By Marcus Leach

The 5.6 per cent uplift in business rates confirmed by the Department for Communities and Local Government will see retailers hit by additional costs of £350 million next year, hampering their ability to invest and create jobs.

The increase comes into effect in April 2012, by which time the Bank of England's central forecast expects inflation to be nearer three per cent.

The British Retail Consortium (BRC) says the process for setting the business rates uplift needs to be reformed so it is less volatile and more affordable. Currently a single month's RPI is used — September's — which this year was at a 20 year high.

The Chancellor spelt out some steps in his Autumn Statement to offer relief to small businesses and to allow for a business rates deferral but those measures, while welcome, will do little to offset the overall cost increase for the retail sector.

"The Government's decision to put business rates up by the maximum possible amount is disappointing, particularly when it's widely accepted that inflation will fall in the New Year. Retailers, who already pay 28 per cent of all business rates, face another massive increase at a time when sales values are growing by barely one per cent," British Retail Consortium Director of Business and Regulation, Tom Ironside, said.

"This is an illustration of the deep flaws in the current methodology for setting business rates. September's RPI, a twenty year high and completely out of step with the likely rate of inflation next year, is being used to impose an eye-watering tax rise on the private sector's biggest employer, currently providing crucial first jobs to a million 16 — 24 year olds. We need a switch to a more predictable and affordable method, such as an annual average.

"Retailers want to be in a position to grow their businesses, boost town centres and create jobs and renewed confidence. The Government's unwillingness to consider a more limited increase makes it harder for the sector to make a greater contribution to the recovery."

Join us on
Follow @freshbusiness