James Benamor questions why the business rate cap came so late for the UK’s long-suffering businesses.
A 2 per cent cap on business rates was announced by George Osborne in his December Autumn Statement, a much-needed move to give the UK’s long-suffering small business community a glimmer of hope that the government might finally be doing something to champion their cause. Osborne claimed the cap could save businesses up to £3,375. Yet in his 2014 Budget announcement, while a three-year extension to business rate discounts and enhanced capital allowances in enterprise zones was announced, the business rate cap failed to get a mention.
Although the cap was a nice, if not unexpected gesture, it’s too little too late for those businesses that have already been forced into closure in the ever-deepening financial crisis. So my question to the government is why it took them so long to enforce this cap? And what does a £3,000 saving actually mean for those SMEs and micro-businesses still struggling to stay afloat?
With 2014 well underway, the UK high street continues to fall victim to the spiralling costs of renting retail space and running a business. Many small businesses are still on the verge of closure, with access to funding playing a major role in this. A study from PwC and The Local Data Company reveals an average of 18 town centre shops were closing each day in 2013, a clear indication on the continued struggles of all UK businesses, even the bigger players. This cap on business rates has been a long time coming, but the savings businesses will reap as a result will be a drop in the ocean compared to the full costs they currently face.
Micro-businesses across the UK, whether window cleaners, self-employed hairdressers or taxi drivers, are simply struggling to make ends meet and find the funds needed to grow their businesses. A recent Amigo Loans study revealed a fifth (21 per cent) have no idea how they will grow the business in the future, and a further 15 per cent say growth just simply isn’t possible for them right now.
And what’s equally worrying is that, while the government continues to mull over its commitment to small business growth, an increasing number of small businesses are turning to payday loan sharks as a viable solution to their funding worries. Not only is this a dangerous and inflexible way to borrow, but the short-term reality of payday loans means they can get away with charging eye-wateringly high APRs that result in needlessly costly repayments. Small business owners rarely know where their business will be from one month to the next, so what they need is flexibility, the ability to borrow larger amounts over longer periods and at an affordable rate.
Further support for UK businesses can come in a number of forms, whether offering reduced rate business loans to promising start-ups or invigorating the Funding for Lending Scheme. There are also rumblings that Osborne may overhaul the business rate system for 2017, a move which business lobby groups, including the BRC, are pushing for. We are fully behind any moves that will ultimately reduce the costs for SMEs and micro-businesses, and this clearly needs to be a government priority as the year draws on.