'Stonking rate rise will close down businesses'

George Osborne today came under pressure to spare firms from a "stonking" rise in business rates when he unveils his Budget next month.

MPs and business groups joined forces in a bid to stop the Chancellor's 5.6 per cent increase due in April, warning it could force firms to close.

They called for the rates, the equivalent of council tax, to rise by a maximum of two per cent each year to help boost jobs and growth.

The increase, which would cost London firms hundreds of pounds a year, was linked to September's inflation rate of 5.6 per cent. That was the highest for 20 years but has since dropped to 3.9 per cent, with a cross-party group of MPs demanding the rise should instead be linked to the Government's inflation target of two per cent.

They have tabled a Commons motion describing the cap as "a progressive measure that will boost jobs and growth by providing business with relief from high inflation, certainty on future rates and the confidence to invest and expand". Lib-Dem MP Lorely Burt, who signed the motion, said many businesses were struggling as much as families and deserved help.

"We must ensure they are able to survive, prosper and be the engine which pulls the UK economy back to prosperity," she said.

Adam Marshall, policy director at the British Chambers of Commerce, said it was "cynical" of the Government to freeze council tax while raising rates for small businesses.

Calling for the increase to be cancelled entirely, he added: "If the best we can do is a two per cent cap it would certainly be a step forward and a great deal more sensible than a stonking 5.6 per cent rise that could put companies out of business."

Some 290,000 firms in London are eligible to pay business rates, although Mr Osborne has taken steps to protect businesses in recent years. Small firms have been granted a "holiday" while others can defer up to 60 per cent of their bills to help manage cash flows.