More than a third of UK small businesses are preparing to reduce investment and staff costs once business rates rise next month.
Research by the Federation of Small Businesses ahead of next week’s Budget found that 36% of small firms expect to see their business rates increase from April 1.
Of those facing a rates rise, 44% of members say their business rates will eventually rise by more than £1,000 a year.
And one in five (21%) will see their annual bill increase by more than 40%.
Such drastic hikes could have massive consequences for the growth of those small businesses hit by the “rates bombshell”, the FSB warned.
Of the one in three small businesses facing a rise in rates, more than half (54%) expect profits to fall and four in ten (38%) are set to increase prices.
As many as 55% plan to reduce, postpone or cancel investment in their business, which will hit UK productivity and growth, the FSB added.
The survey indicates that of those small businesses facing an increase in their business rates, almost one in five (19%), may ultimately consider closing down or selling their business as a result of the hike in their bills.
FSB national chairman, Mike Cherry, said: “The business rates system is an unfair, regressive tax which hits small firms before they’ve had the chance to make their first £1 in turnover, let alone profit.
“The major win at the latest Budget to exclude 600,000 small firms from the business rates system remains hugely important.
“However, our survey shows the delayed revaluation harms too many small businesses who face unsustainable and unaffordable rises.
“This is particularly true in London where we urge the Chancellor to raise relief thresholds as part of his spring Budget. This will help protect hundreds of small businesses currently left out in the cold.
“A small hardship fund designed to assist pockets of firms throughout the country would go a long way to resolving the anxiety felt within the small business community.”
Cherry added: “While many of these businesses which may have contemplated the possibility of closure will ultimately find a way to carry on, the current level of anxiety within the small business community should worry policymakers.
“Profitability across the UK small business community is already falling. The costs of doing business for small firms are now at their highest levels since early 2014.
“The last thing we need is a business rates burden so heavy that it threatens the future growth prospects of our entrepreneurs.
“The seven year gap between this year’s revaluation and the last has stored-up all kinds of problems for our business community.
“The solution is for the chancellor to use his spring Budget to announce a cross-party commission to propose measures for a replacement business tax system linked fairly to the ability to pay.”