The Black Country-based boss of one of the world’s oldest companies has launched a scathing attack on the Government, accusing it of “incompetence at the highest level” over the reintroduction of rates on empty properties.
The move could make some speculative developments and regeneration projects uneconomic, Constantine Folkes said.
The chairman of the privately-held property and engineering group Folkes Holdings, makes the attack in the company’s 2007 annual report.
The Rating (Empty Properties Act), which does not apply in Scotland, was announced by the then chancellor Gordon Brown in his March 2007 Budget. Rates on void buildings were suspended to help the property industry in the 1980s. Their reintroduction will cost Folkes Holdings an additional £500,000 a year, the equivalent of 11 per cent of the company’s property trading property, Mr Folkes says in the annual report.
“It is, in our opinion, wholly inappropriate and purely yet another tax raising mechanism (£1 billion addition to the Treasury) aimed at a sector of the community without a vote. As commercial buildings, while empty require very little council service, it appears wholly iniquitous that business should pay such a local tax.
“Developers will now need to add this cost to development appraisals and it is likely, where margins are thin, this will mean the difference between proceeding with a speculative development or not.
“Certainly where developers are ‘packaging’ sites together for large regeneration schemes which may take several years to put together this new tax will be a huge disincentive and will delay regeneration schemes, most likely where they most needed.”
Mr Folkes goes on to say: “This is an ill-conceived tax, implemented with total disregard to any consultation process, total ignorance of how the industry works and is damaging to the property industry, tenant expansion and speculative development and will lead to less rather than more progress in the economy and ultimately a reduced tax take.
“This is government incompetence at the highest level.”
Lye-based Folkes began as a blacksmith’s business in 1697 and is now one of the biggest privately-owned property investment companies in the Midlands. Its engineering division takes in forgings specialist Somers as well as a heat treatment operation. It also owns Bridgnorth builder’s merchant and retailer William Williams.
The Folkes company took the business private in 2002.
Mr Folkes says in the annual report that a “realignment” of property values following the onset of the crisis sparked by the collapse of the US sub-prime market last year had resulted in Folkes’ portfolio being written down by 4.4 per cent to £103 million.
The 2007 report shows that Folkes Holdings increased its pre-revaluation operating profit last year by nearly half to £8.595 million on sales 16.5 per cent up at £31.172 million. Profit after tax, taking into account revaluation and net finance costs, fell by 62 per cent to £2.647 million.