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| Hospitality Today | Feb / March 2017
property – this is set by the Valuation Office Agency, and increases each year in line with inflation, taking into account the size of the property and its usage.
Today’ s rates are calculated from April 2015, as they are revalued in five-year cycles. Many businesses are unhappy because 2015 rent settlements- on which the new rates were calculated- were a particularly high period for rental values. A historic level of rent is used to assess the rateable value, which means there is a disconnect between the current rent levels and the levels used to assess the rates. Business rates bills have continued to rise when property values have fallen.
Why is this an issue now?
The changes to business rates are the largest for London for over a decade, and the brunt of the nationwide increases will be borne by London-based businesses, leading to suggestions that the Capital is propping up the tax for the rest of the country.
Firms in the Midlands and the north are largely unaffected or will see even see a reduction. Businesses based in central London especially will suffer sharp rises, with Dover Street in Mayfair estimated to see an astonishing 415 % increase in tax. The average increase in the West End is likely to be 55 %.
Restaurants are particularly perturbed by these rises as they are unexpected and unplanned for, coming on top of the expanded costs they saw post-Brexit, with raw materials and food prices becoming more expensive, as well as the recent increases to the national minimum wage.
What effect has this had?
Jamie Oliver has already announced that he is to close six Jamie’ s Italian restaurants, with others likely to follow. The owners of restaurants such as Pied a Terre, The Ivy( above) and Sexy Fish have also all voiced concern over the rises. However, it is not just high-end outlets that are affected. Although they have bigger labour costs, high-end restaurants also have wider profit margins, and should be able to wear these increases.