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City News Desk Business in the London borough of Westminster are facing an average rise of 38% in business rates under a new business rates regime.
In a statement to the London Daily News Westminster City Council said:
"Westminster is calling for a reform of business rates as figures released tomorrow (1/10/09) are expected to show central London businesses will be forced to pay out an extra £500m in rates due to revaluation."
Westminster, which at £1.2billion a year collects more rates on behalf of the Government than any other local authority in the country, and nearly as much as the City of London, Birmingham and Manchester combined, warns businesses in the heart of the capital will suffer most - putting thousands of jobs at risk.
Across Westminster the average bill is expected to soar by 38%, costing the capital's businesses £456m. Including the Mayor's Business Rates Supplement to pay for Crossrail, which works out at around 5%, the total cost to businesses in Westminster will be closer to £500m.
Cllr Brian Connell, cabinet member for economic development at Westminster City Council, said: "In areas such as Westminster, which outperformed other regions prior to the recession, businesses will be particularly hard hit. My concern is that some could be pushed close to the brink and lay off staff unless the Government introduces radical reforms to prevent the system unfairly penalising successful areas.
"The fact is where local authorities and landlords have invested heavily in an area to ensure it remains a desirable business centres, rates are going to increase significantly. But neglected areas which experienced falls in rental values even before the recession will now be rewarded for failure through lower business rates."
Worst hit will be office space, with average revised rates expected to increase bills by around 60%.Hotels will face average bill increases of 28%, bars and clubs 13%, and retailers and restaurants just under 10%. But some properties in areas of the West End, Mayfair and Paddington, could see their rates double.
Richard Dickinson, chief executive of the New West End Company, which represents businesses in the West End, said: "The scale of these increases is chilling. Businesses will have no choice other than to cuts costs even further than they have already. Given the West End's vital contribution to the wider economy, both in London and nationally, this will impact everybody. It's a not just a local issue."
The five yearly revaluation is based on commercial rents in April 2008 when property values were at their pre-recession peak, and does not take into account the subsequent spectacular falls when the economy nosedived.
The Government's transitional relief scheme will spread increases over four or five years for businesses most affected by revaluation, but despite the cap on increases each year, businesses could still be paying over double their current bills by the end of the five year period.
Although business rates are collected by local councils, they are actually set by central Government using a complex formula, and Westminster's forecast of rate rises already takes into account a reduction in the multiplier which ensures the total amount collected does not increase more than the rate of inflation.
In 2010 onwards that will mean other areas seeing drops in their business rates at the cost of the economically most active and important areas of the UK.
The Treasury collects £23.5billion each year through business rates. However, Westminster only receives 12% of its contribution back through grant funding. More than 550,000 jobs are dependent on Westminster's diverse economy of shops, offices, restaurants and entertainment. Soho alone boasts the world's largest concentration of creative industries of media, film, advertising, contributing nearly £15bn a year to the economy.
A total of 280,000 firms pay business rates in London, 33,000 of which are in Westminster, among them famous names such as Google, Diageo and Apple, and flagship stores for John Lewis and Marks & Spencer. However firms employing four or less people make up 70 per cent of all premises in Westminster.
Bills have already risen by five per cent this year following an inflation-linked five per cent in April, though the Government introduced legislation so businesses could spread the increase over three years following concerns of the impact on businesses during the recession.
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