The government’s revaluation of business rates will prove hugely damaging to businesses in the capital as they try to recover from the impact of the recession, London Councils has warned.

In March this year, London Councils’ Chairman Councillor Merrick Cockell wrote to the Chancellor Alistair Darling, to warn him of the crippling effect that business rate rises could have on business in the capital – particularly during the recession.

One of London Councils’ chief concerns centred on the business rate revaluation, details of which have been revealed this week by Communities and Local Government.

Councillor Cockell warned the Chancellor that the rate revaluation would be flawed because it would be based on over-inflated commercial rental values dating from April 2008 before the recession began.

Since then, the capital has borne the brunt of the downturn and commercial rents have fallen considerably. However, businesses in the capital now will be forced to cope with rate rises set by an arbitrary – and artificially high – figure which bears little relation to the current rental values.

Forcing London’s small businesses to pay such high business rates as they struggle to come out of a recession will set back the capital’s recovery, and in all likelihood, prove damaging to businesses around the country.

London Councils’ Chairman Councillor Merrick Cockell said:

“Forcing London’s businesses to pay rates based on pre-recession values is short-sighted. The capital has already borne the brunt of the recession and introducing inflated rates at this time will really hamper their recovery.

“London remains the engine room of the British economy. If you prevent the capital’s businesses from recovering, the rest of the country will soon suffer. The Chancellor must urgently reconsider the impact of the business rate revaluation on the country’s economic wellbeing.”