The Brief: Sadiq Kahn, has expressed his concern over the future of thousands of enterprises, small businesses in particular, over the higher business rates and has called it a “ticking timebomb”. The Mayor of London estimates that as many as 28 boroughs in the capital will face increased rates once the revaluation takes place in April next year.
Why It Matters: In the fourth quarter of 2021, business closures in the country reached more than 83,000 because of the pandemic’s brutal impact. As of October 2022, the number of small and medium enterprises that have folded has already reached 53,880, with the majority located in London.
Finanze Foresights: Kahn’s predictions come as no surprise since many enterprises have been desperately holding their own in a bid to outlast the recession, which has already started. A combination of surging inflation, slower economic activity, and rising interest rates make it almost seem impossible for many to survive the ongoing crisis. Revaluations in non-domestic properties are carried out to ensure fairness instead of revenue generation. Currently, businesses with a ratable value of less than £12,000 are not required to pay business rates, but the revaluation may cause many to not qualify anymore. Kahn wants to raise the threshold to £28,000, which, in our opinion, can benefit struggling businesses that have yet to recover from the pandemic. But the government instead believes that the Supporting Small Business (SSB) scheme will deliver more impact since it limits bill increases at £50 per month over the next three years. In addition, the business rates multiplier will be frozen to keep bills lower, which may benefit half a million small properties. Kahn’s proposal is better suited to support enterprises, but the government still has to keep the rates in place for many to fill its 50-billion-pound fiscal hole.
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