City Powerhouse Expected to Weather Significant Rates Increases

The City of London, also known as the Square Mile and often regarded as the hub of the UK economy, is home to London’s largest office towers and many financial and professional service occupiers. Indeed, traditional office-based firms continue to make up the single largest proportion of all firms in the City. These very occupiers are therefore direct contributors to the prosperity and enduring status enjoyed by the City of London as the epicentre of UK PLC. (City of London Corporation – Future of Office Use – Final Report July 2023). 

Under the outgoing 2023 Rating List, City of London Offices are estimated to contribute in the region of £1.4bn in Business Rates, of the overall annual collection of just under £28bn. Thus, representing approximately 5% of the overall Business Rates collection nationally. So, what is the macro-economic impact of the City of London “powerhouse” and how does this stack up in the wider context? According to a City of London Corporation factsheet published in March 2025, the CoL generates a total of £97bn in economic output annually. This is equivalent to 4% of all UK Gross Value Added. 

The City has a total office square footage of approximately 9.5m sq m and firms based in City offices employ a significant portion of the UK workforce. Perhaps, therefore, unsurprisingly, the City accounts for one in every five financial services jobs in the UK. The importance of the City’s office occupiers to the UK economy is therefore clear and undisputed. Notwithstanding, research suggests those same occupiers are on average likely to incur an increase in their Rateable Value in the order of 25% percent at the forthcoming 2026 Rating revaluation.  

Additionally, to fund a permanently lower multiplier for Retail Hospitality and Leisure properties, there will be a permanently higher multiplier for those ratepayers with assessments at RV £500k and above. The forthcoming 2026 Revaluation will introduce new assessments for all non-domestic hereditaments (units of occupation). Rateable Values will be based on hypothetical rental value under economic circumstances and market conditions that existed at the fixed date of 1 April 2024. Consequently, values placed on assessments ought to reflect differences in demand attributable to the various subcategories of office space, when compared to the situation at the valuation date relating to the current 2023 Rating List, 1 April 2021. 

It is widely acknowledged that since the Covid-19 pandemic, there has been a growing differential in value between the best ‘grade A’ office buildings and secondary buildings, the ageing, or ‘Grade B’ stock, which includes ‘grey’, or tenant-marketed space. This reflects a shift in demand, driven by a ‘Flight to Quality’ and, whilst long-term growth predictions are optimistic, a significant proportion of the City’s existing office stock will require investment to meet new energy regulations and market demands. It remains to be seen whether this disparity in demand between the best quality and secondary / ‘grey’ space will be accurately reflected in 2026 List assessments. Presently, there is a risk that, unless the Valuation Office has recognised this ‘dual market’ situation in undertaking the revaluation, rents underpinning the best quality space could be applied as evidence to support inflated values on the less attractive, dated stock, for which demand has dwindled. 

As above, the other major contributor to predicted increases in rates payable for City offices will be the proposed permanent increase in the UBR multiplier for assessments with a Rateable Value at or above £500k. The purpose of the increase is to pay for a simultaneous permanent cut in the multiplier on retail hospitality and leisure properties with Rateable Values below £500k, following withdrawal of relief with effect from 1 April 2026. This higher multiplier, potentially 20% above the standard rate multiplier for 26/27, will therefore also coincide with the national revaluation from next April. Presently, we anticipate this will impact more than one thousand separate office assessments within the City’s boundary.  

It won’t only be occupiers of City offices that will be feeling the effect of the revaluation, but landlords too. Since 2024, they have been subject to a longer, 13-week reoccupation requirement to trigger a fresh 3-month empty rate relief ‘void’ and will be footing higher bills during periods of vacancy. Further, offices that had been removed from the Rating List during a period of refurbishment can now be brought back into assessment by the City of London via Completion Notice without the need for any structural alteration to have taken place. Landlords are therefore likely to be exposed to longer periods of increased empty liability than they were prior to the implementation of the Non-Domestic Rating Act in the Autumn of 2023. 

Arguably, ratepayers who proportionally represent some of the highest contributors to the UK economy are being unfairly penalised by these new measures. This comes at a time when economic uncertainty, born out of global conflict and political unrest, is placing increased strain on supply chains and trading conditions. We will know more about the impact of the revaluation on City offices once the draft Rating List is published in November, to coincide with the confirmation of the 2026/27 multipliers in the Chancellor’s Autumn Budget.  

If you’re looking for expert advice on how to navigate the upcoming Rating Revaluation, the Montagu Evans Rating team is here to help.

Looking for more information on the 2026 Revaluation? Explore our Business Rates Revaluation: 2026 Handbook.