London is, without a doubt, a fantastic city in which to live, do business and visit – an epicentre of world-leading business, culture, entertainment and retail. Anyone walking along our iconic streets, from Bond Street to Brick Lane, cannot help but be struck by its unique mix of architecture and people.
But we are also the chosen home of leading global businesses and industries, including the City’s Square Mile, West End retail, the museum district, Soho’s nightlife and much more. These thriving firms have helped to make the capital such an amazing place to live and work. But the benefit extends beyond London, with the economic contribution felt across the entire UK.
This year has seen unprecedented political change, including the UK’s decision to leave the EU, a new Prime Minister and political direction, and most recently Donald Trump’s shock election win in the US, all of which are creating great uncertainty for businesses.
Within this context, business needs to be helped not hindered. However, additional upcoming challenges surrounding the revaluation of business rates threaten to further undermine the strength of London businesses.
The unfair imposition of elevated business rate hikes will pose a threat to jobs and lead to difficult investment decisions in the boardroom. Those decisions will be taken not just by UK businesses, but also those overseas that have a choice between London and other international cities when investing in their company’s future.
The rate revaluation will hit London the hardest of anywhere in the UK, with rates across the capital increasing by a staggering £885m a year and some businesses facing tax increases of over 100 per cent.
The government’s proposed transitional relief scheme, setting a cap on rate hikes of 45 per cent for large businesses with just six months’ notice, will offer very little compensation for companies which will struggle to prepare for the uplift in time. The knock-on effect will impact jobs, investment and growth across the country, not just in London.
The sheer number of organisations and individuals who have already spoken out against this proposal are surely reason enough for the government to rethink its current stance on transitional relief.
An alliance of 43 organisations representing over 16,000 businesses has called for reform and we now, together with 23 other cross-party London MPs, support these asks to give London its best chance at success.
Government needs to give businesses a realistic opportunity to plan for the large rate rises accrued over the years since the last revaluation. The vast gulf of seven years between revaluations has led to an unrealistic burden on businesses. Instead we should have lower percentage increases and a longer transitional period in order to more realistically manage the changes.
Second, to offset the cost to business, the government should consider mitigating proposals that can help London business to generate the income to meet the rises. This could include elements such as extended trading hours or local funding options that should be reviewed on a district by district basis.
The current system is inequitable and benefits neither occupiers, owners nor indeed the government. The interval between revaluation means the government does not collect taxes when the economy is buoyant, but defers them until the next revaluation. Businesses often face the prospect of paying these increases at a time when the economy is struggling.
Above all there is a desperate need to review the long-term effectiveness of the current model of taxing business. We need to urgently explore the decoupling of the capital’s business rates system so that it works for London businesses and for Londoners. This needs to be designed so as to avoid future revaluation turbulence and indeed the ongoing undermining of the tax base in the rest of England.