Based inside the arches for decades, many feel they have no choice but to relocate

Spiralling rents are driving growing numbers of artists and small businesses out of London’s East End, with the problem expected to spread to other cities around the UK.

Faced with rent increases of 200% to 300%, small businesses that have been based in the capital for decades are being forced to relocate to Kent or Essex, according to the New Economics Foundation thinktank and the East End Trades Guild (EETG) founded in 2012 representing 230 small firms with a combined turnover of more than £80m.

In many cases, traders are being replaced by cafes and workspaces designed for people working on laptops.

Of those that remain, many are struggling for survival, as business rates also went up substantially last year for the first time in seven years.

Frances Northrop of the New Economics Foundation says: “Imagine London without the small businesses of Portobello Road, Brick Lane, Columbia Road and Chinatown. They are being driven out by the cold logic of ever-increasing rents.”

Many small independent businesses are based in railway arches across London, often owned by Network Rail or Transport for London.

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Network Rail has almost 4,500 arches across the country, with two-thirds of those in London. Transport for London, meanwhile, owns about 2,000 commercial units across London.



Derec Hickman of Chu’s Garage in Hackney, who runs the Guardians of the Arches, a group that is open to traders in the rest of the UK, says: “The action is spreading from London to other cities. What’s happening to us will happen to them.”

Five of his neighbours are looking to leave, and one trader has already moved out of the arches due to the crippling rent increases.

The EETG is proposing a London working rent: an affordable formula for small and micro-businesses akin to the London living rent, and has received backing from the mayors of Hackney and Tower Hamlets.

The New Economics Foundation is in the process of working out a formula. Guardian Money spoke to a number of small businesses affected by the rent hikes.

Poetstyle

The bespoke furniture maker was one of the first tenants at Bayford Street Industrial Units in Hackney, built by the Greater London Council in the 1980s to attract local business and jobs to a then-run down area.

This year, unable to meet the now private landlord’s demands to double the rent, Poetstyle, with its 15 furniture makers, moved to Hainault, on the border of London and Essex. Managing director Charlie Fox says it has just moved out of its second workshop in a railway arch in Hackney after facing a similar rent hike there.

He says Network Rail originally asked for £31 per sq ft, which was then reduced to £18 until September, but going up to £24 thereafter. He was originally paying £14.

“It’s not really viable,” he says. “It is tough, ever since Brexit, but I just can’t hike the price of a sofa because I’m up against cheap imports.”

Urban Species

Sarah Haque and her son launched their company in 2004 in Cheshire Street, Shoreditch, to create and sell T-shirts and other products designed by London and UK-based artists.

Their business rate has gone up from £1,100 to £16,000 a year, while the annual rent charged by their private landlord is rising to £29,000 plus VAT in a stepped five-year increase, compared with £8,500 in 2006. No improvements have been made to the space, she says.

Haque says she had to reduce her staff from 10 to four. “It’s very, very sad because we’ve been here more than 10 years and it’ll be sad to leave. We can’t increase our business, we are late in paying the rent and late in paying salaries. It’s just a mess.”

Tatty Devine

Best known for its laser-cut Perspex jewellery, Tatty Devine is run by Rosie Wolfenden and Harriet Vine, who founded the business together in 1999, and were awarded MBEs for services to the fashion industry in 2013.

They opened a shop in London’s Brick Lane in 2000 – but Wolfenden says the shop rent has quadrupled since then.

“It’s getting to the point where it’s unaffordable,” she says. “It’s driving out so many creatives from Hackney or Tower Hamlets. A lot have gone to Kent, to Margate.”

She notes that there are lot of empty shops in east London.

Wolfenden adds: “If we were to inflate our prices to match the rent and rate rises, we would go out of business.”

She says the business is surviving because it includes retail, wholesale and e-commerce, and could not have been set up in the same location if she and Vine were starting it today.

Facebook Twitter Pinterest Chu’s Garage. Network Rail wanted to increase the rent from £18,000 to £38,000. Photograph: Sarah Ainslee

Chu’s Garage

The MOT garage in a railway arch in London Fields, east London, was founded by Quang Chu 30 years ago.

He is battling a rent increase from Network Rail, his landlord, which originally wanted to hike the rent from £18,000 to £38,000 (or £35,000 if the garage gave up its secured tenancy).

Network Rail is now asking for a stepped increase to £26,500 in the first year, going up to £34,000 in the third year, says the firm.

Ten other traders in the arches were put under the same pressure, says Derec Hickman, who married into the Vietnamese family that founded Chu’s Garage.

The garage and one other trader are due to go to arbitration, where the rent will be set by independent assessors.

What the owners say

Network Rail

On the claim that it is hiking rents in order to pocket a bigger profit from the sale of property, it says “this is completely untrue. Any reviews are part of business-as-usual activity. The sale will be based on past performance and receipts of the estate over a number of years”.

Asked about increases of 200% to 300% or more, it says “this is not typical at all … average increases reflect the numbers of years since the last review, up to six, and the average market rents in the area, which we use for comparison as we aim to be competitive”. Rents, it says, are very competitive, adding: “We support thousands of independent businesses across the country … where significant increases are proposed, we look to mitigate the impact by negotiating with tenants and, where appropriate, offering stepped increases … we are a taxpayer-funded public company, with a responsibility to use funds from rents and sales to invest in growing the railway. Rents are at the low end to ensure they are competitive.”

Transport for London

Graeme Craig, director of commercial development, says: “We are committed to encouraging diverse, small businesses as vital to London’s economy. Our leases are flexible … and we are working with Tower Hamlets and Hackney and the EETG to explore how we might change our policies to allow smaller businesses to continue to flourish on our estate.”