Westminster City Council 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.

ENDS

Notes to editors;

*The Valuation Office Agency, the government’s independent agency, will publish new rateable values online for all business premises on 1st October to come into effect on 1st April 2010.

*The effect of the Revaluation on businesses will be mitigated by the Government's intention to introduce a transitional scheme, which will spread the increases from the revaluation over 4 or 5 years (a new Revaluation will happen in 2015)

*The total amount raised by the Treasury through business rates is not allowed to increase by more than the rate of inflation - many areas will see their bills fall -primarily at the expense of the capital and parts of the south west such as central of Cardiff which also experienced a boom in property prices before the recession.

*Even taking into account transitional relief which aims to spread increases over four or five years up to 2014 or 2015, under the Government's preferred option would see the following caps over five years: 12.5%, 17.5%, 20%, 25%, 25% - cumulatively 147% - any amounts higher would become due from the sixth year without any cap. The Government admits that across the UK 33,700 businesses will face such large increases they will fall into that bracket. These figures exclude the Mayor's Business Rate Supplement which applies to larger properties. (a rateable valuable of £50,000+).

Gross revenue from non-domestic rates 2008/09

£s

Westminster 1,256,521,352

City of London 657,034,717

Birmingham 448,670,855

Manchester 338,602,961

ECONOMIC FACTS

Westminster is:

- Largest employment centre in the UK employing 568,000 people comprising 2.5% of national workforce and 14% of London’s workforce.

- GDP is £16bn. Accounts for 2.2% of national GDP, and 19% of London’s GDP. The second biggest contributor to GDP is the City of London, which contributes 2%

The West End boasts 40 theatres that contribute around £1 billion to the UK economy every year.

- More retail space than Paris or Rome, (6.6million sq foot, 600 shops) with 120 international and 176 flagship stores.

- 285,000 jobs with over 13,000 in the entertainment industry.

- Attracting a retail spend of over £5.5 billion a year, the three streets of Oxford, Regent and Bond Street gross a higher retail spend than Manchester and Birmingham combined.

- Westminster has more than 65,000 hotel beds, 39 per cent of all bed spaces in the capital.

Creative industries: Soho has long been a magnet for media, TV, film and advertising, and Westminster boasts the greatest concentration of creative industries in the country, employing more than 64,000 people, with a turnover of £14.9 billion. The creative industries contribute to London’s "buzz" which strengthens Westminster’s position in the international labour market, and also has a positive effect on other sectors such as tourism and leisure, helping to attract inward investment.

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