affects of business rates increase

What are the effects on SMEs of Business Rate Reviews? From the Perspective of an Insolvency Practitioner

Earlier in 2017 a long overdue review of business rates across Great Britain took place. It was supposed to take place in 2015, but was delayed for 2 years. It was expected that the outcome would be increases in business rates across the board. This article looks at the implications of such an increase for businesses, from the point of view of an insolvency practitioner.

It is the insolvency practitioner who deals with insolvencies, and there has been an increase in insolvencies in the high street in recent years. Insolvencies are caused by many things: cash flow problems, creditor pressure, change in consumer habits (i.e. the shift to online buying), etc. Any significant increase in business rates is likely to have a negative outcome for some businesses. Indeed many consider the increases a ticking time bomb for small businesses

What is the Likely Outcome?

 

Independent research from an industry body showed that c.36% of small businesses were anticipating an increase. More to the point, 44% of those interviewed were fearing that the increase would be at least £1,000 annually

 

Although there will be winners and losers, for those businesses that expect to see a big increase in their business rates, the outcome could be:

 

  • A delay in planned investment
  • Cuts in costs
  • Cuts to staffing levels
  • Possible pressure of insolvency

 

The Prime Minister announced that a £3.6 billion transitional relief fund was being established to soften the blow to those businesses being harder hit than others. .

It remains to be seen what the fall out will be, but from an Insolvency Practitioners point of view, it is likely that there will be an increase in SMEs facing the pressure of company insolvency as a result.