Matthew Evans from MRG asks John Webber Director and Head of Rating at Colliers seven questions about the business impact of coronavirus and life after lockdown.
Do you have a personal sense of how the current “Lockdown” will be relaxed and the best method to ensure businesses can start operating again?
From a surveying perspective, the important part of our job is getting back to inspecting properties and sites, and not necessarily sitting in crowded offices. Shift patterns and safe working environments are critical. I also appreciate that many people need to be around other people – even if at a distance – for their mental wellbeing. The economy needs to start moving and as long as those “at risk” are protected, the wheels should and can start moving. The use of technology such as Microsoft Teams is a game changer. I think occupiers will need as much space – it will just have a lower density. As a clean desk freak myself, I think the culture change will also be welcomed.
Do you feel that the Government has done enough for businesses affected by the COVID situation especially in way of Rent and Business Rates?
I was very aware of not being too critical of the Government in the early days and weeks because you could see and hear from those I was speaking to that decisions were being taken at speed – something that most of us, and certainly civil servants, are not used to doing. The 12 month holiday for whole sectors was a mistake – I think a 3 month rolling holiday for everyone would have made more sense. Regarding rents – it is a balance between tenants not having cash to pay and landlords financially unable to give rent holidays widely. If the Government Grant scheme had been rolled out to all sectors and the state aid cap removed, then that money could have been used to pay part if not all of the rental bills. Countries like Sweden and Denmark have used a ‘Furloughed Space’ scheme where the Govt. picks up the rent bill when occupiers can show that their space is empty. It is not too late for the Government to look at this.
Has any particular sector/industry been forgotten by the government from your prospective?
Offices and logistics / industrial. There are also some transport related industries as well. As I said above, a rolling 3 month rates holiday for everyone would have meant no one was left behind, and over a 12 month period would cost less than the scheme they have implemented.
What are the main points of the government support packages in terms of Business Rates. Which parts do you think are the most appropriate and what is missing that you would like to see?
12 months holiday for the retail / hospitality and extended retail sector. This is a very generous scheme and is exempt from any state aid rules. It applies to big and small businesses. I say generous because some, thankfully, in this sector are still trading – not at 100%, but still trading nonetheless. Others in retail and hospitality will be affected far longer, and the 12 month holiday will be desperately needed. Unfortunately the aid did not include other sectors such as offices, which will undoubtedly be affected because of social distancing for far longer. What will be a growing problem over the coming weeks is the attitude of billing authorities, many of whom will be taking aggressive recovery action against ratepayers, particularly in offices who have not paid their business rates since the lockdown for the very good reason that they are prohibited from occupying them. The government should issue a clear directive to billing authorities that void relief should be granted to all properties that had to be vacated during the lockdown. This certainly includes the majority of offices in all the major cities in the UK and particularly in London.
What initiatives would you recommend longer term to support both SME’s and corporate businesses, post the immediate coronavirus period?
The Government have helped many small businesses in recent years, however this disadvantages small businesses based in central London because of the threshold that is currently being used in relation to small business rate relief. This should be addressed by the government by raising the threshold in higher value locations both in London and other major cities. We at Colliers International have been calling for a review into business rates with the most fundamental change being the multiplier. This has crept up to an eye watering 50% tax, up from a 30% tax in 1990. We are in effect asking for a 40% cut in the multiplier which will help all businesses across the UK. At the same time we should have a fundamental review of reliefs given to many businesses, but keep It at the same amount it should have been had governments of all persuasions not felt the need to handout relief’s on a regular basis as well as adding annual RPI increases over the last 30 years.
What will be the lasting effects on London in terms of Business Rates?
I think the most important thing that central government and local government can learn is that you cannot have a tax at 50% and expect business to grow as we move into an extended economic downturn. In order to encourage businesses to grow, the tax has to be reduced to 30% or else the “golden goose” that is property will be well and truly cooked.
What is the key lesson you have learned from this pandemic?
The key issue I have learnt is that communicating with clients and colleagues on a regular basis is more important than ever. To understand the financial pressures that clients are under is a necessity in order to advise them properly on real estate close down.
I’d like to add that the Govt. have shown an ability to listen and act accordingly and that is extremely welcomed. The work of people in MHCLG , BEIS and the Treasury should be applauded. It would be great to continue the dialogue and transparency when we reach ‘peacetime’.
The most important thing I am sure we have all learned it to appreciate our health and our loved ones.
Unlocking the Lockdown Series