What you need to know so you aren’t taken by surprise

It’s hard when you’re running a business to keep track of every external factor that could have an influence on you and your bottom line. 

You do need to know that a lot of essential bills are going to be rising from Saturday April 1st and every business, no matter what sector or area of the country they are in, will be paying more than they were on March 31st. 

We’ve found five essential charges that will either definitely be rising or stand a good chance at being more. 

They are:- 

  • Business rates
  • Interest rates and inflation
  • Corporation tax
  • Energy Bills Discount Scheme (EBDS)
  • Water rates

Find out how your company will be affected below. 

Business rates

Business Rates have been revalued for the first time since 2017 and no matter where your company is based or what sector you are in – they will affect you and the amount you will have to pay.

The Valuation Office Agency (VOA) has conducted the exercise of revaluing the 2.14 million non-domestic properties in England and Wales alone. The combined rateable value of these properties has risen to £70.3 billion compared to the £65.7 billion in the 2017 survey. 

These new values will reflect changes in rental valuations between 2015 and 2021.  

The VOA states that while their valuations follow rental values as the basis for their findings, they do not set the market but reflect what commercial occupiers are paying in rent to use their premises. 

The Treasury also announced various measures to specifically support retail, hospitality and leisure businesses as well as other small businesses who will lose eligibility for either Small Business or Rural Rate Relief due to the new valuation. 

Looking closer at the individual sectors:

  • Retail

While some retail sectors such as shopping malls were already seeing a reduction in values with the Covid-19 pandemic continuing this trend. Overall there has been a decrease in rateable value for retail properties but this was not universal across all retail sectors. 

VOA evidence showed that rents in neighbourhood shopping parades and shops in small town centres and market towns were stable and in some cases increased. 

There were 517,000 properties surveyed for a rateable value of approximately £15 billion. This equates to an average decrease in their rateable values of 10%.

  • Pubs and leisure

Many bars, restaurants and bistros saw growth between 2015 and 2020 but the pandemic effectively reset the board. 42,000 properties were surveyed for a current total rateable value of £1.3 billion which means pubs should see an average decrease in their rateable value of 17%.

  • Cost based valuations

Properties such as breweries, steelworks or chemical plants are surveyed using costs as a measure and will have seen an increase in their effective rateable value because building costs did increase substantially between 2015 and 2021. 

The Building Cost Information Service all-in Tender Price Index (TPI) showed an increase in costs of 21% in the last six years. It’s a trusted measure of price movements in the construction industry and reflects the average increase in building costs. Actual costs could have been higher depending on the type of building and materials used. 

  • Warehouses and logistics

Rents have increased significantly given the huge demand for online shopping even before the pandemic arrived and this is reflected in the valuations along with the limited supply of these type of properties in the UK. 1,550 were surveyed for a total of £2.43 billion which equates to an average increase of 35% in their rateable value. 

  • Offices 

All areas of the UK saw an increase in rateable values for offices with 437,000 surveyed for a total value of £16.3 billion which is an average increase of 10% per property. 

Interest rates and inflation

The Bank of England announced another interest rate rise to 4.25% last week which will increase the cost of borrowing for businesses. 

This was the 11th consecutive rate rise and while markets are split on whether it will be raised again to 4.5% in May, it has moved from a probability to a possibility. 

The rise was mainly seen as an attempt to continue to tackle the high inflation levels in the UK – currently at 10.4% and unexpectedly rose last month from 10.1%. 

This time last year inflation was at 6.2% which was still somewhat higher than the BOE’s target of 2% which it still thinks it will reach by the end of 2023. 

Inflation affects businesses in several ways. It means they pay more for essential supplies and stock, causes their staff to ask for more in wage rises to keep up with their own bills and expenses and eats into their profits if they don’t raise prices – which in turn could cause customers to look elsewhere as their budgets are squeezed. 

It also leaves them liable for higher rent increases as landlords look to recover their shortfalls. 

Corporation tax

As confirmed in the Spring Budget by the chancellor, Corporation Tax is rising from 19% to a top rate of 25% from April 1st.  

This rate will be paid by businesses earning £250,000 or more in profit with a tapering scale for those earning less or making a loss. 

Energy Bill Discount Scheme (EBDS)

The Energy Bill Relief Scheme (EBRS) ended on March 31st and was replaced by the new Energy Bill Discount Scheme (EBDS) instead. 

We covered how it works in more detail previously but briefly the new scheme offers discounted rates on fixed price energy contracts. It is not a business energy price cap. 

Chris Horner, insolvency director with BusinessRescueExpert, said: “While it’s good news that there will be some discounts applied from April 1st, we’ve all seen how volatile the energy price market can be so there is no guarantee that it will be sufficient over the next 12 months.

“It’s a fair bet that energy bills will still rise for businesses, although not as fast as they otherwise would have.

Water rates

Water rates for businesses are also increasing on April 1st by an average of 14.4% across the country. 

The individual amount will depend on where in the country the business is located, who their local water wholesaler is and the specific business water tariff they are signed up for. 

The two main factors that have driven the rise are: 

  • Inflationary increase

The cost of operating the water infrastructure has increased significantly as the water network uses vast quantities of electricity and the cost of this has soared during the energy crisis. There has been an average increase of 7.5% on wholesale water rates. 

  • Increases in retail business water rates

Most businesses pay default water rates that are capped by the regulator Ofwat.  This year Ofwat has reassessed its default price cap calculation, resulting in a 30% increase in the retail rates changed by business water suppliers. 

On average this change will increase overall business water bills by 6.4% before inflation.

We’re just over a quarter of the way into 2023 and things are about to get more expensive for nearly every business in the country. 

All of a sudden they are having to make more money just to stand still and before they can think about profit. 

This might be the right time to consider the position of the business and what can be done to improve it. 

Even were a director to conclude that if everything falls their way, it might still be a better decision to close the business, liquidate it quickly and start a new chapter without the debts and the hassle, options are available.

No matter what path they choose, the best decision they could take today is to arrange a free initial consultation with one of our team of expert advisors. 

Once they get a clearer idea of the position of the business, they will be able to come up with a range of options that the owners and directors can pursue to get them closer to their goals – whatever they are.