One week after the chancellors budget, businesses continue to feel the impact of being left without sufficient support.

Chancellor’s Spring Budget Disappoints Business Owners and Leaders

As the anticipation and speculation surrounding the Chancellor’s spring budget reached its peak, business leaders and owners across the country were eager to hear what would be announced. One of the top concerns for many was the issue of business rates, and several leading trade bodies even joined together to co-write a letter urging the Chancellor to use the predicted inflation rate of 2% to set the standard multiplier, rather than the September 2023 rate.

However, the hopes of these business leaders and owners were dashed as the Chancellor’s budget, announced on Saturday 16 March, confirmed that the standard multiplier would indeed increase. From 1 April, commercial properties with rateable values (RV) of over £51,000 will see an increase in their business rates at a rate of 6.7%, in line with the September 2023 inflation rate. This is more than triple the CPI inflation rate predicted for the second quarter of 2024, which is expected to be just 2%.

While tax cuts were a predictable certainty in the budget, there was debate over which taxes would be affected. Ultimately, a further cut to the National Insurance (NI) tax was announced, a decision that some found puzzling, especially considering that the 2023 autumn budget’s NI tax cut only came into effect in January. With a General Election looming, it became clear that the decisions made in this budget were intended to build the government’s voter base, with a focus on the individual rather than businesses. Experts estimated that a further 1% tax cut would cost £4.5 billion, but the actual NI tax cut of 2% is expected to cost around £10 billion.

While the NI tax cut may seem beneficial for businesses, as it could potentially ease the burden of tax on NI per employee each month, the 6.7% increase in business rates effectively negates any potential benefits. According to RVA Surveyors, using the 6.7% inflation rate will add over £1.5 billion to business rates tax bills from April.

In particular, anchor stores are facing higher outgoing costs than many independent retailers, and with the cost of living crisis, these costs have become astronomical. While inflation may be slowing down, it has had little effect on their outgoing costs.

“This is the second increase in just 12 months – and at nearly 7% as well. While an increase in the multiplier could have been expected or reasoned by a lot of people, it doesn’t mitigate the fact that already at the beginning of this rating list, the multipliers were not lowered as per usual. And now somehow businesses are expected to accept another increase to an already historically high tax,” said Anthony Hughes, Managing Director at RVA Surveyors.

While local authorities and councils do offer reliefs and assistance to eligible businesses, larger businesses are often exempt or face heavy restrictions. For example, the Retail Hospitality and Leisure relief (RHL) has a cap of £110,000 across the entirety of estates, which is not enough for many larger businesses to offset the upcoming increases.

“This increase is yet another burden for commercial property owners and tenants as they navigate ever-changing and unstable markets for the majority of industries,” Hughes added. “Business owners and leaders have every right to be angry, especially larger businesses who are only eligible for minimal support.”

While small and medium companies do have access to a range of support, it may not be enough to withstand the challenges facing businesses and individuals in a constantly changing landscape. For many businesses, the upcoming business rates hike will be their second increase in just twelve months, leaving them to question if this will be the final straw.