Retailers will be hit by additional costs of £350m next year, says the BRC, after the Government confirmed a 5.6% uplift in business rates.

The rates increase is currently set in line with a single month's RPI - September's - which this year was at a 20-year high. By the time it comes into effect in April 2012, the Bank of England is forecasting inflation to be nearer 3%.

While the Chancellor has extended the period of rate relief for SMEs and allowed for ratepayers to defer payment of 60% of the increase in their 2012-2013 bills, the BRC argues this will do little to offset the overall cost increase for the retail sector.

The organisation is calling for the process of setting business rates to be reformed to make it less volatile and more affordable.

BRC director of business and regulation Tom Ironside said: "The Government's decision to put business rates up by the maximum possible amount is disappointing, particularly when it's widely accepted that inflation will fall in the New Year. Retailers, who already pay 28% of all business rates, face another massive increase at a time when sales values are growing by barely 1%.

"This is an illustration of the deep flaws in the current methodology for setting business rates. September's RPI, a 20-year high and completely out of step with the likely rate of inflation next year, is being used to impose an eye-watering tax on the private sector's biggest employer, currently providing crucial first jobs to a million 16-24-year-olds. We need a switch to a more predictable and affordable method, such as an annual average."

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