LONDON businesses are in a more perilous state than those in the rest of the country and worse is to come, warns Boris Johnson, in the shape of a huge tax hike.
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Figures released today by business info group Equifax show that, while other parts of Britain have seen the rate of business failures slow down in recent months, companies in London have been going to the wall in increasing numbers.
A major reason for the difference is that the service sector, dominant in London, has been about the hardest hit of all this recession.
Nationally, 2.2% more businesses went bust between April and June this year compared to January-March, but in London the figure was 9.4%.
“The recession is still having an enormous impact on business fortunes with many organisations simply unable to survive against the onslaught of falling sales and restricted access to funding to cover the cash flow gap,” said Equifax’s Neil Munroe.
On top of all that, business taxes, or rates, in London are set to go up by an average of 10% over the next five years, while falling in most other parts of the country. Some companies in the capital will be lumbered with rises of 12.5%, while regions like the West Midlands celebrate falls of 7%.
“It is grossly unfair to bleed the capital of the hundreds of millions of pounds its businesses need to subsidise services in the regions,” said London Mayor Boris Johnson today.
“I urge [the government] to reconsider the impact of such an arbitrary hike.”
The main reason for the hike is that the rates were calculated based on property prices in April 2008, just before the credit-crunch-price-crash-armageddon, which has since seen commercial rents in London tumble by 40%.
“London is being punished just because it happens to have a volatile property market,” said Johnson.