Why September’s inflation figures could push up 2024 business rates up by almost £2bn
Directors and business owners are used to planning ahead and taking decisions that they know will only come to fruition in the medium and long term. It’s all part of running a company.
The most recent set of inflation figures were greeted with slight surprise and disappointment by policy makers and watchers as they maintained their current level of 6.7%.
But there is an unpleasant sting in the tale attached.
Local government ministers are using this figure to base next year’s business rates level on and if they stick with September’s CPI rate then they will rise across all sectors by an estimated £1.92 billion in England on April 1st 2024.
The multiplier, which is applied to the rateable value of properties to calculate the tax due, typically rises every April in line with the previous September’s inflation rate but rarely if ever will they see such a steep one-off rise.
Certain sectors of the economy such as retailers and hospitality firms will see a bigger relative rise because they currently enjoy a discount on their rates that was brought in during the pandemic period.
This last vestige of government support will expire on March 31st 2024 and they will then pay the full rate from the following working day.
The British Retail Consortium (BRC) said retailers face a collective £470m-a-year increase from next year as a result of the inflation bump.
Stores are expected to be struck by a £15,300 business rates bill for an average site from next April in comparison to the current year of £3,600.
Helen Dickinson, chief of the BRC, said: “Retailers are publicly calling on the chancellor to freeze the business rates multiplier, allowing them to keep driving down prices, and invest in new shops and jobs.”
“With the all-important Christmas period fast approaching, retailers hope that cost pressures continue to ease in the coming months. “
“Unfortunately, the September CPI figures will inevitably put renewed pressure on consumer prices,” she added.
The hospitality sector isn’t escaping the impact of the business rates bill hike either with businesses expecting an additional £234m.
For a restaurant, the bill is poised to jump to £21,600 from £5,000, while at pubs, it is expected to hit £16,800, from £3,900.
Kate Nicholls, chief executive of UKHospitality said the latest inflation reading could be a “final nail in the coffin” for many businesses.
“These figures finally confirm the bleak picture facing hospitality businesses from next April.
“Almost a billion pounds in extra costs from business rates alone is unfathomable – and insurmountable – for many,” she said.
“It would be particularly perilous for small, independent businesses, for which ongoing relief measures are a lifeline at a challenging time.
“Hospitality is at the heart of our communities and it’s essential we do all we can to protect them and the value they bring, from driving economic growth to creating jobs.”
Many businesses can withstand one financial shock but when they happen to coalesce at the same time then it could prove to be insurmountable for even the most well run and prudent firms.
Most are managing to live with the environment of high inflation and rising interest rates to counter them and having an internal balancing act to soak up the fiscal consequences of both.
But a huge business rates rise coming down the pipeline in six months time, exacerbated by the relatively high inflation figures, might well be the final straw for many.
If there is some good news to be had then it’s that this is enough time for directors to get some professional advice and dig into what options they have to prepare their business for the oncoming storm.
We offer a free initial consultation for anybody who wants to discuss, in detail, what they can do to protect themselves and their company.
Depending on their goals and their situation, there are a range of options available to strengthen their hand or to arrange the orderly closure of the company in time to satisfy outstanding creditors and relaunch a new venture or move onto a new professional challenge.
No matter what aims and goals you have, the earlier you get some guidance about how to get there – the easier it can be to turn them into reality.