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Government's policy changes will cost businesses £9bn a year by 2020

The CBI wants George Osborne's next Budget to tackle business rates as British firms battle extra costs like the new living wage.

by Rebecca Smith
Last Updated: 19 May 2016

With the 2016 Budget now a month away, the CBI has pulled together its warnings and wish list ahead of March 16. The business group has assessed the impact changes in policy (including the National Living Wage and the apprenticeship levy) will have on the nation’s firms and it’s not pretty.

After whipping out its calculator, the CBI has calculated that these changes will cost businesses around £9bn every year by 2020-21 and around £29bn over the course of this parliament. So it thinks now is surely the time to grapple with the long-term bugbear of business rates, made all the more pressing by the 'cumulative burden' these new costs have brought.

‘What is coming over very clearly from our members... is that any more could really tip investment decisions, could tip growth plans, could tip job creation,' The CBI’s director-general Carolyn Fairbairn warned. 

It’s not the only organisation to have warned of the vampiric effect that business rates are having on the UK’s firms. The British Retail Consortium has also wheeled out some of its own eye-catching numbers in the hope it’ll catch George Osborne’s attention. Apparently, more than 40,000 high street shops will close by 2020 as the Chancellor is ‘sucking the life out of town centres’ with steep rates.

The CBI pointed out that smaller firms were particularly at risk and likely to get tied up in red tape – and that's something Osborne should keep a careful eye on. The government has been keen to position itself on the side of entrepreneurs; passionate about enterprise and those who take risks to establish businesses that boost the UK economy.

That label is at risk of slipping with the CBI's growing discontent coupled with Cambridge Satchel Company founder Julie Deane's review into self-employment, which has just been released. Deane thinks the UK’s self-employed feel like ‘second-class citizens’ in certain areas of the economy.

‘They feel that the sector is treated as  if it is a sector that doesn’t contribute as much or maybe they should be growing and scaling, whereas a lot of them are very happy being sole-traders or one person companies,’ she pointed out. Self-employed people now make up 15% (4.6m) of the nation’s workforce, which is an all-time high. Neglect them at your peril, David Cameron.

A notable recommendation made in the report was that the government should think about increasing the maternity allowance paid to self-employed people for the first six weeks – bringing it into line with the statutory maternity pay that employees receive. Similarly, the introduction of an Adoption Allowance on the same basis as the existing statutory adoption pay for employees, should also be extended.

Many may baulk at the idea of Jeremy Corbyn being pro-business, but to his credit, he did raise attention to the issue back in October, saying he wished to introduce parental leave for the self-employed. No mutterings about broken clocks being right twice a day now.

The CBI wants the UK’s ‘outdated business rates regime’ revamped and the smallest businesses taken out of the tax altogether along with more clarity when it comes to the government’s energy policy.

Of course Osborne won’t be able to please everyone with the Budget and often there’s an element of giving with one hand only to take away with the other, so drastic changes can seem hard to come by.

But the business rates burden has been a long-time gripe among the nation’s firms and a growing concern particularly among retailers (some 27,000 shops have closed since 2007, but business rates keep going up in line with inflation). And if the government doesn’t give the problem due consideration, its own wider aims around employment and productivity could take a hit sooner rather than later too.

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