Business leaders last night welcomed a Government move to limit a planned rise in business rates to two per cent instead of the five per cent originally announced.
The move was announced by chancellor Alistair Darling, who said the remaining three per cent increase will be spread out over the following two years to offer “real and genuine help” to firms.
There had been widespread anger in the business community over the proposed five per cent increase, which had been due to come into effect today , with companies claiming the extra cost would result in redundancies.
The move will allow companies to defer some £600 million of taxes due to be paid this year.
Mr Darling said: “I am very conscious of the fact that businesses in this country were faced with an increase to business rates of five per cent simply because the increase in business rates is linked to the rate of RPI inflation last autumn, last September.
“But RPI inflation has now fallen to zero per cent in the last month and it is expected that it will fall further than that.
“So I want to bring forward a measure that will help businesses.”
To cheers from Labour benches, he announced: “Companies will be able to pay two per cent annual increase this year.
“They can stay the remaining three per cent, smoothed out over the following two years.”
Councils would be writing to businesses about the change and setting out their options, he added.
“I believe this will provide real and genuine help for businesses in this country.
“Indeed, 1.5 million properties will gain from this and it will defer about £600?million.”
Lee Hopley, head of economic policy at the Engineering Employers Federation, said: “Just as companies were facing the prospect of a sharp rise in business rates, the chancellor’s announcement will provide some much needed relief.
“The last thing businesses needed were higher taxes as they struggled to cut costs and this decision will allow companies to defer part of their tax bill, giving breathing space.”
The Federation of Small Businesses also welcomed the announcement, saying the chancellor had listened to their concerns.