London's hipster office hubs will be under intense pressure when the new business rates come in next year, as new figures highlight the extent of the tax increases that are set to burden the City Fringe.
The government has published its first business rate re-evaluation for seven years. The new tax for each property is based on its rent, and as rents in the City Fringe have surged in recent years, these areas will be hit with some of the biggest increases.
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The worst-hit office hot spots include Farringdon, with an average 75 per cent increase, Shoreditch (54 per cent) and Clerkenwell (47 per cent).
The huge rises in business rates for City Fringe locations is due to their popularity with technology companies, which have been moving into these areas and driving up rents.
The large increases in rates will make it more difficult for new tech firms looking to move into the newly-fashionable office locations on the border of the City, according to Jerry Schurder, head of business rates at Gerald Eve.
"The resurgence of the City Fringe has been driven by tech firms attracted to the area by relatively low occupation costs," said Schurder. "Huge rises in business rates liabilities severely impact on the affordability of the market and potentially puts the location's continued success in peril."
The new business rates will come in on 1 April 2017. Lobby groups were pushing for the government to offer London businesses – which are facing huge rises – some transitional relief, meaning that businesses would not have to pay the full rate in the first year. This would give companies time to adjust to the new outgoings.
The government has said increases could be limited to 45 per cent in the first year – but under the current scheme, first year rises are capped at 12.5 per cent.
These massive spikes in liabilities highlight how business rates have reached unacceptable and unsustainable levels. Occupiers have just six months to work out how they will meet these increases, with an obvious potential impact on jobs and wider investment.