London ‘staring down the barrel’ of £2bn hit from higher business rates
London is set to take a massive blow from changes to business rates when the tax increases next April.
Business rates could rise by an estimated 26 per cent across the capital, from £9bn to £11bn, according to the Heart of London Business Alliance (HOLBA).
“Businesses in the West End and across London are staring down the barrel of a huge tax hike, with no justification or reform,” Ros Morgan, chief executive of HOLBA, said.
The higher tax comes in part from higher rateable values – an estimate of how much the property is worth in annual rent on the open market – and a new higher rate multiplier for large businesses.
The higher rate is for businesses in properties with a rateable value of over £500,000, and will rise to pay for a cut for smaller businesses.
While the changes were made to help make the system fairer, Morgan said it still penalises “physical businesses that drive economic activity and footfall”.
While retailers have been crying out for business rates reform for years, the response to the Non-Domestic Rates Bill has been largely negative.
High Streets UK has labelled the bill a “disaster for jobs, investment [and] growth” as it places “too great a burden” on the UK’s flagship high streets.
And two thirds of businesses subject to the government’s new business rate multiplier will increase prices to combat cost pressures, a survey has found.
Business rates to cost West End an extra £63m
London’s West End boasts 335 locations with a rental value exceeding £500,000, making it the UK’s most valuable retail site.
The area as a whole has a total rental value of £495m, nearly 28 times the value of central Birmingham, which has 25 sites over £500,000 and a total rental value of £17.5m.
Colliers has separately estimated that rateable values in the West End could increase by about 30 per cent following next year’s re-evaluation of rents.
If the multiplier increases to 55p, the annual amount owed on these properties will jump from £212m to £274m a year – an increase of £182,727 per property.
“Occupiers of multiple properties in the area will need to brace themselves… No wonder so many retailers and hospitality businesses have been raising their voices in alarm,” Colliers said.
“This whole new policy is nuts,” Webber said. “Why does the government think it is sensible to hit the bigger retail, hospitality and leisure players… by an even more punitive business rates taxes?”
“Businesses are therefore preparing for the worst and it would not be surprising if property expansion plans or hiring plans are put on hold.”