Monday 6 February 2017 1:20 am

Industry groups call on chancellor Philip Hammond to cut businesses some slack in the Spring Budget next month

Businesses large and small are calling on chancellor Philip Hammond to ease the mounting burden on firms in next month's Budget.

Business rates, the apprenticeship levy, the national living wage and pensions auto-enrolment are some of the rising costs highlighted by two influential business groups today.

In its submission to the Treasury ahead of the Budget on 8 March, the Confederation of British Industry (CBI) says that government should be prepared to cut business rates as part of a package of measures designed to ensure economic stability.

Read more: A third of London firms to spend more on business rates than rent next year

“In a more challenging economic environment, the government must be careful not to put further pressure on firms," said Rain Newton-Smith, chief economist at the CBI.

“Top of the list for the high street and our manufacturers is for the government to tackle the UK’s outdated business rates system, as this seriously risks impairing their ability to deliver the jobs and investment in our economy.”

Business rates across the UK are due to rise in April for the first time in seven years following a controversial re-evaluation process.

Read more: London boroughs prepare for £9.5bn business rates hike

The CBI calls for the government to change the way rates are calculated by bringing forward a switch from the Retail Price Index to Consumer Price Index as their benchmark. An adjustment from next year would cost the government £1bn, according to CBI calculations, but represent a saving for business.

Britain's largest business group also highlighted its fears that the apprenticeship levy will not function as planned, with concerns the supply of high-quality training will fall short of demand.

Newton-Smith added: “In effect the apprenticeship levy works as a tax on payroll. What we want to see is that [the revenue raised] is directed towards training.”

Read more: Apprenticeship what? Four in 10 business leaders don't understand new levy

Due to come into force in April, the apprenticeship levy of 0.5 per cent of payroll costs applies to companies with staff costs above £3m. 

Meanwhile, an analysis by the Federation of Small Businesses (FSB) found that the average small business employer will face £2,600 in additional employment costs from government policy in the 2017/2018 tax year.

This includes a hit from the national living wage resulting in a rise in national insurance contributions, and the impact of pension auto-enrolment.

Read more: Theresa May's government is failing to partner with small businesses

In the FSB's submission to the chancellor, national chairman Mike Cherry said: “Spring Budget 2017 is a critical moment for the government to show it is unashamedly pro-business, and that the chancellor recognises that small businesses are the engines of job creation. Spiralling labour costs are now threatening their growth ambitions and hiring intentions.”

Other priorities highlighted in the CBI’s Budget submission include building on the success of the R&D tax credit by introducing a supercharged credit for pre-commercialisation activity. It also calls for government to work in partnership with industry and praises the new industrial strategy as a significant opportunity to build a "long-term, modern economy."