West End businesses propose new rates system

The Heart of London Business Alliance (HOLBA) has today published research demonstrating the impact of the Government’s plans to reform business rates on London’s iconic West End and the wider central London economy.

HOLBA is proposing a new approach to collecting business rates which would see tax collected directly from online sales in addition to bricks and mortar businesses.

Its new Combined Business Rate would introduce a new digital business rate element generating an estimated £6 billion from 2% of all online sales in the UK (with some exemptions) while the existing business rates charged on bricks and mortar businesses would see up to a 37% cut.

The Government is currently legislating for business rates relief for retail, hospitality and leisure businesses with rateable property values of under £500,000 to be funded, from April 2026, by higher rates from businesses occupying properties with a rateable value of over £500,000.

However, with nearly 2,000 businesses in Westminster with a rateable value of over £500,000, the proposed changes would mean London property occupiers could see their business rate bills increase by up to 20%.

Ros Morgan (left), chief executive of HOLBA, said: “The Government has not shared an assessment of the likely impact on businesses from their proposed policy which is why we commissioned our own research by local government finance experts. If the Government proceeds with its proposed changes – the impact on operating costs for many of our member businesses in the West End will be truly shocking.

“The business rate system was implemented before the rise of the digital economy, and it needs to catch up. Successive Governments have tried and failed to reform business rates, but we believe that our idea for a new Combined Business Rate would widen the tax base, create a more inclusive and equitable system, potentially produce more tax for the Exchequer and reduce the unfair burden on certain sectors of the economy.

“Many of our members who will be affected are retail, hospitality and leisure businesses – the majority of whom are currently operating on wafer thin margins. The cumulative impact of these cost rises is already stifling investment, employment and growth which could be very damaging in the long term for our area of the West End that is worth over £10 billion annually to the UK’s economy.

John Dickie, chief executive of BusinessLDN, added: “The Government’s commitment to transforming business rates, including to support the retail, leisure and hospitality sectors, is laudable. But these new findings demonstrate that the proposed reforms would lead to firms in the capital shouldering more than their fair share of the burden.

“The Government should now conduct a full impact assessment and reconsider its proposals to ensure they achieve their stated objective without placing a disproportionate burden on the London economy, which is vital for the UK’s growth.”

The HOLBA reports The Potential Impact on Businesses of the Government’s Business Rates Reform Proposals and Business Rates Reform – An Alternative were undertaken by local government finance experts using official government data. Both are available here.