Small businesses in the North are set to bear the brunt of changes to business rates this spring.

In her tax-raising Budget in October, Chancellor Rachel Reeves announced plans to phase out rates relief introduced to help struggling companies during the Covid-19 pandemic.

The move means retail, hospitality, and leisure firms face an extra £140million increase in bills in April when the relief is slashed from 75 per cent to 40 per cent.

Smaller firms will see their rates bills more than double, threatening to tip some of them over the edge as they also deal with hikes in employer National Insurance and minimum wage. 

The issue has been highlighted by the Mail’s Save Our High Streets campaign. The rise in business rates will be felt hardest in the North of England because commercial property prices there are generally lower than in the South.

This means more shops in the North benefited from relief in the pandemic – and therefore more of them will see a large increase in their business rates bills when that relief is cut in April.

‘Like the housing market, commercial property is more valuable in the South,’ said Andrew Goodacre, chief executive of the British Independent Retailers Association trade body.

‘It is therefore likely that many more businesses based in the North will have received full relief compared to those in the South, and will therefore feel more of the pain from this 140 per cent increase in the rates bill.’

Business rates relief for retail, hospitality and leisure firms gave a 75 per cent discount on the bill up to a cash value of £110,000.

But the risk to high streets in the North from a business rates hike is not confined to smaller firms shutting up shop.

‘Anchor’ retailers such as supermarkets and large chains are also reviewing whether to keep stores open due to rising rates bills, meaning stores in

the North could be earmarked for closure. Goodacre added: ‘It’s much harder for them to make sense of their business in the North if the profit margins and sales are less.

‘Once those anchor stores go, people will spend less time on those high streets and unless you have other attractions to keep people coming in, the smaller businesses will be exposed to decline.’

Overall, the number of firms in critical financial distress leapt by a half to 46,583 businesses in the final quarter of last year, according to insolvency specialists Begbies Traynor.

Of these, 4,927 firms were in the North-West while Yorkshire, which includes cities such as Leeds, Sheffield, and York, reported 3,191 cases of critical distress.

The Government insists an overhaul of business rates will in due course mean a ‘permanent tax cut’ for properties with a rateable value below £500,000 as part of a ‘fairer’ system that will see warehouses run by online giants like Amazon – as well as larger bricks-and-mortar retailers – pay more.

‘They misled the country'

By RICHARD MARSDEN 

Famous for its medieval minster (pictured above) and historic shopping streets, York is one of Britain’s most popular tourist destinations. But a leading retailer in the city told how he fears ‘punitive’ government policies could hit its wealth of vibrant independent shops and traders.

Nicholas Brown, managing director of upmarket department store Browns of York, said Labour ‘misled’ the country by pledging not to hike National Insurance – then doing just that for businesses.

And he is worried the impact of that policy will be worsened by the rise in the National Minimum Wage and cut in business rate relief in April.

Brown, 65, said he and other retailers in cities such as York fear what may happen to some of the smaller shops which are so vital to their high streets once the ‘punitive’ cut to business rate relief comes in.

The big rises in tax and wage bills come as online shopping continues to grow and bricks-and-mortar retailers face a burden from Covid – such as paying back money borrowed from the Government under pandemic-era support schemes.

In a broadside against Labour and Chancellor Rachel Reeves, Brown said: ‘They misled the country and it’s costing a lot.

‘The new Government promised us change and growth. We’ve had change and it’s certainly not been for the better.

‘At the General Election, they made it clear National Insurance wasn’t going up, very clear.

‘They should have said that National Insurance contributions were not going up for employed people, not employers.

‘We’ve had two years of 9 per cent rises in the National Minimum Wage. This time, we weren’t thinking it would be as high as 6.7 per cent – we thought it would be in line with inflation, at around 2 per cent.’

Brown has run Browns – which was founded as a draper’s by Henry Rhodes Brown in 1886 – for 32 years. He urged the Government to review business rates because they are ‘not fit for purpose’.

Brown, who employs close to 200 people, added: ‘Retail is a much more competitive environment than it’s ever been. We’ve got to become fitter and leaner to survive.’