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fru-gal

Could business rate increases in London be the catalyst for businesses leaving the capital?

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I was reading an article about how business rates in the East End of London are going to increase and along with the increase in rents, many small business will consider leaving the capital as it won't be worth them staying. 

Could this be the catalyst for London no longer being the centre for business? Surely with the massive rental costs and business rates, it will be very hard for most small to medium sized companies to make a profit in London and it would make more sense to move to cheaper locations? Will there be a mass of jobs relocating outside of London after April?

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If I understand this rate rise its due to the cost of properties increasing , so property price inflation  does have it's downside as business's ( Who unfortunately don't all own the property the business is located at )   are  now finding out.

I do think it will cause issues in London which i why I expect the chancellor to make changes to it in the budget 

 

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I dont mind business rates as they serve a function like a value tax and make the allocation of premises a bit more efficient

if there where no business rates you would just be paying more rent and also paying old crap shops to move out.

The issue comes when the market is funny monied like London and the property value has no link to the value of the business.

My business pays rates based on fair maintainable trade so I guess a fair option is to allow this

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11 minutes ago, Nabby81 said:

If I understand this rate rise its due to the cost of properties increasing , so property price inflation  does have it's downside as business's ( Who unfortunately don't all own the property the business is located at )   are  now finding out.

I do think it will cause issues in London which i why I expect the chancellor to make changes to it in the budget 

 

Business rates and rents are paid by the occupiers, not the owners. A Land Value Tax would sort this out but of course the landowners would complain and we have a government run by the rich for the rich, so unlikely to happen.

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24 minutes ago, Nabby81 said:

If I understand this rate rise its due to the cost of properties increasing ,

No, it's increasing because the parasites living off the general populations back want EVEN MORE.

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11 minutes ago, fru-gal said:

Business rates and rents are paid by the occupiers, not the owners. A Land Value Tax would sort this out but of course the landowners would complain and we have a government run by the rich for the rich, so unlikely to happen.

No, the Business rates are paid by the customers, ultimately you and I.

 

It's a hidden tax.

 

One of many

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1 minute ago, TheCountOfNowhere said:

No, it's increasing because the parasites living off the general populations back want EVEN MORE.

Exactly. The main beneficiaries are the landowners who do nothing except sit back and wait for increases. No hard work involved (the opposite infact).

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Just now, fru-gal said:

Exactly. The main beneficiaries are the landowners who do nothing except sit back and wait for increases. No hard work involved (the opposite infact).

Unless they dont charge a decent rental 

Then they are stuck with a property with business rates payable 

 

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In the long term London is likely to lose out, as will any city with such high living costs. Automation will kill a lot of jobs off and then the need to be based where skills are will diminish.

Anyone working in the financial services industry should seriously consider their future prospects. Remote working and the gig economy will rule one day.

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Just now, Fromage Frais said:

Unless they dont charge a decent rental 

Then they are stuck with a property with business rates payable 

 

This might be what happens. They will kill the golden goose. LVT is a no brainer. Just introduce it already!

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rateable values are based on rents...many landlords that celebrated whopping rental growth in parts of London may think twice when they find their tenants going bust with the double whammy of high rents and high business rates...the parasite killing the host.

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I'm not sure exactly where the east End starts.   You can walk 1/3 mile from the city going east, and suddenly you are in a different world.  It stops, it's like going from glass and elevators to Indian shoe and sari shops in 100 yards.

If... these smallish businesses local to the city were to sell up,  I can just see another prime area for "redevelopment."    They might even get Osbabes back with his hard hat to sort it out for them.

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Has been happening since the late 1980s......London, Soho for example was full of small business, family business, shops, delicatessens, greengrocers, butchers, restaurants........almost all gone now both rent and rates have forced them out.....all that's left is the big companies chain shops.... 'signature stores' that are most probably lost leaders because doing the figures it no longer adds up, unprofitable, nonviable.;)

 

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22 minutes ago, interestrateripoff said:

Hard to see how many small businesses in the capital are viable.

True.....So you might ask yourself what is the point in bothering going there when most big business are online, everything available there, now the eating places are all chains all the same staged type places bit like a newbuild ....atmosphere has completely changed never to return.......there are still interesting independent real places and people very much worth visiting thankfully.;)

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55 minutes ago, interestrateripoff said:

Hard to see how many small businesses in the capital are viable.

My favourites are the pubs.

You get the details and think what a lovely little pub nice area.... except there are no upper floors so someone either has to commute in (with pub hours no thanks) or buy a multimillion £ flat next to their business that turns over a few hundred grand.

Edited by Fromage Frais

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I hope more businesses leave the capital so often do I get recruiters call me about a great opportunity then disclose the central london location. FFS I work in software why do we need to be in central london?! aparently according to these same recruiters its because it's easy to recruit people who live locally and pay people to move. So whilst someone like me would love to work in Gloucester, southampton or cheltenham or the cotswalds no companies seem to want to move there because of the lack of talent willing to move to Gloucester especially international talent. So I am stuck in either cambridge london or maybe oxford neither of which are cheap locations for engineers.

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The rate money goes to the council so they'll expand more and more until the whole edifice collapses but they'll stave it off for a while by printing money and robbing savers and taxpayers etc - the city will remain "productive" and continue to pay the rates with printed off bailout money handed to them gratis.

"Business" as usual.

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7 hours ago, fru-gal said:

Business rates and rents are paid by the occupiers, not the owners. A Land Value Tax would sort this out but of course the landowners would complain and we have a government run by the rich for the rich, so unlikely to happen.

No, they are paid by the owners. 

If rates rise, businesses will vacate areas with high rates.  This will force landlords to lower rents.

Ultimately, through lower rents, the tax will fall mainly on the landlord.

Rates are the least damaging, fairest tax.  Not once have I heard this mentioned in the media, or by politicians, although it is well established economics.

If there is an issue here at all, it is the sudden changes, which means disruption whilst the market adjusts.

Small businesses are being priced out not by rates, but by rents.  If landlords can charge more they will. Small businesses will be dumped in favour of chains and commercial may be dumped in favour of residential.

 

Edited by BuyToLeech

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A bit of an anecdote but maybe relevant...

I moved to auckland recently, and one of the things that struck me about it here is that rents and rates in the middle of town must be lower, to be able to support some of the specialist types of stores that you can still find. 

As an example, within about 50m walk of the dior and nespresso stores, there's a mall and off the beaten track in there there's a game store, where you can buy board games and trading card games. The vast majority of the space is just tables, where people sit and play magic the gathering, Pokémon, etc. 

Moving out here, it really struck me that in london, you just wouldn't get a business using their floor space like that - and especially not so close to the highest value store fronts.... And guess what, these types of fairly low value added businesses are what give the place a bit of community and remove that 'bland, every city the same' feel

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2 hours ago, honkydonkey said:

Same in Berlin. Shops everywhere selling all sorts, some selling such crap rates must be almost zero. 

Yeah I used to live in berlin as well, absolutely love the place for the same reason. Feels like little niche businesses can pop up that cater to diverse tastes in a way you don't see as much of in london anymore. It might not all be of interest to you, but feels like all sorts of community and interests can thrive - rather than everything but the most commercial being strangled out of existence by identicit-chain-store branch #257

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Just on another moody note about how regeneration and rents in london have killed the vibe, when I moved there in 1999 there used to be loads of amazing clubs. The venues I used to go to that have been demolished:

- the end, best club in london around turn of the century imo (demolished for crossrail) 

- the Astoria (also crossrail) 

- bagleys and the cross (Kings cross eurostar and housing regenration) 

- turnmills (redeveloped for offices, I think) 

Maybe it's because I got oldish myself (36), but the last few years I lived in london, on the odd occasion I'd go out, for eg in soho, it felt like the only people who you'd see walking the street were middle aged,  rich looking people. I'm sure it wasn't like that 15 or 20 years ago, back when kids could afford to go out and party. Maybe they all just moved to Berlin and manchester... Ah, Berlin du bist so geil

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14 hours ago, fru-gal said:

I was reading an article about how business rates in the East End of London are going to increase and along with the increase in rents, many small business will consider leaving the capital as it won't be worth them staying. 

Could this be the catalyst for London no longer being the centre for business? Surely with the massive rental costs and business rates, it will be very hard for most small to medium sized companies to make a profit in London and it would make more sense to move to cheaper locations? Will there be a mass of jobs relocating outside of London after April?

Just going back to your original question fru-gal, sure some businesses will 'leave', and move to a cheaper place to do business. But I imagine the bigger cost is in the stuff that can only really exist locally. For example, things that would exist as social spaces, only serving the local community. Stuff that rather than relocating simply shuts down, or never exists in the first place.

It's the loss of those types of local businesses that really harm the atmosphere of a place. For me, I felt that in the loss of places like your local sticky carpet boozer. No kitchen, no catering, no hipster pretence - rather, average folks, moderately priced lager and a pool table out the back. Sadly there really are very few pubs like that left in london now. You just can't make enough money unless you have a kitchen - and dining changes the whole feel

But I'm sure that from gut feel, it does feel like yes, there's an ongoing trend of stuff like services - graphic designers, accountants, law practices, etc etc that you find online and work with mostly remotely. Many of these things have been shifting out of London due to cost - some to cheaper cities, much over seas. 

I worked in london for services that really had to be done locally - food delivery services and that sort of thing. Even within that company, the kids who were just out of uni, I talked to them and know they were barely getting by, often being supported by parents a bit and spending most of what they earn to rent in london. I'm sure they could have been living more comfortably if the head office was in brum, leeds or Manchester, but in terms of ecommerce and 'tech' startups, London is still the place (at least in the uk) to be. 

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