Business rates are a blunt instrument, one which is set to deliver a heavy blow to London’s retailers, offices and hotels. Rates are due to rise from next April after a revaluation of rateable values for England’s 1.85m commercial properties by the Valuation Office Agency. It is the first such revaluation since 2010.
Analysis by property consultancy Gerald Eve shows the steep hikes in valuations being faced by some of the capital’s most-prominent properties, as first revealed by City A.M. late last month. Rises for London attractions include 142 per cent for the O2 arena, 90 per cent for the Tower of London and 70 per cent for the London Eye; West End retailers Harrods, Hamleys, John Lewis and Selfridges are all facing increases over 50 per cent, while the Dorchester Hotel will see a 54 per cent rise.
The Bank of England is looking at a 61 per cent hike. The extra burden for London as a whole could be £885m a year according to the latest estimates from Gerald Eve. No wonder the consultancy’s Jerry Schurder says that business rates have reached “unacceptable and unsustainable levels”. Many businesses, including those in the West End’s retail powerhouse, could see higher occupancy costs hit the bottom line.
Job losses and property disposals would follow. Much-needed respite for ratepayers may come in the form of transitional arrangements which will likely stagger the proposed increases. A government consultation on this closes this month. But wider business rates reform is needed. The current system is too inflexible and London, as the UK's economic engine, is disproportionately hit by what is essentially a tax on prosperity: revaluation is designed to redistribute wealth across the country by getting areas that are thriving to shoulder more of the burden.
The government has proposed more local power over rate-setting but this may create a confusing patchwork of measures and exacerbate the north-south divide. Instead, more frequent revaluations would better reflect changes in market rents and demand for space, and may give retailers some much needed relief from the very large financial headache of a punitive rate rise once every five years. The financial dynamism of the West End post-Brexit rests on it.