News & Insight

Business rates issue is now a matter of life and death

Christian Nellemann

This week it's been revealed that business rates bills could increase by 1 billion pounds next year.

This week it’s been revealed that business rates bills could increase by £1 billion next year. That could mean small businesses pay double what they did just last year.

It all comes down to Retail Price Inflation – the figure that’s used to calculate business rates – which was up to 3.9% for September.

Following on from last year’s catastrophic revaluation and a stagnantly underperforming pound, I think small businesses are in big trouble unless action is taken soon.

Forget phasing and targets – this needs to be addressed now

Politics aside, the pound has plummeted since the EU Referendum and consumers are being more cautious. That’s an inarguable fact. It’s affected import prices, and it’s forced some small businesses to put prices up at a time when customers are harder to sell to in the first place.

For businesses that have faced rate rises already, the situation is dire. And for those lucky enough to get reduced business rates bills following last year’s revaluation, the government’s five-year phasing period means many aren’t paying less yet anyway.

Evidently, the current climate is not a time for phasing.

Forget 2020. Small businesses can barely see beyond 2017.

The government has also planned to link rates with the lower Consumer Price Index (CPI) from 2020, to put an end to these unmanageably big increases. This will potentially save businesses £1 billion over the first three years. But this plan shows a lack of understanding for small businesses.

Let’s look at it this way. Your mortgage suddenly doubles and you can’t afford it. So the government says don’t worry – this increase is unfair so in 3 years’ time we’ll change the way your mortgage is calculated to allow it to drop to something you can afford again.

You’d feel frustrated, confused and abandoned – not to mention terrified.

Which is how thousands of small businesses will feel unless rates are frozen or CPI-indexing is implemented immediately.

I think the problem is that the government only understands big businesses – because they more closely mirror their own working lives. It’s a culture of endless meetings, huge numbers of staff and long-term targets; a culture of planning ahead. And it’s a culture that’s utterly at odds with small businesses.

Last year the average annual profit of a small business was £13,000. So there’s no planning ahead – it’s just a case of planning how you can pay your bills every month, and your employees if you’re lucky enough to afford any.

Freeze business rates. Give small businesses a break. 2020 means nothing if you’re on the brink of closing – you’d be happy just to make it to 2018.

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  • Christian Nellemann is the Founder and CEO of XLN, a provider of low-cost phone, broadband, energy and card processing services exclusively to small businesses. A serial entrepreneur, he’s a two-time winner of Ernst & Young’s Entrepreneur of the Year award and one of only 17 inductees into their Global Hall of Fame. He is passionate about small businesses, and is a featured columnist for realbusiness.co.uk.
  • Follow him on Twitter @christianxln