A group representing businesses in London’s West End said the government’s plans to reduce the burden of business rates for smaller businesses and target online retailers could significantly impact the area.
From April 2026, a new higher rate for all businesses with a rateable property value of over £500,000 will be introduced, disproportionately affecting businesses in the West End.
Heart of London Business Alliance (HOLBA) has urged the government to delay this “poorly assessed” policy, conduct a full impact assessment, and explore the idea of a new ‘combined business rate’ that it said will help to protect high streets and city centres while ensuring online retailers contribute their fair share.
HOLBA’s research shows that just 0.8 per cent of UK businesses will bear the £2.2 billion business rate hike, with 44 per cent of them based in London. Nearly 2,000 businesses in Westminster – many within the retail, hospitality and leisure sectors that are already operating on tight margins – will be hit hardest, stifling investment, employment, and growth, it added.
Devised by local government finance experts, HOLBA is proposing a new approach, which would see tax collected directly from online sales in addition to bricks and mortar businesses. This new ‘combined business rate’ would introduce a digital element to business rates, generating an estimated £6 billion from 2 per cent of all online sales in the UK (with some exemptions), reducing business rates charged on bricks and mortar businesses by up to 37 per cent.
“The government has not shared an assessment of the likely impact on businesses from their proposed policy which is why we commissioned our own research by local government finance experts. This led us to develop a very credible alternative on behalf of our members,” Ros Morgan, HOLBA chief executive, said.
“If the government proceeds with its proposed changes – the impact on operating costs for many of our member businesses in the West End will be truly shocking. The business rate system was implemented before the rise of the digital economy, and it needs to catch up. Successive governments have tried and failed to reform business rates, but we believe that our idea for a new ‘combined business rate’ would widen the tax base, create a more inclusive and equitable system, potentially produce more tax for the Exchequer and reduce the unfair burden on certain sectors of the economy.
“Many of our members who will be affected by the government’s proposed tax rise are retail, hospitality and leisure businesses – the majority of whom are currently operating on wafer thin margins. The cumulative impact of these cost rises is already stifling investment, employment and growth which could be very damaging in the long term for our area of the West End that is worth over £10 billion annually to the UK’s economy.
“We urge the government to drop their plans to reform business rates and consider our proposals instead.”
John Dickie, chief executive of BusinessLDN, added: “The government’s commitment to transforming business rates, including to support the retail, leisure and hospitality sectors, is laudable. But these new findings demonstrate that the proposed reforms would lead to firms in the capital shouldering more than their fair share of the burden. The Government should now conduct a full impact assessment and reconsider its proposals to ensure they achieve their stated objective without placing a disproportionate burden on the London economy, which is vital for the UK’s growth.”
