The Mayor of London, Sadiq Khan has warned that thousands of businesses face a ‘ticking timebomb’ of increased Business Rates unless the Government provides additional support.
With businesses across the capital facing a triple whammy of rising inflation, increased taxes and soaring energy costs, the Mayor is concerned that some companies – particularly small businesses and those in outer London and deprived parts of inner London – may even be forced to close without assistance.
Sadiq has revealed today that Business Rates bills are likely to rise overall in 28 out of 32 London boroughs in April 2023, including every outer London borough, when the government’s business rates revaluation comes into effect.*
The Mayor is hugely concerned as outer London businesses and those in the more deprived parts of inner London in particular may be less likely to be able to absorb large increases in bills compared to large central London retail businesses – some of which will be paying lower Business Rates next year.
Business rates are calculated according to a property’s rateable value. This is based on an estimation by the Valuation Office Agency of the property’s open market rental value. The rateable value of a property is then used to calculate the Business Rates bills of premises.
The Mayor has today revealed that:
- Nearly two thirds of outer London boroughs will see Business Rates increases above the national average.
- Barking and Dagenham ratepayers are facing an average 24 per cent rise in rateable values in April. Ratepayers in Ealing, Hackney, Bexley, Brent, Sutton and Merton will see rateable values increase by more than double the national average.** This will mean significant higher bills across these boroughs.
- More than 200 schools across London will see their Business rates valuations increase by more than 50 per and at least 30 schools will see their underlying bills more than double.
- Many key sporting venues face huge rises in rates bills over the next year. The All England Lawn Tennis Club in Wimbledon will see its bill increase by 75 per cent over the next three years. Crystal Palace Football Club will see the bill on its Selhurst Park stadium increase by nearly 60 per cent over two years.
- Ratepayers of industrial premises which include warehouses, food and drink manufacturers, fashion and textile firms, breweries and laboratories are likely to face disproportionately large increases to their bills in 2023. Valuations for this sector – which are key to the supply chain for London retailers and households – will rise by more than a third across London on average and by more than 50 per cent in Newham and Southwark.
- The Mayor is also concerned that refuges, including those used for women fleeing domestic violence may now be classed as businesses and liable to pay Business Rates.
Over 50,000 small businesses in London have already closed this year and the hospitality and cultural sectors are particularly at risk as households cut discretionary spending to cope with the cost-of-living crisis.
Sadiq recognises that there was some Business Rates support in the Government’s recent Autumn Statement. However, he is today calling on Government to increase the rateable value threshold below which small businesses receive 100 per cent rates relief from £12,000 to at least £28,000 in London and £25,000 in the rest of England. This could potentially save up to £6,500 a year for thousands of firms and help many businesses, including those in the night time economy which has been severely hit by restrictions imposed during the pandemic and the current cost of living crisis.
Sadiq is also reiterating his call today for the fundamental reform of the Business Rates system, including full devolution of business rates tax policy to the capital and to other cities and regions of England in line with the existing devolved arrangements in Scotland, Wales and Northern Ireland so that he is able to ensure a system that is fair to London’s businesses.
Full devolution would allow the Mayor and London boroughs to invest directly in the things that matter most to Londoners, including policing, affordable housing, support for children and young Londoners, infrastructure investment, social care and support for businesses and allow him to re design the tax in a way which takes into account London’s unique economy and higher relative rental values.
By raising the small business rates relief threshold and truly devolving control of business rates – alongside the full suite of property taxes – and dislocating London from the national system, the increases some London businesses are seeing could be limited or even eliminated entirely.
The Mayor of London, Sadiq Khan, said: “Businesses across the capital, which have had to weather the perfect storm of Covid-19 and Brexit, withstand a hammering by soaring inflation and falling consumer spending, now face a ticking timebomb of increased Business Rates bills at the worst possible time.
“Many businesses will struggle to pay their new bills from April 2023. While I appreciate support that some central London businesses have received from Government, I am worried that outer London as well as many parts of inner London are being forgotten.
“We need an urgent package of measures from Government to support small businesses and those in the outer London boroughs who are fighting to survive in this tough economic climate.
“In the long term, the Government must fully devolve the full suite of property taxes, including Business Rates to the capital, so we can direct investment to where it is most needed.”
Rowena Howie, FSB London Policy Chair, said: “FSB have long argued for wholesale reform of the broken business rates system which remains an archaic form of taxation. FSB have been consistently pushing for a wider review on rates which are a major cost for London’s small businesses community. The Small Business Rate Relief threshold should be increased to £25k. This would cost around £1 billion and would greatly support 200,000 businesses removing them from the rates system.”
The Mayor’s London Business Hub includes practical guides on how businesses can manage cash flow and rising costs during the cost of living crisis. As part of the Hub, the Mayor’s Property Advice Service supports small businesses to understand the costs associated with renting a property. The programme provides webinars and 1-2-1 advice, including on handling talks with Local Authorities on business rates and other issues like moving forward a change in planning use class.