Recovery Team Scaling up at RMT Accountants
March 11, 2019
Business groups have broadly welcomed this month’s announcement by Chancellor George Osborne that councils in England will in future have the right to set their own business rates and to keep the proceeds, in a move designed to increase competition and encourage enterprise.
Meanwhile, a recent survey has revealed that a considerable number of small firms have expressed concerns over the effects that the introduction of the new National Living Wage could potentially have on their businesses. A mere 6% of companies surveyed believe that the wage will have a positive impact on their firm.
With the latest figures revealing that inflation dipped below zero once again in September, business groups await the Chancellor’s Statement with interest. Our website will feature special coverage of the Autumn Statement announcements, following the Chancellor’s Speech on Wednesday 25 November.
Both the Confederation of British Industry (CBI) and the Local Government Association (LGA) have welcomed proposals unveiled by Chancellor George Osborne to give councils in England the authority to alter the level of business rates in their area, and the opportunity to keep all of the proceeds of those rates.
Currently, businesses pay a uniform business rate set by the central government, which is calculated by multiplying the rental value of a property by either the standard rate (49.5p) or the lower rate (48p), before subtracting any rate relief. Councils retain 50% of the earnings, with the rest going to the Treasury which then redistributes the revenue to compensate areas with fewer businesses.
The new proposals, announced by the Chancellor at the Conservative Party Conference, will mean that councils can cut these rates and effectively compete with each other to encourage enterprise and attract businesses to their area.
CBI director-general John Cridland said that the change ‘could spur councils to take a pro-growth approach, and has the CBI’s support,’ adding: ‘But this must not be a way to increase rates without the consent of the local business community’.
Gary Porter of the LGA commented: ‘While this is good news for councils and businesses, local authorities will face almost £10bn of cost pressures by 2020 so we will now seek to work with government about how this proposal can be introduced more quickly.
‘We would expect measures to ensure local areas with less ability to generate business rates income do not suffer as a result of these changes and all councils are also given leeway to vary business rates up as well as down.’
However, as some analysts have noted, the proposals are not necessarily as radical as they might first appear. A system of tariffs and top-ups to support areas with lower levels of business activity will be kept in its present state, and the Government also plans to introduce a ‘safety net’ for any area where business rate receipts fall by 7.5%.
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A survey released by the Federation of Small Businesses (FSB) has revealed that a significant amount of small firms are concerned about the potential impact that the new National Living Wage (NLW) will have on their businesses.
Of the firms that are likely to be negatively affected, some 50% said they would increase prices, while 52% reported that they would put off hiring new recruits to help offset the wage hike.
According to the FSB’s research, wholesale and retail companies, alongside food and accommodation services, are most likely to believe that the NLW will impact negatively on their business.
Additionally, firms located in the South West, Yorkshire, the West Midlands and Wales are amongst those most likely to foresee a negative impact.
Only 6% of companies thought that the policy would have a positive impact on their business when it is implemented next April.
Announced in the Chancellor’s July Budget, the NLW of £7.20 an hour comes into effect in April 2016 for workers over the age of 25.
Following the publication of the latest Cost of Employment Index, the FSB predicts that, for a small retail business with six full-time staff members aged 25 or over and earning the current minimum wage, the NLW will cost an additional £5,900 a year.
John Allan, national chairman of the FSB, stated that: ‘Over half of our members already pay their staff above the voluntary living wage, but those that don’t are often operating in highly competitive sectors with very tight margins.’
He concluded: ‘With the economy recovering it is right that employees should be rewarded with a pay rise – but we cannot allow wage changes to become a political football.
‘It’s important that the independent Low Pay Commission continues to play a central role in setting the minimum wage – and that includes deviating from the Government’s plan to raise the National Living Wage to over £9 an hour by 2020, if it becomes apparent that the economy cannot afford it.’
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