London’s huge office sector faces a £1.3 billion extra business rates burden over the next three years, according to research published.
The warning comes after Chancellor Jeremy Hunt refused to order major reform of business rates in this month’s Budget and ahead of a revaluation at the start of April.
The 2023 revaluation is based on rateable values from April 2021 and reflects rental growth since the last revaluation.
Real estate advisory firm Altus Group told the Evening Standard business rates bills for the 107,420 offices in the capital will cost the office sector an extra £1.32 billion over the three years of the new cycle.
It found the total business rates bill will be £4.78 billion in the 2023/2024 financial year, up by £203 million from the prior 12 months. In the following two years there will be larger increases with big rises in certain boroughs phased in, and as the tax rates rise with inflation.
Up until recently business rates have been based on values from April 2015.The tax is linked to the underlying open market rent of a property, and the Government has committed to moving to three-yearly revaluations from 2023.
While some retailers — particularly in the West End— will emerge as winners from the revaluation because shop rateable values have declined, the London office sector will be hit by hikes.
Stewart Carter, senior director at Altus Group, said: “How the Valuation Office Agency has interpreted the rental evidence at their disposal will be key to the success of the 2023 revaluation.”
The Evening Standard revealed last month how owners of shops on Oxford Street, Regent Street, Bond Street, Kensington High Street, King’s Road, Knightsbridge and in Covent Garden will pay an estimated £222 million in business rates in the financial year to April 2024, down 30% from the prior 12 months.
Retailers on leading London shopping streets are set to see a total of £96million slashed from business rates bill.
But business leaders have described as “desperately disappointing” the Government’s decision not to launch a major shake-up of the business rate system.
Richard Burge, CEO of the London Chamber of Commerce and Industry, said: “The absence of concrete measures in the Budget in providing help with energy costs and business rates reduction means firms continue to face the toxic mix of high inflation, elevated borrowing costs and reduced consumer spending.”
A Treasury spokesman said: “Properties in London will on average see a 4% drop in their bills partly thanks to our £13.6 billion Autumn Statement business rates support package, which provides 75% relief for retail, hospitality and leisure, caps rising bills and protects all from rising inflation.”
He added: “Our business rates review committed to more frequent revaluations to better reflect the commercial property market, helping to level the playing field between bricks and mortarand in-store retail.”
