Business rates have increased dramatically even though the previous government pledged to help companies through the recession.

Some of the High Street devastation we can now see is mainly due to business rates rising by 11% in the three years to end of March 2010, according to Financial Mail.

The Department for Communities and Local Government says that the rates businesses pay are linked to the RPI, but this has only risen by 7.44% over the three year period. In 2007/8, the Treasury collected £17.4bn, in 2008/9 the figure was £19bn and in 2009/10, £19.4bn was collected in business rates. The average rates bill in 2009/10 was £11,432, a rise of £1,102 from 2007/8.

Phil McCabe from the FPB said that struggling firms have been hit extremely hard by this significant increase.

The situation is not likely to improve next year either unless the coalition takes some action quickly.

The annual increase in commercial property rates is based on the RPI for September. The RPI figure for September was 4.6% which will produce a much higher increase than most businesses had budgeted for. Retailers in particular are expected to be badly hit by such a rise, especially at a time when public sector spending cuts have dented consumer confidence.

The director general of the British Retail Consortium, Stephen Robertson, has already sent a letter to the government urging them to change the way they calculate next year’s increase. He pointed out that nobody expected inflation to fall as slowly as it has been doing. Retailers faced with massive rates increases will have to trim costs elsewhere and this will prevent them from creating new employment to soak up some of the public sector fall out.

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Image: Shopping – Grim Sweaper by David Blackwell.

Rather than reversing the trend for late payments, a new directive from the EU could actually make matters worse, according to the FPB.

Many public sector organisations currently have a ten-day settlement target and the forum is concerned that the implementation of a standard 30 day period could cause those bodies to abandon speedy settlement. For example, recent FPB research shows that the NHS pays contractors within 10 days in 90% of cases. On the other hand, some organisations are unable to settle any invoices in 10 days and some struggle to pay 20% within 30 days.

Phil Orford, the chief executive of the FPB, agreed that the Late Payments Directive should help tackle the problem small businesses and freelancers are facing due to late settlement of invoices, which is currently thought to be costing the UK economy £24 billion.

However, he also pointed out that although not all public sector bodies have adopted the ten day payment rule, abandoning it would be a step backwards and could encourage those who currently pay up quickly to increase the waiting period for settlement.

Late payment of timesheets has become a real problem not only in the UK but across Europe as a whole. In Italy, the average public sector settlement time is a huge 100 days whilst private sector companies take an average of 66 days to pay their debts.

The FPB has long been campaigning for legislation to cope with the problem of late payment and the Prompt Payment Code was introduced to help combat the problem. However, signing up is optional and not many large businesses have pledged to settle in full and on time. And many small businesses remain reluctant to take on late payers through fear of losing the contract.

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Image: In Search Of Lost Time by bogenfreund

The latest public body to come under fire for late payment of invoices is the police force.

Despite repeated directives from the government, suppliers to some of the UK’s police forces have to wait over 2 months for settlement at a time when some SMEs are still facing insolvency threats, according to the FPB.

The best police forces settle their invoices within days but there is a huge gulf between them and the worst performers. The FPB say that some manage to settle over 75% of invoices within 10 days and virtually all are paid within 30 days. On the other hand, some forces settle less than 1% of their invoices within 10 days and more than 50% are still outstanding after 30 days.

Meanwhile it has been revealed that SMEs are now accepting excuses for late payment rather than chasing customers with outstanding debts.

A survey conducted by positivecollections.co.uk found that almost three quarters of SMEs accept late payment excuses. 10% of businesses don’t like chasing debts at all in case they lose business in the future and 17% would like to chase up debtors but think it is too expensive to start legal action.

Micro businesses fare reasonably well in the debt recovery stakes with 45% saying they always receive payment on time.

Although there has been an increasing trend towards late payment since the recession took hold, there are major concerns that SMEs cannot afford to suffer this kind of disruption to their cash flow and some may be forced out of business.

Whilst there will always be instances where late payments are unavoidable, this should never be accepted as the norm and businesses and contractors should try and implement measures to keep their credit control in good shape.

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Image: Painful Time [Explored- FP] by ShaZ Ni [pretty busy T_T]