Hackney businesses put at risk from huge hike in rates
Hackney Council is calling on the Government to rethink its planned increase to business rates which would see hundreds of local business hit with huge bills next year.
It warns the borough’s innovative and thriving business communities risk sliding into stagnation, from the new creative clusters around Tech City to the traditional businesses which have served residents for years.
Under the Government’s current proposals, more than 370 businesses in Hackney could face a rise in their rates of between £10,000 and £100,000 from April, with some facing an even greater hike. Further rises may then take place each year until 2021/22.
The situation follows a national revaluation of ‘rateable values’; what a business property is considered worth on the open market, and what business rates are based on. Hackney has seen an average increase of 46% in rateable value from previous valuations in 2010 – the highest in the country, and five times the England average.
The maximum annual increase in rates depends on what size a business is classed as, which is based on their premises’ rateable value. In the first year, ‘small’ business could have to pay up to 5% more, ‘medium’ businesses 12.5%, and ‘large’ 45%. Over the five years the total maximum increases for the three classes are 64%, 147% and 297%.
Hackney will have about 500 properties in 2017 that fall just above the threshold to be classed as ‘medium’ businesses rather than ‘small’, meaning their rates increase will be capped at 12.5% rather than 5%.
The impact is greatest for the borough’s 562 properties with a 2017 value of over £100,000, classing them as ‘large’. These face rises of up to 45%, which for about 20 of them will result in a bill increase of more than £100,000 next year.
Cllr Guy Nicholson, Cabinet Member for Planning, Business and Investment, has written to the Chancellor Philip Hammond requesting he delay rolling out the new system of charges or, failing that, implement the rises over a longer period allowing businesses to plan ahead.
Hackney’s economic success over the past decade has seen a large increase in property values and rents, particularly around Shoreditch. This rapid increase has distorted the borough’s revaluation and ignores the reality that many of its businesses have not seen an equivalent rise in profits to accommodate such a massive increase in rates alongside rising commercial rents.
“For almost all of Hackney’s businesses such a massive hike will be extremely difficult to manage, and comes at an already economically uncertain time while Britain is attempting to negotiate its departure from the EU. Hackney’s diverse business community is made up of those that have been serving Hackney’s communities for years trading alongside the entrepreneurial start-ups at the heart of Tech City and the creative industries.
“One of London’s most popular and innovative boroughs to invest into and do business in is now at real risk of sliding into stagnation, forcing relocation instead of expansion, and replacing job creation and thriving business clusters with unemployment and empty buildings.
“Government needs to rethink this hugely disproportionate tax hike which jeopardises jobs and economic growth in Hackney and across London. We urge the Chancellor to consider halting these planned increases, or at the very least bring them in more gradually to give our businesses a realistic chance of managing such a burdensome tax rise.
Public sector buildings are also subject to the increase in business rates. Hackney’s schools face an overall average increase in rateable value of 41%, equating to £2.2 million. The associated rates rise per school has yet to be calculated. The Council itself faces a rates rise of £1 million on its buildings next year.
Cllr Nicholson added: “Having to spend more of the Dedicated Schools Grant on business rates means our schools will have less to spend on pupils, improvements and day-to-day costs. At a time of unprecedented cuts to local government funding, these extra costs for the Council put further pressure on our frontline services.”
Cllr Nicholson’s letter is available here.
More information on business rates is available on the Council's website.