Business leaders join council in condemning £500m London rates hike

1st October 2009, 4:40pm

Business leaders have joined Westminster City Council in calling for a radical overhaul of business rates after figures released by the Valuation Office Agency showed central London businesses including restaurants, pubs and hotels could be forced to pay out an extra £500m in rates due to revaluation.

Hotels will face average bill increases of 27%, bars and clubs 13%, and restaurants 9% and retailers 7.2%. Although, worst hit will be office space, with average revised rates expected to increase bills by 58%. 

Across Westminster the average bill is expected to soar by 38%, costing the capital's businesses £456m. Including the Mayor's Business Rates Supplement to pay for Crossrail, which works out at around 5%, the total cost to businesses in Westminster will be closer to £500m. 

Cllr Brian Connell, cabinet member for economic development, said: "The figures make grim reading and sadly confirm our worst fears. For central London businesses this will be a bitter pill to swallow following one of the toughest years in living memory. 

"The Government sets business rates, and it has the power to change them. There is something fundamentally flawed about a system which is so heavily weighted against areas which invested to remain competitive, and also fails to take into account of the recession."

More than 1,000 businesses alone will suffer a doubling of their rates. 

Commenting on the impact of the 2010 revaluation of business rates, Colin Stanbridge, chief executive of the London Chamber of Commerce and Industry (LCCI) said: "With London hoping to emerge from the recession in 2010, it is important that next year's change in business rates does not hinder the recovery of our firms. London already pays far more than its fair share of business rates and so we are urging the government to rethink its plans to ask the capital's firms to shoulder an even greater burden."

The five yearly revaluation is based on commercial rents in April 2008 when property values were at their pre-recession peak, and does not take into account the subsequent spectacular falls when the economy nosedived. 

Although business rates are collected by local councils, they are actually set by central Government using a complex formula.

In 2010 onwards that will mean other areas seeing drops in their business rates at the cost of the economically most active and important areas of the UK.

Jonathan Evans, who is the vice chairman of the Westminster Property Association and the head of Asset and Property Management (London) at Land Securities, said: "Westminster business rates are going to hit be particularly hard hit as a result of this revaluation, because it is based on rental values eighteen months ago which are far higher than they are today. Empty rates liability will make this even more punitive, particularly for retail. The effect on the economy of this key area in the country will be severe and will stifle recovery, just at the time when the country needs it to lead the way in pulling out of the recession. The WPA supports Westminster City Council in its call for a radical re-think of the proposals."

The Treasury collects £23.5billion each year through business rates. More than 550,000 jobs are dependent on Westminster's diverse economy of shops, offices, restaurants and entertainment.

Soho alone boasts the world's largest concentration of creative industries of media, film, advertising, contributing nearly £15bn a year to the economy.

Related Articles:

• 30 Sep 2009 - EXCLUSIVE: £500m business rate bombshell facing central London hospitality firms
• 30 Jul 2009 - More government help for catering businesses
• 08 Jul 2009 - FSB calls for urgent help for pubs risk closure
• 24 Apr 2009 - 'Chancellor has missed an opportunity', says BHA
• 10 Nov 2008 - Thousands of pubs could get tax reduction

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