A new government tax on empty buildings has prompted a huge rise in demand for demolition contractors as developers rush to flatten deserted properties, writes Dan Stewart.

Developers such as Brixton, Gazeley and Segro, and supermarkets Tesco and Sainsbury’s have demolished hundreds of empty industrial buildings to avoid paying annual tax of about £150,000 a unit on them. Segro is understood to have demolished 500,000ft2 of property since the beginning of the year.

Empty rates relief, which for years exempted developers from paying business rates on empty properties, was scrapped on 1 April this year.

Industrial developers were given a six-month grace period, whereas office and retail premises were exempted for three months. From 1 October, all empty buildings will be fully taxed unless they are unuseable.

Although the government has warned developers against damaging their properties to make them unuseable, there is no law to prevent them simply demolishing empty properties, provided they are not listed.

Why pay £400,000 in tax when you can hire a demolition contractor for £150,000

Colin Mcloughlin, General Demolition

Colin McLoughlin, chairman of General Demolition, said: “We’ve got more work than we can do at the moment. Why would you want to pay, say, £400,000 in tax on empty buildings when you can hire a demolition contractor for £150,000?”

One developer source said: “Demolition is about the only growth sector in the market at the minute. It’s straight cause and effect.”  

A spokesperson for Brixton said: “The revenue we could get for renting out a building is offset by the liability we’d pay if part of it was empty, which falls in favour of demolition.”

For more stories on demolition, visit www.building.co.uk/archive