Battling traders spell out the deadly cost of business rates hike

This week the Federation of Small Business’s (FSB) survey found almost 20 per cent may shut, with 44 per cent expecting bills to go up eventually by more than £1,000 a year.

This comes at a time too when profitability is falling and costs of doing business are at their highest levels since 2014, says the FSB’s national chairman Mike Cherry.

The group wants the new appeals system, which could prevent many previously eligible firms from seeking justice and trigger a rise in rogue ratings agencies, to be scrapped and for relief thresholds to be raised.

Chancellor Philip Hammond can also use his Spring Budget this month to announce a cross-party commission to devise measures for a replacement business tax system based on the ability to pay, it recommends. 

While the changes due on April 1 will take some 600,000 businesses with a rateable value under £12,000 out of the rates system altogether, many others are finding themselves squeezed as never before.

Those enterprises fighting on the frontline include timber company owner Emma Woods, fancy dress retailer Sheila Tims and Giles Fry, founder of a clutch of friendly neighbourhood bars.

Trading in different sectors and regions, together they typify both the broad range of entrepreneurs affected and the scale of their problems.

Expansion was a given when Express Enterprise spoke to Snug bar owners Giles Fry and his business partner Ashley Moore in August last year.

But no longer. “For the first time in 13 years, it’s consolidation not growth,” they say of their business which has nine sites serving cocktails, craft beers and good food in towns across the south-east.

The pair employ 106, paying the living wage regardless of age. The rates rise for their base in St Albans, Hertfordshire, is 114 per cent.

“That’s the highest, but looking ahead around a third of our profits could go in rates,” says Fry.

“We consider our businesses as well as creating jobs, bring life and difference to local high streets and are a valuable alternative to mass market casual dining chains which are able to absorb rises of this size.

“For us though it is a perfect storm because there’s been the increase in operating costs from produce price rises as well as wage regulation which we more than support. High streets are our business and rate rises of this magnitude are not sustainable.

“We shall appeal but the system is in trouble and taking years. In this situation it gets harder to motivate staff, and knocks the enthusiasm of the young who join keen to learn new skills.”

Fry and Moore’s view is supported by ALMR, their trade body whose chief executive Kate Nicholls who warns help and reforms are urgently needed.

“The pub and bar sector is the only one facing increases in every region in the UK. Pubs already pay around a third of their turnover in taxes and rates increases will eat further into margins, undermine investment and will see some venues ultimately become unprofitable,” she says.

 “Pubs saw an average increase of 15 per cent in rateable value at the last revaluation, with restaurants seeing an average 23 per cent increase.

“Even with transitional reliefs, bills for pubs are set to increase by up to 10 per cent. Pubs and bars are fantastic employers and integral parts of local communities. If costs continue to rise for these businesses they will find themselves seriously struggling to meet them.

 “In the short term, the Government must take immediate action to ensure that pubs and bars can navigate the new rates.”

 ALMR is calling for action in three areas: sector-specific relief for the hardest hit during transition, then a 12.5 per cent increase cap in line with the Scottish Government’s so no businesses bears an unfair brunt and a Government commitment that businesses will have a guaranteed right of appeal within a fair and accurate system. 

“Government proposals will see appeals dismissed on the grounds of reasonable professional judgment when ratings falling within a 10 per cent margin of error. 

The proposals are subjective, imprecise and unfair and the Government must abandon them,” adds Nicholls.

“In the longer term we are pushing for a root-and-branch reform of the business rates system that is not fit for purpose and penalises success and investment.”

Productivity will be the casualty for successful business Duncombe Sawmill in Helmsley, north Yorkshire that produces wood products from logs to artisan gates and fencing.

For owner Emma Woods the current system of linking rental and rateable values has proved particularly punishing.

“Our valuation has gone up 63 per cent, although by any other measure, be it turnover or number of staff, we are a small business. But we are not classified as such because of our site which has a lot of empty space.

“But we need that to saw the logs and for our lorries to turn round. Our land also has a covenant and can only be a saw mill so we’ve no choice.”

Based on a small, industrial estate, Woods sees little in return either for the charges.

“We are on private road that we maintain, have no refuse collection provided, no street lighting and limited policing so it’s difficult to understand why the hike,” she explains. “This will curb investment in our new machinery and therefore have a knock-on effect on our productivity.”

Helmsley, renowned nationally for the enterprising effort it makes supporting local traders especially around events like Small Business Saturday, is a close knit, thriving spot, whose traders were all too aware when Enterprise Express spoke to some of them of the wider damage to all the community resulting from the losses of some.

It is a similar situation in Crowthorne, Berkshire where a one-valuation-fits-all has enraged traders who perceive it as nonsensical and unjust.

For Sheila Tims, owner of fancy dress hire and sales retailer Bewitched, her rate rise really signals the end.

Planning to retire this summer anyway after 15 years, she employs three and her small shop’s rateable value has increased from £10,000 to £17,500 according to the official assessor, the Valuation Office Agency.

Independent reviews she has sought from estate agents however have estimated a £12,000 rental value, which would have meant she would have paid nothing or very little under the new regime.

“But eventually now my bill will go up 253 per cent to £8,100 which is unsustainable,” she says.

“Crowthorne businesses have all been given a square foot valuation that is far more than our near neighbours in Sandhurst.

“But one size does not fit all. Bewitched is in a small parade of shops, without even the benefit of high street footfall.

“I had hoped to sell the business, but I have no illusions this is going to be almost impossible with this size of rates bill.  

“Most likely I will sell the stock and close, not something I had planned. It will mean a loss of £50,000 to £100,000 to our family.”

And the future is not good for other businesses nearby, she adds.   

“One computer firm told me his rates were going up from £300 to £3,000 so 1000 per cent.

“If this does not change Crowthorne will be a ghost town. It is wrong and very sad.”

www.fsb.org.uk, www.duncombesawmill.co.uk, www.thesnugbar.co.uk, www.bewitchedfancydress.com