Inflation and business rates to deliver £6.8bn hit to small businesses

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Inflation and business rate rises could deliver a £6.8bn hit to small and medium-sized businesses this year.

The rising costs are leading more than half (57 per cent) of these firms to predict their revenues will not grow this year, according to a report from insurance group RSA.

Fourteen per cent of small and medium businesses – a proportion representing £252bn in turnover – expect revenues to drop.

Read more: Alarm bells sound over rising costs and inflation 

Business rates have been re-evaluated for the first time in seven years, and are sky-rocketing for many firms, especially in the capital. The rise in commercial property taxes comes in on 1 April, with the average shop contending with an 8.4 per cent hike in rates.

In London, some businesses are facing rate rises of 45 per cent or more.

Read more: What next for inflation?

Over a third of the UK's 5.4m small and medium sized companies said rising business costs are one of the top three risks to their business. Research by the Federation of Small Businesses has found that one in five might close down, or sell their business, due to business rate rises.

RSA's Russell White said:

The business environment is expected to become much harsher in the coming year, and it's crucial that businesses plan ahead to ensure that they are prepared. The government also has a role to play by considering ways through which it can mitigate the negative effects that increasing business costs could have on the economy.