The Chancellor has announced that he’ll be scaling back the rise to two per cent this year. Businesses will be able to spread the remaining three per cent increase between 2010 and 2012.

Business leaders and local councils had been calling on the government to back down on the rate rise given that RPI inflation, which hit five per cent last September – the month that business rate increases are set – has now plummeted to zero per cent.

A five per cent rise in business rates would have crippled many small businesses and family firms. “The announcement by the Chancellor today is a step in the right direction,” comments Grant Gordon, director general of The Institute for Family Business. “The IFB looks forward to further announcements in the budget on ensuring the UK is competitive in relation to corporation tax, alongside an increase in access to funds for growing businesses.”

Charlie Mullins, who set up London-based Pimlico Plumbers with his wife Lynda back in 1979, says the planned increase in business rates would have been “suicide”.

“The government should be giving out incentives so businesses can fight their way through this recession, not hammering them down with more tax,” he says. “Worse, ministers had the cheek to try and push this through while granting themselves a pay rise. The knock-on effect of job losses and families losing their homes would have cost the country a fortune in dole money and other benefits.”

Richard Glasson, who runs £100m-turnover communications agency Gyro International, says the U-turn is good news but reckons the timing and nature of the announcement is “purely political” and “exposes the absolute lack of any cohesive, meaningful strategy to support businesses”. “The fact that the decision was made and publicised the day before the increase was set to come in makes this look like a knee-jerk reaction designed to divert attention from negative headlines,” he says.

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