By Marcus Leach

The Business Centre Association (BCA) has warned of a catastrophic shortage of flexible office space within the next two years, stifling growth in the small business sector, if the Government does not raise the threshold for empty property rates (EPR).

BCA members have been forced to abandon virtually all new developments outside London since April, because the lowering of the empty property rate threshold from £18,000 to £2,600 has made almost all schemes outside the capital unviable.

Developments are on hold across England and Wales because operators cannot afford to pay empty property rates on space that generates zero income. New business centres typically need a minimum of 18 months before achieving optimum occupancy.

Business centres play a crucial role in nurturing and engaging with entrepreneurs, industry start-ups and SMEs that need to rent flexible professional business space on easy terms in order to survive. The sector accommodates more than 40,000 start-up companies at any time.

If the current situation continues, the BCA is warning that there could be a critical shortage of usable business space as the economy starts to recover. This could lead to sharp rent rises, causing further damage to the fragile economy.

“With unemployment at a 17 year-high, there has never been a more critical time for nurturing entrepreneurs and start-ups. We should be giving the small business sector all the help we can to lead the UK out of recession, but EPR has put the brakes on growth and is stifling innovation," Harry Platt, chief executive of Workspace Group plc and BCA chairman said.

“The coalition Government says that it is keen to encourage enterprise, but the current EPR threshold is inhibiting the creation of small firms. Worryingly, the areas most desperately in need of regeneration will be worst affected by this tax.”

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