London’s businesses will be forced to hand over an extra £4 billion in tax over the next five years in an unprecedented raid on the capital’s “cash cow” economy.
The impact will start to be felt next April, when business rate bills for thousands of companies across the capital will rocket following last month’s Government revaluation.
An analysis for the Evening Standard suggests the extra burden for London could be as much as £885 million a year, although the increases will be phased in.
The West End and City will see some of the steepest hikes, with the bills of some businesses going up fivefold by 2020, and the annual total for these areas rising by £500 million.
Experts warned the increases could devastate small shops, bars and restaurants that are already reeling from soaring rents.
They added that the extra costs would be passed on to consumers in the form of even higher prices — in what is already the country’s most expensive place to live.
Jerry Schurder, head of business rates at consultants Gerald Eve, which carried out the analysis, said: “Yet again, the Government is treating London’s businesses as a cash cow.
“Even prior to the revaluation London paid far more in rates than any other region, but now firms in the capital have to find an extra £4 billion between them over the next five years; ultimately, it is likely to be customers that pay through higher prices.”
He added that for many businesses the extra rate burden “could be the difference between trading profitably and going out of business.
“Government should be wary of killing the golden goose, as these rises risk doing.”
High-profile businesses that will have to find huge extra sums include Queens Park Rangers and Crystal Palace, according to surveyor CVS, as well as Harrods, Selfridges and John Lewis.
Separate borough breakdowns from property adviser Colliers International show that revenues raised from Westminster businesses will go up £300 million — from £2.12 billion to £2.45 billion — while the City’s bill will rise by about £250 million, from £1.02 billion to £1.26 billion.
Neighbourhoods of the capital that will be particularly hard-hit include Marylebone and Brixton.
For most firms the rises will be phased in, with a 45 per cent ceiling in the first year and 50 per cent in April 2018.
However, the “relief” is much less generous than for previous revaluations. Figures from the Government’s Valuation Office Agency show that London has just 16.2 per cent of England’s rateable properties, but accounts for 32.1 per cent of its total rateable value.
Vin Vara, who is head of the British Independent Retailers Association and runs nine Tool Shop stores in central London, said his rates bill had risen £47,610, up 38 per cent.
“All businesses will count the cost. We will have to look at streamlining our workforce. It’s a terrible kick in the teeth and there’s no doubt London is being targeted.
“The way rates are calculated has to be reformed or it will be the death knell for many independent businesses in London.”
Chemist Mahesh Soneji, 57, who has run Madesil Pharmacie in Marylebone High Street for 16 years, faces his business rates doubling to £160,000. He has also seen his rent rise from £117,000 to £180,000 in five years.
“Business rates are another tax we don’t need and we certainly don’t see the benefit. We don’t see more police or a crackdown on shoplifters.
“We would ask the authorities to look again at the way rates are calculated as it is unfair.There’s no doubt businesses will have to close.
“It makes me worry about the future, it will be a struggle to pay. There may be casualties to members of staff.”
Ali Bridarbahkt, 40, operations manager at family-owned Persian restaurant Galleria in New Cavendish Street, said his rates could double to just under £40,000.
“It comes out of the profits as you can’t just put up prices,” he said. “I just hope what they are saying we will be charged is reconsidered. New restaurants, like so many already in the area, will struggle to stay open.
“We expect another rent increase which will make things even more difficult.”
The Department for Communities and Local Government said: “Firms need to be confident that the rates they pay are accurate and fair, no matter where they are in country, and these updates will give them that reassurance.
“Nearly three quarters of companies will see no change, or even a fall, in bills, including 600,000 who from next April will have their bills cut altogether.
“For those ratepayers facing in-creases, London will benefit more than anywhere else in the country from the transitional relief scheme with almost £1 billion of support over the next few years.”
More than 140,000 properties in London will benefit from transitional relief, of which over 100,000 were small properties, the DCLG said.
“We certainly don’t see the benefit. We don’t see more police or a crackdown on shoplifters.”