By Marcus Leach

As the economic slump continues and ministers prepare to address calls for a cap to business rate increases and Mary Portas’s damning report of the British high street, experts are calling for the Government to revise other current policies which they say are stifling economic growth.

Recent reforms, such as rate relief for small businesses and changes to empty space relief are stunting business growth, rather than encouraging it, says Sarah Davey, who has held senior positions within the Valuation Office Agency (VOA) and is now head of business rates consultancy Ruddle Merz London.

“The extension of rates relief for small businesses applies to less than one per cent of the smallest businesses in the UK,” she said. “If any of those businesses start to grow they then find themselves hit with a huge rates bill, so as soon as they start to prosper, they are penalised for it.

“Small businesses actually managing to grow in the current economy are the key to reviving it. The Government needs to build a more supportive system which fosters the growth of small businesses, not stifles it.”

Two other Government initiatives called into question are the recent rates deferral scheme and the revision of empty space policy.

“Theoretically, rates deferment aims to help businesses hit hardest by the economic downturn, but all it does is simply give them the option to put off the inevitable," Sarah Davey added.

“Those that take up the offer because they cannot afford to pay their rates bill will simply get a much bigger one further down the line, when there’s no guarantee that their finances will be in better shape.”

Empty space relief for empty business space was reduced in 2008 to just three months for office premises and six months for industrial premises and has seen the government subsequently collect an extra £1 billion in rates.

“Initially we were told that the shift in legislation on empty space was to stop new buildings standing vacant, but we now have more empty shops and offices that ever, and the revised policy is making things worse," she went on.

“The previous empty rates relief system, whereby businesses rates bills were halved until occupied encouraged property investment, development, and acquisition - something that is desperately needed to jump-start the economy. The system we now have penalises those speculating and investing in property, which has a knock-on effect on numerous different industries.

“Following Mary Portas’s recommendations, the Government is about to set wheels in motion that will affect every business in the country. We can only hope that they consider the long term future of the British economy before the Government’s short term financial goals."

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