EMPTY property rates (EPR) will cost the North-East tens of millions of pounds next year and were condemned as the “last straw” for businesses in the present economic climate by a regional property expert.

In this region, the tax – which became payable on every empty building, even those recently completed, from April 1 – is expected to drain more than £34.5m from the economy this year, with that figure rising significantly next year, Kevan Carrick, partner in Newcastle-based JK Property Consultants, has warned.

Mr Carrick, also regional policy spokesman for the Royal Institution of Chartered Surveyors (RICS), said the future of speculative development in the North-East was at risk because of EPR, and said the lack of regional differentiation was exacerbating the situation.

“This is the most unhelpful tax, which will cost businesses in the North-East about £34.5m this year, and that is just the start. Next year, we can expect a significant increase in that amount,” he said.

“This will be the last straw for companies which are already having to find ways of reducing their costs because of what is already happening in the economy.

“There has always been regional differentiation in the amount of land available to develop – in the South-East there is often not enough to accommodate demand, but in the North-East, where there is a lot of regeneration, the story is very different.

Through EPR, the Government is effectively redistributing wealth the wrong way.”

Mr Carrick’s comments come in support of Building on Success, a campaign run by The Northern Echo and North-East Chamber of Commerce (NECC), which aims to grant full relief from EPR.

Relief from EPR was abolished by then-Chancellor Gordon Brown in last year’s Budget, who claimed it would help stimulate swift lettings.

Although relief was granted by Alistair Darling in this year’s Pre-Budget Report, the exemption only applies on EPR of up to £15,000 for 12 months.

In his research, Mr Carrick has found that to qualify for the exemption, offices must be of between 1,000sq ft and 1,500sq ft of space, and industrial units of between 5,000sq ft and 7,000sq ft.

“While this may help small businesses who want to relocate and save them from the threat of EPR hanging over them, that cannot be said for developers who are seeking to sub-let – very few of them will benefit from the threshold,”

he said.

“There is, generally, nothing happening in the way of speculative developments – it is very difficult to get funds from a bank anyway to build something for which there may not be any tenants. Although some developments may go ahead if they are part let, there is still significant risk involved if it is not 100 per cent let, which is a very difficult thing to achieve.

“While the Government obviously believes that EPR isn’t necessarily wrong, the circumstances in the North-East mean, and are proving, that it is very bad for the region as a matter of course.”