Sadiq warns 'London's high streets under threat' due to business rates

• Mayor highlights three London shops set to be hit by large increases

• Government’s move presents ‘clear and present risk’ to businesses

With increased business rate bills landing on doorsteps across the capital this weekend, the Mayor of London, Sadiq Khan, has warned that “the very nature of London’s high streets is under threat.”

The Mayor is particularly concerned that many small, independent companies who have worked hard to build up their businesses over many decades, could be forced to close for good as they will be unable to pay new business rates bills that are rising by up to 45 per cent.

According to Government data, London’s businesses are facing a £900 million business rate hike as a result of the revaluation, to fund an equivalent tax cut for the rest of the country. That figure could eventually rise to £1.2bn.*

The Mayor has today highlighted the plight of three independent businesses in London who are all coming to terms with their increased business rates bills.

Gareth Jones owns the chocolatier, Alexeeva Jones, on Westbourne Grove, Notting Hill. He has seen the rateable value of his premises increase from £52,000 to £87,500.

The rateable value for the shop is over £1,500 per square metre – more than five times the charge per square metre levied on the offices of leading global companies in central London.

Its actual rates bill, after the transitional relief announced by Philip Hammond, the Chancellor, in the Budget, will rise by around 15 per cent this year from £26,000 to more than £30,000 – and to at least £42,000 by 2021.

Gareth Jones said: “I have been running the business for four and a half years. It is already difficult enough running your own business but rent rises and business rates increase are particularly onerous.

“It is another cost burden and makes it more difficult to run a small business. This makes me think that enough is enough and I am now considering closing down for good.

“As with a lot of small businesses, I think that the best opportunities may now be online or wholesale. That takes away the huge and increasing overheads of being on the street.”

Noah Crutchfield owns three shops in Hackney, including the Maiden store on Shoreditch High Street, which opened in 2009. The shops sells a diverse range of items for people of all ages including kitchenware, lighting, toys, jewellery and books.

Under the new revaluation, the rateable value of Maiden will increase from £7,200 to £18,000. Noah faces a 60 per cent rise by 2021 – around £10,000 under the transitional relief scheme before inflation.

He said: “Rateable values are about to shoot upwards across Hackney and London as a whole and this will result in huge increases in business rates bills for small businesses like mine.

“Of course I accept that businesses must pay a contribution to local and national government for the services we use. However, this rise will mean that many businesses will have to close because the dramatic increase in their rateable value will take their business above the threshold for small business rates relief and because the rises in parts of London such as Shoreditch are the highest in the entire country.

“These increases will make it harder for small independent businesses in London to stay open and many neighbouring businesses are already signalling they might have to shut due to the increases.

“We are already looking at having to cut staff hours in order to meet the increased bills. We are also considering moving our business outside London or abroad due to the crippling effect of this rates rise. Small businesses already struggle due to high rents in London and this rates rise may just be the straw that breaks the camel's back.

“Many other businesses in London (and East London in particular) are being hit even harder by this rates rises and I feel that London businesses do deserve a significantly higher threshold for small business rates relief than the rest of the country. The rates system is unfair and needs urgent reform.”

Katrina Phillips whose family has been trading from the same shop on Portobello Road, in Notting Hill, since 1963. Katrina runs a shop that sells things that are ethically produced, old, or by artists.

She has seen the rateable value of her premises increase by more than 55 per cent, from £33,500 to £52,000 through the recent revaluation and as a result her business rates bill will increase by more than £10,000 over the next five years.

Katrina explained: ““I have gone into debt to keep the shop open, warded off bailiffs in tough times, and never given up.

“When the new business rates were announced, without exaggeration, I thought I was going to have a heart attack. I literally could not breathe.

“I have kept going through very tough times. I have strived to create a place of authenticity and beauty, something people are proud and relived to be a part of.

“I will not be able to survive these increases. There is not enough money taken by small shops to bear these insane rents and rates.”

The Mayor of London, Sadiq Khan, said: “When small companies just like these open their new business rates bills this weekend they will be faced with a clear and present risk to their very existence.

“These dedicated business owners have dedicated their lives to running successful business that are part of their communities. They have toiled through thick and thin. Their stories highlight not only the impact these business rates hikes will have on London’s economy, but the human cost too.

“The very nature of London’s high streets is under threat. What we need is full devolution of business rates to London with genuine protections in place so we can safeguard businesses like this which are part of the fabric of what makes London such a vibrant, diverse and successful city.”

Sue Terpilowski OBE, London Policy Chair Federation of Small Businesses, said: “FSB London fought hard for a concession at the Budget that will impact small businesses. However, the lingering concerns still remain that the average micro business in London will have to find thousands of pounds a month to cover the increase in business rates, alongside £2,600 in additional employment costs in 2017/18 and a further increase in pensions auto-enrolment costs.

"We need to realise that the hard costs of operating a business in the capital are starting to outweigh the benefits which simply does not make economic sense.”

While the Mayor has welcomed plans to alleviate the impact of the increases announced by the Chancellor in last week’s Budget, he does not believe they go anywhere near far enough.

The Chancellor announced a £300 million discretionary relief hardship fund in the Budget. London’s share in 2017-18 of £72.5 million equates to less than 10 per cent of the additional bill facing London ratepayers from 1 April.

In some boroughs, the fund will make almost no difference, with the Royal Borough of Kingston set to receive £421,000 and Sutton just £445,000. It is also only a temporary sticking plaster as the fund will be progressively reduced and, by 2020, will fall to only £2.1 million across the whole of London – equivalent to a mere 0.02 per cent of the £8.3 billion expected to be collected in business rates from London ratepayers.

The Government has also set aside £25 million for the next five years to provide transitional support for small businesses losing eligibility for small business rate relief.

Many of these firms have been paying no business rates for the last five years and were facing immediate increases of more than £3,000 in 2017-18 before the Budget. While the Mayor welcomes the scheme in so far as it goes we estimate that fewer than 5,000 businesses across London out of more than 300,000 - including only 28 firms in the City of London and a mere 20 in Merton - are expected to benefit.

Sadiq also believes that at least 1,000 pubs in London will not be eligible for the one-off £1,000 discount that was announced in the Budget. As the leading rating agents Gerald Eve have highlighted, due to state aid limits the proportion of pubs likely to benefit nationally is just 60 per cent - well below the 90 per cent of pubs claimed by the Government.

And for the majority of pubs in central and inner London facing large rises in their bills of up to 44 per cent on 1 April this will provide a very limited and very temporary concession.

To compound the misery for businesses, bills that are currently dropping through letterboxes will not reflect these new reliefs and businesses will have to pay their bills on the basis of the pre-Budget figures until local authorities have received the necessary detailed guidance from the Government.