Heart of London Business Alliance has today published new research that demonstrates the impact of the Government’s current plans to reform business rates on London’s iconic West End and the wider central London economy. The research also proposes sweeping changes to the current business rate system.
Announced in the 2024 Autumn Budget, the Government is currently legislating for business rates relief for retail, hospitality and leisure businesses with rateable property values of under £500,000 to be funded, from April 2026, by higher rates from businesses occupying properties with a rateable value of over £500,000. However, with nearly 2,000 businesses in Westminster with a rateable value of over £500,000, the proposed changes would mean London property occupiers could see their business rate bills increase by up to 20%.
Ros Morgan, chief executive of Heart of London Business Alliance, said: “The Government has not shared an assessment of the likely impact on businesses from their proposed policy which is why we commissioned our own research by local government finance experts. This led us to develop a very credible alternative on behalf of our members.
“If the Government proceeds with its proposed changes – the impact on operating costs for many of our member businesses in the West End will be truly shocking. The business rate system was implemented before the rise of the digital economy, and it needs to catch up. Successive Governments have tried and failed to reform business rates, but we believe that our idea for a new Combined Business Rate would widen the tax base, create a more inclusive and equitable system, potentially produce more tax for the Exchequer and reduce the unfair burden on certain sectors of the economy.
“Many of our members who will be affected by the Government’s proposed tax rise are retail, hospitality and leisure businesses – the majority of whom are currently operating on wafer thin margins. The cumulative impact of these cost rises is already stifling investment, employment and growth which could be very damaging in the long term for our area of the West End that is worth over £10 billion annually to the UK’s economy.
“We urge the Government to drop their plans to reform business rates and consider our proposals instead.”
John Dickie, chief executive of BusinessLDN, said: “The Government’s commitment to transforming business rates, including to support the retail, leisure and hospitality sectors, is laudable. But these new findings demonstrate that the proposed reforms would lead to firms in the capital shouldering more than their fair share of the burden. The Government should now conduct a full impact assessment and reconsider its proposals to ensure they achieve their stated objective without placing a disproportionate burden on the London economy, which is vital for the UK’s growth.”
Neil Dolan, managing director of Little Lion Entertainment, which operates the visitor attraction The Crystal Maze LIVE Experience, said: “The Government’s commitment to reforming the business rates system was initially welcomed by businesses in the Experience Economy sector but this sentiment soon soured upon the presentation of the hastily pulled together proposals.
“Many businesses in this sector need properties with a large footprint to accommodate fun, memorable and often unique experiences for customers in central London, whilst keeping prices affordable. It is clear from HOLBA’s report that these business rate changes would disproportionately impact businesses like ours within London’s West End. This would be a further critical blow to an already overburdened sector, which is still reeling from the recent budget announcements and the impact to consumer confidence due to the prolonged cost of living crisis.
“This anti-growth approach only further dissuades businesses from feeling confident in investing or seeking expansion within the UK and will ultimately continue to limit the overall growth of the UK’s economy. If the Government is seeking to protect our city centres and high streets, it should consider a more targeted approach towards those businesses whose growth comes purely from online sales, rather than from those who are investing in our cities and workforce.
“We’ll be working closely with HOLBA to call on the Government to publish an impact assessment of their proposals, acknowledge the damage it will do, particularly to the West End, and consider adopting HOLBA’s alternative approach that will protect UK businesses whilst ensuring that those who solely rely on an online presence pay their fair share.”
HOLBA’s reports: ‘The Potential Impact on Businesses of the Government’s Business Rates Reform Proposals’ and ‘Business Rates Reform – An Alternative’ was undertaken by local government finance experts using official government data.
