Chancellor Alistair Darling bows to pressure and scales back proposed 5% rate increase, which threatened to cripple beleaguered retailers.

In a last minute decision and thanks to much campaigning by the British Retail Consortium (BRC), Alistair Darling announced today that the proposed 5% business rate increase has been cut to 2%.

Good news for many retailers, however the remaining 3% has not been scrapped entirely, with businesses given the option to spread the payment over the next two years.

BRC director general Stephen Robertson welcomed the announcement but stressed that retailers still face a £100m increase to their bills from today, with no change to the overall £1.6bn increase in business rates bills faced by retailers in 2010/2011.

"It's come at the last minute but the Government's recognition that piling on a massive extra £250m business rates burden in a recession would seriously harm hard-pressed retailers is welcome."

He added: "But the Chancellor has only taken a first step. The timing has changed but the eventual costs haven't. He still plans business rates increases totalling £1.6bn by 2010/2011 - that's 30% more.

The BRC is meeting with the Government today, ahead of the budget, to discuss the next move and to urge it to consider the reintroduction of empty property tax relief.

The Confederation of British Industry (CBI) also feel the decision is a 'step in the right direction' but feels the Government can do more to help businesses.

CBI director general Richard Lambert said: "We welcome the announcement but have been campaigning for a two-year freeze on business rates, instead of the 5% rise that is still being applied over time."

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