SHOPPING centre bosses say a council plan to impose a new “building tax” at one of the highest rates in the country will damage the North East’s fragile economy.

Council leaders in Newcastle and Gateshead have between them come up with one of the highest new building charges seen by shopping bosses, planning officers have been told.

Capital Shopping Centres, which owns the Metrocentre and Eldon Square, has called for a rethink on plans to charge firms £128 per square metre for new buildings.

The charge, known as the Community Infrastructure Levy, has to be set by councils after the coalition Government decided to introduce the new policy. Local authorities can use the levy to pay for projects such as schools, hospitals and park improvements.

Bosses at Capital Shopping say they already employ some 14% of Newcastle and Gateshead’s workforce, with around 16,000 employees working at their Metrocentre and Eldon Square sites.

As part of the firm’s expansion plans the company recently bought up the former Federation Brewery site next to the Metrocentre with the hope of creating thousands more jobs in construction and retail.

The 17-acre site bought for around £3m currently avoids the building tax as it is outside the boundary, but any similar development would be handed a bill up to £8.8m under current plans. Capital Shopping said it had specific concerns about the charge in the North East. In a statement issued as part of efforts to secure a rethink, the group warned that the Newcastle and Gateshead charge was “one of the highest levels we have experienced throughout the country”.

The firm adds: “It will significantly undermine the viability and deliverability of new retail development, greatly reduce the competitiveness of the North East economy and our ability to provide additional jobs and investment to the area when compared to other regions.

“The long-term impacts of this new tax on the development industry are not yet fully understood however applying such high levels so early on, particularly at this time whilst the economy is still in a fragile condition, will significantly reduce the number of new commercial developments taking place as the development industry tries to tackle and overcome viability issues.”

Gateshead Council development director Paul Dowling said talks were still ongoing over the proposed fee.

He said: “We had our first round of consultation in autumn 2012, and we have taken these comments into account and are currently updating our figures ready for another round of consultation later this year. In the meantime, we are meeting with CSC next month to discuss the future of Metrocentre, the regeneration of the Metrogreen area and the levy.

“It is important to note that this is only charged in areas, and on types of development, that can afford to pay it. The last thing we want to do is stifle development, so we are being cautious in our approach Many other regional centres and towns look set to charge similar, or even up to two and three times the rate we are suggesting.”

Newcastle Council, which works with Capital via its stake in Eldon Square, said existing businesses would not be hit by the levy.

A spokesman said: “They have responded to our initial consultation on the Community Infrastructure Levy.

“We are working through the issues they raise and intend to discuss with them, and others who have expressed a view, our method, approach and assumptions as we work towards finalising the charging schedule and charging zones by the end of this year.” Business groups have called on the council to think carefully before risking development.

North East Chamber of Commerce head of member relations Jonathan Walker said: “While we appreciate the incredibly difficult financial position of our local authorities which face significant budget cuts, we would urge them to not make any decisions that might impact on business growth or development in their areas.

“The onus is on local authorities to send out a clear message to the market that the North East is open for business.

“Everything possible must be done to help the private sector lead the regional recovery from recession and oppressive levies placed on developers will only hamper our efforts to rebuild a sustainable, healthy regional economy.”