Ahead of the change to business rates tomorrow, new research reveals that thousands of London companies are ill prepared for the imminent increase to their tax burden, with nearly 70,000 businesses already experiencing ‘Significant’ financial distress even before the changes take effect.
Nearly 70,000 London companies entering new tax year in a state of ‘Significant’ financial distress
With businesses in the Capital set to face a sharp rise in business rates from the 1 April, new research reveals that thousands of London companies are ill prepared for the imminent increase to their tax burden, with nearly 70,000 businesses already experiencing ‘Significant’ financial distress even before the changes take effect.
London businesses are expected to be hit hardest by this Saturday’s nationwide revaluation of business rates, with government data indicating that firms in the Capital could see their tax bills increase by as much as 45 per cent.
According to research from Begbies Traynor, the UK’s leading independent insolvency firm, 69,785 businesses in London will enter the new tax regime in a state of ‘Significant’ financial distress, up 8 per cent from 64,764 in Q4 2016. Of these, 92 per cent (61,445) are SMEs; thought to be most vulnerable to the tax increase.
London Mayor Sadiq Kahn recently warned that independent and family run businesses could be forced off London’s high streets by the business rates reform, with just some of the recently announced discretionary discounts on business rates being available to London companies this year.
Julie Palmer, Partner at Begbies Traynor commented:
“Although the Government announced some business rates relief in the recent Budget, London businesses are still going to be some of the worst affected across the country. Considering how many London businesses are already in a weakened financial state, I am concerned that a large number may struggle to take on the increased tax burden from this highly-debated reform.
“As if that wasn’t enough pressure, with the latest increase to the National Living Wage also taking effect in April, coupled with rising uncertainty following the triggering of Article 50, the Capital’s businesses are facing challenges from all directions this year.”
About Red Flag Alert:
Begbies Traynor’s Red Flag Alert research has been measuring and reporting corporate financial distress since 2004, and over that time has become an industry benchmark of the underlying health of companies across every sector and region of the UK.
Through its unique algorithm, the Red Flag Alert measures corporate distress signals, drawing on factual legal and financial data from a wide range of relevant sources, including intelligence from the UK’s leading insolvency business, Begbies Traynor.
The release refers to the numbers of companies experiencing ‘Significant’ problems, which are those with minor CCJs (of less than £5k) filed against them or which have been identified by Red Flag’s proprietary credit risk scoring system which screens companies for a sustained or marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
Red Flag Alert is commercially available to all businesses, on an annual subscription basis, to help them better understand risk and exposure and help prepare them for the future. Further information about Red Flag Alert can be found at: www.redflagalert.com
About Begbies Traynor Group:
Begbies Traynor Group plc operates from over 40 UK locations through two operating divisions: Begbies Traynor is the UK’s leading independent business recovery practice handling the largest number of corporate appointments, principally serving the mid-market and smaller companies. We provide a range of specialist professional services primarily to businesses, their professional advisors and the major banks covering insolvency, restructuring and risk management activities.
Eddisons is a leading UK firm of chartered surveyors, offering a wide range of specialist services to banks, insolvency practitioners, and owners and occupiers of commercial property. The core services offered are valuation and disposal of property including fixed charge property receiverships; valuation and disposal of machinery and business assets; auctions; insolvency insurance brokerage; property and facilities management; and building consultancy and ratings valuations.
Information on Begbies Traynor Group can be accessed via the Group’s website at www.begbies-traynorgroup.com