London’s music venues are recovering – but business rate review could stop them in their tracks

A woman dances in a nightclub. Image: Getty.

Much has been written about the revaluation of business rates and their impact up and down the country. Due to an outcry from a number of sectors and business lobbying groups, not least the CBI, the chancellor is considering measures to relieve those facing the highest increases. (In his recent Budget, indeed, he gave pubs a rebate of up to £1,000, though he did nothing for other sectors.)

Most of the businesses worst affected are in zones 1 and 2 in London, where property has, in some cases, doubled in value since the last valuation was conducted in 2008. And it is the independent retail and commercial sector that will feel these rises the most. A large high street chain can shoulder a rate increase of between 25 and 30 per cent; an independent cafe or restaurant often can't. Such an increase, after all, could mean an extra bill of up to £15,000 for a mid-sized premises. That would be enough to close an independent pizza shop, but allow Pizza Express to survive. 

Of these independent businesses that are most threatened, at the top of the list are our grassroots music venues and nightclubs. Over the past ten years, 50 per cent of London's nightclubs have closed, along with 35 per cent of its music venues.

In fact, there have recently been some signs of recovery in the ecosystem. Last month, the Greater London Authority published a report that found there had been no net loss of venues in 2016, a first since 2007. A few new venues have even opened, including The Soundlounge in Tooting, Sankeys East in Romford and, at the end of March, Soul Store West in Kilburn.

Now this rates rise threatens to derail this progress. And there remains something rotten in the way we value these places: when assessing and calculating their rates, we don’t consider their cultural or economic value. These premises are the incubators of the sector, each investing £500,000 directly into new and emerging talent each year. And yet, unlike community centres and libraries, for example, little relief is offered that recognises the benefits these places and spaces bring to their communities. 

Indeed, instead of recognising this value, we are doing the opposite. Take The Lexington, in Islington. In the past, it's hosted many artists who you wouldn't have heard of at the time, but almost certainly would have now. Yet the value of the land the venue sits on has increased significantly, increasing the value of the property and thus its business rate. (It's a similar system to council tax.)


There's another penalty: rates recategorisation often means an increase in annual alcohol licence fees that can also run into thousands of pounds. Paying for that means selling more alcohol, which puts pressure on the businesses to stop providing the unprofitable live music aspect. And so The Lexington, instead of being a music venue and community asset, becomes a solely alcohol-led premises, similar to a chain pub or bar.

All this is compounded by the way that venues in London are being penalised for their success in regenerating its town centres. Cafe Oto opened at a time when Dalston town centre was not as desirable as it is now. Its contribution to the local community – along with those of many other businesses and entrepreneurs – has led to Dalston changing and becoming more desirable. Yet Cafe Oto and the like have not been recognised as agents of change and arbiters of community cohesion; instead, the work they've done merely means the land they sit on has become more expensive, and so their rates are going up.

There is no standard classification of music venues and nightclubs in the system by which we assess rateable value: they not categorised as a particular type of business, so their floor space is assessed not on its need to welcome an audience, but on its size and its capacity to sell enough alcohol to fill that space. Yes, venues and nightclubs often live or die on their ability to sell alcohol, but without the music – the culture – people wouldn’t be drinking that alcohol in the first place. Yet this is not recognised: their cultural value is ignored, and venues are made to pick up the tab in more ways the one.

It would be best if such places were assessed for what they are, rather than being lumped into a general categorisation that more often than not impacts them negatively. They should all pay business rates – this is the only way core services can be delivered – but increases in those rates should take account of their community benefit, and recognise their cultural value. 

If we don’t take a good hard look at how our classification and rating systems measures music venues and nightclubs – or cultural infrastructure in general – we  will lose these places. The recent spate of good news will disappear, and we’ll be back to hearing about venue closures in London and beyond.  

And the same argument applies to other sectors, too: if we don't recognise the value of independent cafes, there is a danger that rate rises will one day mean that Costa Coffee is the only place that'll sell you a flat white. 

The author would like to thank Niall Forde, the Music Venue Trust and Nordicity for support in writing this article. 

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What do new business rates pilots tell us about government’s appetite for devolution?

Sheffield Town Hall, 1897. Image: Hulton Archive/Getty.

There have been big question marks about any future devolution of business rates ever since the last general election stopped the legislation in its tracks.

Not only did it not make its way to the statute book before the pre-election cut off, it was nowhere to be seen in the Queen’s Speech, suggesting the Government had gone cold on the idea. (This scenario was complicated further recently by the introduction of a private members’ bill on business rates by Conservative MP Peter Bone, details of which remain scarce.)

However, regardless of the situation with legislation, the government’s announcement in recent days of a pilot phase of reforms suggests that business rates devolution will go ahead after all. DCLG has invited local authorities to take part in a pilot scheme which will allow volunteer authorities to retain 100 per cent of the business rates growth they generate locally. (It also notes that a further three pilots are currently in operation as they were set up under the last government.)

There are two interesting things in this announcement that give some insight on how the government would like to push the reform forward.

The first is that only authorities that come forward with their neighbours with a proposal to pool all business rates raised into one pot across a wider geography will be considered. This suggests that pooling is likely to be strongly encouraged under the new system, even more considering that the initial position was to give power to the Secretary of State to form pools unilaterally.

The second is that pooled authorities are given free rein to propose their own local arrangements. This includes determining, where applicable, a tier split (i.e. rates distribution between districts and counties), a plan for distributing additional growth across the pool, and how this will be managed between authorities.

It’s the second which is most interesting. Although current pools already have the ability to decide for some of their arrangements, it’s fair to say that the Theresa May-led government has been much less bullish on devolution than George Osborne in particular was, with policies having a much greater ‘top down’ feel to them (for example, the Industrial Strategy) rather than a move towards giving places the tools they need to support economic growth in their areas. So the decision to allow local authorities to come up with proposed arrangements feels like a change in approach from the centre.


Of course, the point of a pilot is to test different arrangements, and the outcomes of this experiment will be used to shape any future reform of the business rates system. Given the complexity of the system and the multitude of options for reform, this seems like a sensible approach to take. But it remains to be seen whether the complex reform of a national system can be led from the bottom up. In effect, making sure this local governance is driven by common growth objectives, rather than individual authorities’ interests, will be essential.

Nonetheless, the government’s reaffirmation of its commitment to business rates to devolution and its willingness to test new approaches is welcome. Given that the UK is one of the most centralised countries in the western world, moves to allow local authorities to keep at least some of the tax revenue that is generated in their area is a step forward in giving places more autonomy over how they spend their money. That interest in changing this appears to have been whetted once more is encouraging.

There are, however, a number of other issues with the current business rates system which need to be ironed out. Centre for Cities is currently working on a briefing of the business rates system, building on our previous work in this area, and we’ll be making suggestions as to how the system can be improved.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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