According to a Federation of Small Businesses poll of London firms, 74% said rates are the single biggest issue affecting their business, compared to 36% who said economic uncertainty was the main issue, and one third (33%) who cited recruitment.
Following a revaluation of properties’ rateable values, from levels last set in 2008, new bills are due to be issued from April.
The government plans the standard multiplier used to calculate business rates to be 0.48 next year, around 3% lower than the current 0.497. This means properties that have seen their rateable value increase by around 3% or less can expect a cut in their rates bill next year, while those whose value has increased by more than 3% can expect an increase in their bill next year.
A number of groups have warned this will lead to large increases for some firms. An FSB report with Camden Town Unlimited Business Improvement District claimed businesses with fewer than 10 employees will be paying £17,000 in Business Rates in April 2017.
Four in ten of those polled said they expect to see an increase of above 20% in their business rates, with nearly one in three saying they are unsure what the impact of revaluation will be on their firm.
FSB London chair Sue Terpilowski , said the capital was in serious danger of losing its vital support system of micro and small businesses without government action.
“The average micro business will have to find £17,000 to cover business rates from April this year. But this increase must not be viewed in isolation as small firms will face an extra £2,600 in additional employment costs from Government policy in the 2017-18 tax year, inflationary increases and a further increase in pensions auto-enrolment costs.
“We need to realise that the hard costs of operating a business in the capital are starting to outweigh the benefits which simply does not make economic sense – and so tacking these burdens at the spring Budget is critical.”
The FSB said the business rates system was unfair as it was “absurd that the amount small businesses are required to fork out bears little or no relation to their turnover, profits or ability to pay”.
Its statement added: “Instead, it is arbitrarily based upon notional property values. The reason this has come to a head now is due to a recent (and much-delayed) revaluation, which has created a new set of anomalies.”
Once the new system is in place, councils have been warned that their finances could be hit with an increase business rate appeals as firms look to reduce their bill although the government has said new rules governing business rate appeals will weed out speculative applications.