Following an increased focus on venture capital investment and growing entrepreneurial ambition in the UK, nearly half a million new companies were created in the first half of 2024, based on data from the New Startup Index by Beauhurst and NatWest.
Of these468,000 new businesses, however, reports suggest that 20% of these companies will fail in their first year, with a substantial 60% of small businesses not making it past their third year.
While it’s clear that budding entrepreneurs aren’t shying away from setting up start-ups in the UK, one of the biggest speedbumps for these small businesses seems to be achieving long-term, sustainable growth.
Among four other measures, James Disney-May has underlined the importance of business rate reforms to give start-ups in the UK a much-needed boost. Here, the entrepreneur expands upon this line of thought:
Small businesses and start-ups with physical premises can often be daunted when faced with the burden of business rates, particularly those that specialise in technology and R&D sectors that require labs or manufacturing facilities.
As it stands, Small Business Rate Relief (SBRR) is calculated according to a property’s rateable value and is only available to small businesses that use one property (though it’s still possible to receive relief if they have more) and this property has a rateable value of less than £15,000.
While this business tax isn’t applicable to firms with a property that has a rateable value of £12,000 or less, those with a rateable value of £12,001 to £15,000, must pay anywhere between 100% to 0%.
For small businesses with a rateable value of £13,500, they’ll receive a significant 50% deduction from their bill, while those with a rateable value of £14,000, will get 33% off. In short, the higher the rateable value of the property, the greater the tax.
Reforming the Small Business Rate Relief (SBRR) could therefore offer vital support to these small companies, helping to reduce their operational costs and promote growth.
The creation of property tax breaks for young businesses with premises dedicated to technological innovation and collaboration could also promote an environment that encourages new ventures and ideas.
By reducing their tax liability with SBRR reform, small businesses with elevated growth can focus their funds on reinvesting in innovation and rejuvenating areas with declining business occupancy rates instead.
SBBR reform would also be in line with the government’s aims to freeze the small business multiplier (as announced in the Budget) and help high street businesses to compete with online companies by cutting business rates.
Published in late 2024, draft legislation outlined the government’s aim to permanently cut business rates for retail hospitality and leisure properties from 2026. Speaking of these business rate reforms, the Exchequer Secretary to the Treasury, James Murray said:
“For too long the business rates system has been working against our high streets.
“Today is a major step towards our new system that will support retail, hospitality and leisure businesses on our high streets to succeed.
“This Bill paves the way for a permanent cut to their tax rate, helping to level the playing field between them and online and out-of-town businesses.”