The leader of Croydon Council has defended the use of more than £4 million of taxpayers money to entice Boxpark to the borough after existing businesses expressed fears about the effect the development would have on trade.

Last summer the council announced it would loan Boxpark £3 million to help set up a mall made out of 97 retrofitted shipping containers next to East Croydon station, following in the footsteps of the company’s successful Shoreditch shopping centre.

But on top of the loan, the council will also pay Boxpark £800,000 over five years to rent eight “pop up showcase units” in the development, which will be used to “attract and showcase high profile businesses-led activities to Croydon”.

The council will also hand over £307,500 in “viability grants” to “support the operations of Boxpark Croydon”.

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The pop-up mall, which has also received a £250,000 grant from the Mayor of London’s regeneration fund, is slated to open this summer.

When questioned about the deal with Boxpark, Councillor Tony Newman defended the council’s £800,000 “pop-up shop programme,” adding: “I don’t think that’s a subsidy”.

Asked about the £61,000-a-year “viability grant”, he said: “I would need to get back to you on that, but I don’t think it’s a grant.”

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But he added: “Councils will always use things, whether its grants or business rates, to incentivise companies to be here. I do understand there are some people threatened by the change, but it will involve a lot of local businesses.

“Whether it’s Boxpark or Fairfield Halls, for some people change is uncomfortable.”

At a publicity event in July, Boxpark founder Roger Wade announced the Croydon mall would include only food and drink businesses – surprising those who expected a retail offering similar to the popular Shoreditch centre.

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An artist's impression of Boxpark Croydon, which is set to open this summer

Since then, some Croydon eateries have expressed concerns about how the development might impact on their trade.

Betim Hasimi, manager of Aqua Mediterranean Meze Bar and Grill in South End, said he did not think it was “fair” for the council to be paying money to Boxpark.

He added: “Of course it’s a worry for everyone.

“It will bring people into Croydon, but we are quite far down from there. I don’t think it’s helpful for businesses round here.”

Saif Bonar, owner of town-centre cafe and bar Matthews Yard, said: “Boxpark is going to hit people hard. It’s going to really hurt them.”

At a council scrutiny committee meeting last night held to discuss Croydon's ailing night-time economy, Matthew McMillan, development director at Boxpark, said more needed to be done to encourage business to set up shop in the town centre.

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Professing to be a regular diner in South End restaurants, Cllr Newman pointed to a recent £3 million project to transform the street into a “restaurant quarter” as a sign of the council’s commitment to promoting existing businesses.

He added: “I don’t understand the anger for the businesses [about Boxpark]. They are two completely different offers.”

Cllr Newman also defended the recently proposed hike in rates for street trading licenses, which critics have dubbed a ‘tax on sunshine.’ He said: "The reason people can put chairs out on the pavement is because the council has spent millions making that possible.

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"It's still going to be cheaper than most boroughs. I'm glad we've done it, it should have happened a year ago, that's my only regret."

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