Ultimately, business rates are a property tax rather than a corporate one, and for some companies this means that there is a relatively straightforward solution: move location. Businesses currently located in areas from Victoria to King’s Cross will be considering their options. Most worryingly for the locations worst hit by rates rises, the most desirable and influential businesses are also often the most mobile.
East London has undergone fundamental change over the last 10 years. In 2008 the Crossrail Bill received Royal Assent and construction started on Europe’s largest infrastructure project that would shift London’s economy East. That same year, the first iPhone was launched, a watershed moment in the fourth industrial revolution which would firmly take hold in East London with the “launch” of Tech City in 2010. All this before the Olympic Games put East London at the centre of the world for a month in 2012.
Shoreditch, Old Street and Clerkenwell are unrecognisable from 2008. Tech and creative businesses arrived in the area due to its affordability and stayed because of the community of businesses, cafés, shops and the nightlife that sprung up around them. Rents increased incrementally, but a tech and creative cluster endured as businesses recognised the value of collaboration with their peers.
However, from 1 April 2017, rates will increase overnight to reflect seven years of economic development in East London. When added to the associated rental increases, this will be too much for many businesses to bear. Smaller, entrepreneurial firms in particular may decide their growth prospects are better in a cheaper location…
Successful regeneration projects such as King’s Cross and Victoria take years to deliver, and the painstaking process of creating new spaces, attracting businesses and growing rental values will be undermined by the sudden sharp increase in business rates.