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Business rate hikes could see companies relocate or even close

Published on Wednesday, 11 January 2017

Businesses in London gearing up for a rates rise later this year could well look to relocate further afield to avoid the hikes whilst some smaller businesses fear they will have to close their doors.


We are already seeing more interest, particularly in office space, here in Kingston and the surrounding area and we believe there may be a direct correlation with the rates revaluation. Whilst rates are due to increase for most businesses in the Kingston area, rises won’t be as steep in central London where rates are expected to rocket. It’s inevitable some businesses will relocate rather than stump up the higher business rate and we could see some businesses could struggle to meet the cost of the higher rate and may be forced to close their doors permanently.


An alliance of 43 bodies in London including the capital’s Chamber of Commerce and the Federation of Small Businesses as well as numerous borough councils and Mayor of London Sadiq Khan have called for a further revamp of business rates.


With businesses in London expected to pay up an extra £4bn over the next five years, the London Chamber of Commerce has called for a separate business rates system for the capital to safeguard its economy.


The previous rates revaluation was undertaken in 2008 and property values have increased massively in that time which will see huge increases in business rates, which is based on property rental values, from April. Estimates suggest London businesses could be facing a collective rates bill of as much as £885m a year following an average 11% increase across the city.
According to The Telegraph, St Pancras Station will face the biggest rates rise with a bill of £10.1m a year, an increase of £21.5m, which equates to 73%, over the next five years. The Royal London Hospital in Whitechapel will experience a £13.5m jump in its rates bill over the next five years and BBC Broadcasting House in Portland Place will see its bill leap by £19.5m. Retailers like Harrods, Selfridges and John Lewis will also see rates jump massively whilst other West End retailers and office occupiers in Shoreditch will have to cough up double.


Lambeth Council is among those fighting for a fairer deal after it calculated businesses in the borough will be paying out an average of 35% more. Its petition includes local businesses affected by the rise including London Duck Tours based on the South Bank which expect to have to find an additional 30%.


However, Chancellor Philip Hammond has put forward a relief scheme to limit increases to 42% a year although the last revaluation capped rises at 12.5%.


Businesses have urged the government to rethink the scheme especially with the onset of Brexit referring to a ‘perfect storm’ which also includes the cost of the national living wage, according to a report in The Telegraph.


The business rates system has long been criticised as antiquated since bills are calculated according to the rental value of the property which the company uses creating inequalities across the country with London-based businesses hardest hit whilst online retailers which operate from smaller premises and often where property is cheaper, pay much less.


Not all businesses will lose out; around 600,000 are expected to have their bills cut where rental value, particularly in neglected High Streets, has fallen.
Meanwhile, companies in the north and the Midlands will be largely unaffected, according to The Guardian although businesses in places like Brighton, Winchester and Oxford are also likely to see hikes.


With some companies seeking to relocate, especially those which are nearing the end of their leases, finding office space in outlying boroughs such as ours or even further afield may also prove a challenge as commercial property remains in short supply and demand is high. Over the past few years we have seen many offices converted into residential dwellings under permitted development rights which could put even more pressure on the sector.


If we do see some businesses relocating in the vicinity, which we believe is likely, we also expect to see rent increases as more companies vie for available space. If you are either looking to relocate in the area or your rental agreement is due to expire, you should be looking as soon as possible and if you do find somewhere suitable, act quickly, if you don’t, we think another business would soon snap up the property.


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