Over the weekend, the BBC reported the Institute for Fiscal Studies warned businesses and councils in London face paying an extra £800m to support other parts of England.

The changes mean London councils will see their incomes rise as business rates jump, while Northern councils will lose out as rates fall. 

As a result, London councils will need to pay more to “top up” other councils. The next business rates revaluation is effective from 1 April.

While the changes to business rates are designed to be "revenue neutral" across England as a whole, rates in London are set to increase by around 11% above inflation over the next five years, while rates in northern England will fall by 10%.

What can you do as a business? You suck it up and get on with it

And London-based agencies have told Recruiter agencies will simply have to “suck up” the rate rise.

Ed Vokes, director and founder of Evolve Hospitality, told Recruiter: “It is what it is - we've got to budget for it and get on with it. There's not a heck of a lot we can do. You either don't pay it and get in trouble or you pay it and get on with it.

“It's a nonsense but it is a way for them to raise revenue. What can you do as a business? You suck it up and get on with it. It either erodes into your profit line or you find a way of making more money to cover it.

“Government says it's committed to helping small businesses and entrepreneurs - and then they penalise you.”

Meanwhile, David Morel, managing director at secretarial staffing specialist Tiger Recruitment, told Recruiter while the rate increase will hit his firm's bottom line, leaving London just isn't an option.

“We're in serviced offices but the rates are going to increase even here.

“The bottom line is we're not going to move out from where we are because of the nature of our business, which is top-end secretarial recruitment. We are centrally based with a good address because we are meeting many, many candidates every day.

“The effect on us is we are just going to have to pay more.”

As for how the impact on Morel's clients, he expects some will seek to move to parts of London where rents are lower.

“Around Mayfair rents are at an absolute premium. You are seeing people moving to other parts of Soho. Rents in certain parts of the City are lower - rents in Farringdon and Kings Cross, where lots of people are moving to are slightly lower compared against premium levels in Mayfair and St James.”

While Morel does not expect clients to move out of London completely, he does think landlords may have to be more flexible in agreeing terms with businesses.

“If you take space on a five-year contract, what I would expect is more flexibility around the number of months you get rent free.”

To offset the adverse effects of the rate increase, Morel called on Chancellor Philip Hammond to use this week's Spring Statement to reduce corporation tax at a quicker rate.

David Taylor, MD at global telco staffing specialist First Point Group, agreed. He told Recruiter: “If they can continue to decrease corporation tax, which they have been doing, that would slightly offset it but I do think in general everybody is pretty [annoyed] with the business rates increases because some of them really are substantial.”

Taylor adds he could not countenance leaving the capital. “We are Central London-based purely because we want to attract a wide range of staff. It doesn't really affect us in our client base at all but we want to multi-national and multi-language speakers so rather than be outside London, we feel we've got to be Central, so we will stay.

“It is going to be a hit on the bottom line and we are going to have to absorb it most probably via profits - we just won't be as profitable as we were the year before.”