Small businesses getting priced out of the capital

More flexible workspace must be found to prevent small and medium-sized businesses from quitting the capital, the London Assembly has warned.

In a report published today, called Helping SMEs to thrive, the Assembly’s economy committee calls on mayor Sadiq Khan to work with local authorities to create more affordable workspaces.

It says that providing targeted support to SMEs will be ‘integral’ to the continued success of London’s economy, particularly as SMEs make up more than 99% of all the firms in the capital and generate 48% of all business turnover.

New SMEs are drawn to London because of the national/international connections, transport links and business environment. But London has the highest rate (10%) of all the regions in the UK for business failures, and one of the reasons why SMEs can struggle in London is the lack of affordable workspace.

According to the report, 16% of industrial land in London was lost between 2001 and 2015. If this trend continues, the capital could lose a third of its industrial land by 2041.

The loss of workspace has been ‘exacerbated’ in some areas by permitted development rights, which make it easier for developers to convert offices into homes and flats.

Research by the GLA shows that prior approval to convert almost 1.5 million square metres to office space to residential units has been given since 2013.

The chief executive of the Wimbletech Community Interest Company, David Fletcher shares his experiences in the report of working with local authorities to make smarter use of existing office space, in libraries, for example.

‘Within two to three weeks, we had opened the space,” said Mr Fletcher. ‘We had a whole manner of different people. You get this beautiful ecosystem and you get that curation of a network in that immediate space.’

SMEs are also under increased pressure in London because of high operating costs.

According to the Institute for Public Policy Research, rents for new, grade A office space have risen by up 70% in the West End and 35% in the City of London since 2009.

Business rate rises are threatening start-ups and small firms, with some companies facing increases of 20%. Although some London boroughs are helping SMEs, such as Croydon, where any SME that signs up to the council’s good employer scheme gets a one-off discretionary grant to reduce their business rates bill.

The report also recommends that the London mayor commission research into assessing which types of business are leaving London, and assess the impact on the local communities where they have moved on.

It says that the mayor should look at how London can better meet the needs of businesses.

‘SMEs are the life blood of London’s economy and our local communities,’ said report author, Fiona Twycross.

‘Yet, they are struggling to find workspace that is flexible, affordable and well-located.

‘The mayor of London needs to address this use to ensure the continued success of this city,’ added Ms Twycross.

‘We need concrete proposals to maximise affordable workspace and to fully understand why SMEs are leaving London. The voices of micro and small businesses must be heard when it comes to shaping the city.’


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