Britain’s biggest commercial property developers are threatening to take the roofs off buildings in an attempt to circumvent changes to business rates, The Times has learnt.

Ian Coull, chief executive of Segro, which owns £4.4 billion of industrial property, said that he was ready to leave his large new developments without a roof to avoid paying rates on empty buildings. Tim Wheeler, chief executive of Brixton, which owns £2.4 billion of warehousing, said that the imminent changes to rates relief would mean his company would demolish old buildings earmarked for redevelopment far earlier than planned, leaving “piles of rubble” in their place.

The executives’ threats come ahead of Alistair Darling’s inaugural Budget next week. They confirm warnings first given by property agents a year ago when the Chancellor announced the changes. They said that the changes risked recreating the sort of blighted industrial landscape last seen in the 1980s as developers ripped off roofs to avoid paying rates.

Owners of industrial property obtain 100 per cent rate relief when buildings are unoccupied. Owners of other commercial property, shops and offices, obtain 100 per cent relief for the first three months and 50 per cent relief after that.

However, from April 6, industrial property owners will obtain 100 per cent relief for only the first six months that a building is vacant. All other empty commercial properties would have three months’ rates relief and then incur the full amount.

The Treasury expects the cuts to generate an extra £950 million in the 2008-09 tax year and £900 million the year after. It has not introduced antiavoidance measures to prevent developers from removing the roofs of unlet buildings to avoid paying.

Reporting a 7.7 per cent increase to £153.7 million in Segro’s annual underlying pretax profit yesterday, Mr Coull, said: “If we build a speculative development and get the market wrong – there is no real interest for letting – we will probably not put the roof on.”

Mr Coull cited a 10,000 square metre building that Segro was constructing in Camberley, Surrey. It is only 40 per cent prelet but is due to be completed this November. He said: “If come the third or fourth quarter of this year there is no occupier interest for the rest of the site – it is split into two buildings – we may not put the roof on the second building.” Leaving the roof off would avoid a £260,000 rates bill on the building, according to Segro’s calculations.

Mr Coull said that without such drastic action, the changes to rate relief would leave Segro with an extra tax charge of £8 million a year, based on the amount of new but unlet developments that came on stream last year. The Government hopes the curtailing of rates relief will encourage more industrial property on to the market for small businesses as landlords accept lower rents to offset the risk of a big tax bill and encourage industrial developers to convert old buildings into housing.

Developers dismissed this idea and said that the changes would backfire. Mr Wheeler said: “If we have development proposals for existing buildings, we will simply knock them down rather than risk letting them on short-term lets while we await planning appovals. There will be simply a pile of rubble instead of buildings that might have had tenants.”

Explore Economics

• Autumn Budget 2007

• Budget 2008

• World Economic Forum

• The Times MPC

Times Recommends

• BA chief waives bonus after T5 fiasco
• Prospects of cheaper loans hit as Libor soars
• Rice price dives as US and Japan set to unlock grain pact