate increases has led to calls for business rate reforms as part of the upcoming Autumn Budget.
Rising rates is just one of the factors that is closely associated with a number of high profile retailers entering into insolvency procedures, including company voluntary arrangements.
A CVA enables a struggling business to reduce creditor pressure, cut costs and restructure.
By reducing their liabilities, the businesses have a greater chance of survival in the long‐term, although other steps to reduce operational outlays will also have a huge impact.
The Confederation of British Industry has also called on the government to address the subject of business rates in order to boost competitiveness and ease the pressure on firm’s finances.
Pubs, bars and restaurants are among the businesses hit hardest by rate increases, as they have also had to face rising labour costs and other operation expenses.
Rising property prices and inflation have caused the multiplier figure – used to calculate business rates – to rise significantly since business rates were first introduced in 1990.
Initially set at 34.8p in the pound, it will rise to 50.6p in April 2019, meaning businesses are paying an effective tax rate of more than 50% on their property.
The multiplier figure is based on the consumer price index inflation reading for September, which currently stands at 2.7%.
Meanwhile the Centre for Retail Research has revealed that more jobs in the retail sector have been threatened by company failure in 2018 than in the previous 24 months combined.
In the year until August, 28 companies entered into insolvency proceedings, with nearly 2,100 stores, and 40,000 employees put at risk.
That compares with 74 firms that failed in 2016 and 2017, when just over 38,000 staff saw their roles threatened.
By Phil Smith