UK business lumped with £20bn tax hike in government double-whammy

Helen Cahill
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Businesses are already planning cutbacks due to the national living wage (Source: Getty)

Businesses are braced for a near-£20bn bill over the next five years as the government lumps firms with higher labour and training costs.

New analysis by City A.M. shows the scale of the costs faced by UK firms when the apprenticeship levy and the rise in the national living wage come into effect towards the end of this week.

This fiscal year alone (2017-18), the apprenticeship levy will cost businesses £2.6bn while the national living wage will set them back around £1.08bn, a rise of four per cent on last year.

Meanwhile, separate figures from business rates specialists CVS show that London firms will have to stump up an extra £9.4bn over the next five years due to a jump in rates when a re-evaluation comes into effect this Saturday, 1 April.

The UK's total bill for business rates, the apprenticeship levy and national living wage comes to an eye-watering £179bn over the five-year period.

Read more: Revealed: The plans already underway for business rate cutbacks

The substantial sum is based on forecasts made by the Treasury, the Office for Budget Responsibility and the Regulatory Policy Committee.

Business groups have slammed the dramatic rise in upfront costs facing UK companies as they navigate Brexit.

Mike Cherry, national chairman of the Federation of Small Businesses, said: "Government should be looking for ways to boost businesses and provide proper long-term support as we face Brexit, not piling on new regulations and taxes that make it harder to run a business."

"While the government has given some short term relief on business rates, small firms in London particularly still face the squeeze of high property prices causing higher rates and rents."

George Osborne Presents The 2016 Budget Statement To The House Of Commons
The national living wage was one of George Osborne's flagship policies (Source: Getty)

CBI chief economist Rain Newton-Smith said firms will be looking for more business rates relief and called on the independent Low Pay Commission to ensure rises in the national minimum wage are affordable.

Many of the sectors hit hardest by the increase in wage costs, such as manufacturing and retail, are also having to contend with higher input costs due to the slump in the value of the pound.

Read more: Be under no illusions: The National Living Wage will cost jobs

Businesses struggling with the burden of the national living wage will likely be forced to invest more in automation in the coming years, said Mike Spicer, director of research at the British Chambers of Commerce. "But where that’s not possible, you’re likely to see that pass through in prices," he said.

Figures out today show London pubs will be hit with a £140m rise in business rates over the next five years, according to new analysis by CVS. They will need to pour 40m extra pints to cover the cost.

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