London set for business rates rise to subsidise rest of UK

The Government is revaluing the amount companies will have to pay in each region of England. The changes will mean while most regions will pay less, London will pay an average 10 per cent more before rebates are taken into account, with offices hardest hit with a 19 per cent hike.

Politicians and business leaders are alarmed that the capital's firms face a "triple whammy" of increased charges from next April, when the revaluation takes effect. Westminster council has calculated this could add up to 25 per cent to bills in central London, once a new levy being imposed by Boris Johnson to help pay for Crossrail and an annual inflation-linked rise in business rates are included.

Businesses with offices in central London, such as Google, Diageo, Apple, Marks & Spencer and the John Lewis Partnership, could be hardest hit. The council fears jobs could be at risk if firms are forced to cut costs or consider relocation. But business rates in the South East outside the capital are due to fall five per cent, by seven per cent in the West Midlands and 10 per cent in the East Midlands.

The problem has emerged because properties were inspected for revaluation in April last year — at the height of the property boom when rents were at a premium. Now firms will struggle in the recession to pay prices based on out-of-date valuations. Westminster is seeking a meeting with the Valuation Office Agency to discuss the impact on firms, which will not find out until October how much they have to pay.

A total of 280,000 firms pay business rates in London. Bills rose by five per cent in April after the last annual inflation-linked change, though Chancellor Alistair Darling has allowed the pain to be spread over three years. Last month, the Mayor said it was "madness" to hit small businesses with higher bills as they were the key to pulling London through the recession.

Bob Neill, shadow minister for local government, said London firms were facing an average £2,000 increase in rates. He added: "There is a business rates bombshell that could push thousands of firms to the wall." The Government is offering rebates to soften the blow, and insists average initial increases will be capped at three per cent.

But independent expert Jerry Schurder, head of business rates at Gerald Eve chartered surveyors, said the Government was quoting regional figures to disguise massive discrepancies across London. He said the Government's own data showed bills for around 100,000 properties would increase by more than 12.5 per cent, of which 50,000 will jump by more than 30 per cent.

No location was given for these businesses but many were likely to be in London. Mr Schurder said: "The City and Docklands will see large increases but not to the extent of the West End." Brian Connell, Westminster's cabinet member for economic development, said: "When we see the real numbers, I would be surprised if we didn't end up with something that bears no relation to the current rateable values in central London."

Ministers estimate that 60 per cent of firms across England will see a reduction in rates, and 40 per cent an increase. The aim is to ensure rates are linked to recent property values.

Local Government Minister, Rosie Winterton, said: "Nearly 45 per cent of business properties will see lower bills as a result of revaluation with the £2billion support scheme helping keep rises in London down. This is on top of other support including help for small business, deferring tax payments and free business health checks."