May Looks to Soften Blow of Investment-Strangling Business Rates Hike

The ONS has reported a surprise 1% fall in business investment in Q4 of 2016 with economists suggesting this is because Brexit uncertainty is now starting to weigh on firms’ spending plans.

The fall in investment is a negative for Sterling as it suggests the UK economy will likely slow over coming months while much-needed international investment flows will also dry up.

And because the UK runs a hefty current account deficit, these investment flows are needed to maintain value in the Pound.

However, Brexit is not the only culprit behind a potential slide in investment intentions as a looming increase in business rates will certainly be casting significant uncertainty over businesses.

The government adjusts the value of business rates to reflect changes in the property market every five years and with property prices tearing higher in the UK many small business fear the next round of rises will make them unviable.

However, it appears that the Prime Minister Theresa May has recognised this and she has tasked two senior ministers with minimising the impact of this investment-sapping decision.

The Federation of Small Businesses (FSB) welcomed news that May has asked the Chancellor, Philip Hammond and Communities Secretary, Sajid Javid, to provide additional help for those firms worst affected by the upcoming changes to business rates.

Speaking in the Commons, the Prime Minister acknowledged that some businesses would be “particularly adversely affected” by the changes and said that the Chancellor and Business Secretary had been tasked by her to make sure there was “appropriate relief” for them.

The FSB is urging the Government to act in next month’s Budget on precisely these lines, following last year’s commitment to provide £6.7bn of assistance for smaller businesses, taking many out of the system altogether.

FSB National Chairman Mike Cherry, said: “I am reassured to hear that the Prime Minister has personally intervened in this extremely worrying situation for many small businesses.

“Many of our members have contacted us to say that they are facing completely unfair and disproportionate increases in their tax bills, with some considering whether to close or scale back their business. That would clearly be in no one’s interest.

“Previous interventions by the Government, backed by FSB, have resulted in 600,000 small businesses receiving 100% relief and therefore protected from the current business rate changes. But the extent of loss faced by some small businesses who are still in scope has created an unacceptable situation and I look forward to hearing the Chancellor’s proposals at the Spring Budget in two weeks’ time.”