JP Morgan looks for business rates discount to unlock £3bn Canary Wharf office project

The plans are subject to planning approval, and continuing positive business environment in the UK, according to JP Morgan

The financial services giant revealed plans last November to build a 3m sq ft office tower which would be the largest and most expensive office building in London, and one of the largest in Europe.

It has now been revealed that Tower Hamlets Council is set to agree in principle to offer a business rates discount to the firm, according to new documents from the council’s cabinet.

The documents state that government has indicated that JP Morgan is unlikely to progress without clarity and certainty on business rates liabilities.

Located at Riverside South in Canary Wharf, the tower is expected to accommodate 12,000 new employees and will serve as the firm’s new UK and Europe, Middle East and Africa (EMEA) headquarters.

In a document, the council called the £3bn scheme one of the most significant investment opportunities for both Tower Hamlets and London. It said the major new development could contribute approximately £9.9bn to the UK economy over six years, and create around 7,800 construction jobs.

The document said that to secure this investment, JP Morgan has requested a business rate incentive over a period of years – with the public bodies asked to agree to the incentive in principle via a memorandum of understanding (MOU). This is expected to be signed by the council by 31 March.

The papers add that the government “has formally requested that the council present a range of viable options for delivering a lawful and fiscally responsible business rates incentive”.

Business rates incentive mechanisms currently under consideration include an enterprise zone. Based on high-level estimates of the site’s rateable values, modelling using such a mechanism predicts a total business rates income of circa £1-1.6bn over a 25 year period.

Another potential option is a local discretionary business rate relief, which, under current framework, would see the cost of the tax cuts born 30% by Tower Hamlets, 37% by the Greater London Authority and 33% by central government.

The document said the second option would represent a “substantial financial risk and could reduce long-term income” for the town hall.

Canary Wharf is already the UK’s third largest economic output by local area, although Tower Hamlets also contains deep poverty and inequality, as the report recognises. It says the development offers the ability to secure new employment, training opportunities and community investments, while the firm also has a track record of community programmes.

JPMorgan Chase previously said the plans were subject to planning approval and to a continuing positive business environment in the UK, with the original announcement following an uptick in confidence in London’s office sector late last year.