EXCLUSIVE: £500m business rate bombshell facing central London hospitality firms

30th September 2009, 11:50am

Westminster City Council is urging business rates to be revised as figures, due to be released tomorrow, show that some central London hotels, restaurants, bars and clubs will face huge tax increases due to revaluation.

Figures are expected to show how central London businesses overall will be forced to pay out an extra £500m in rates.

Hotels will face average bill increases of 28%, bars and clubs 13%, and retailers and restaurants just under 10%.

But some properties in areas of the West End, Mayfair and Paddington, could see their rates double.

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 at Westminster City Council, said these figures are very concerning and warned jobs could be put at risk.

"In areas such as Westminster, which outperformed other regions prior to the recession, businesses will be particularly hard hit. My concern is that some could be pushed close to the brink and lay off staff unless the government introduces radical reforms to prevent the system unfairly penalising successful areas.

"The fact is where local authorities and landlords have invested heavily in an area to ensure it remains a desirable business centres, rates are going to increase significantly. But neglected areas which experienced falls in rental values even before the recession will now be rewarded for failure through lower business rates."

Richard Dickinson, chief executive of the New West End Company, which represents businesses in the West End of London, added: "The scale of these increases is chilling. Businesses will have no choice other than to cuts costs even further than they have already. Given the West End's vital contribution to the wider economy, both in London and nationally, this will impact everybody. It's a not just a local issue."

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.

The Government's transitional relief scheme will spread increases over four or five years for businesses most affected by revaluation, but despite the cap on increases each year, businesses could still be paying over double their current bills by the end of the five year period.

Although business rates are collected by local councils, they are actually set by central Government using a complex formula, and Westminster's forecast of rate rises already takes into account a reduction in the multiplier which ensures the total amount collected does not increase more than the rate of inflation.

More than 550,000 jobs are dependent on Westminster's diverse economy of shops, offices, restaurants and entertainment.

Related Articles:

• 01 Oct 2009 - Business leaders join council in condemning £500m London rates hike
• 16 Sep 2009 - Diners are still eating out but have reduced average spend
• 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
• 21 Nov 2008 - Pub openings worth £203.5m to the treasury
• 10 Nov 2008 - Thousands of pubs could get tax reduction

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