The Prime Minister’s announcement that people should work from home and stay out of town centres will be a hammer blow for the hospitality, retail and leisure sectors, says tax and advisory firm Blick Rothenberg.
Milan Pandya, a business advisory partner at the firm, explained that encouraging people to work from home and stay out of town centres will be a final blow for some businesses in these sectors.
He said: “Following the government’s announcement of further restrictions including the revised message that those who can do should work from home, and may need to do so for a period of at least six months, it is imperative that the support measures introduced by the chancellor are also extended.”
Pandya explained that the government-backed lending schemes should be extended as businesses revise their forecasts in light of the new restrictions, and furlough should be extended on a sector specific basis to protect employment. He warned that the alternative would be mass unemployment, which would hit 16-24 year olds, risking a lost generation.
Pandya said: “If businesses fail now, then all of the previous measures utilised by the government would be in vain.”
His comments came as trade bodies across the financial sector united to urge the chancellor to extend the current business funding schemes in the face of increasing economic uncertainty.
Retail businesses “must not bury their heads in the sand”
Blick Rothenberg also argued that retail businesses that want to stay in their premises need to engage with their landlords and not bury their heads in the sand.
Tenants need to have a constructive discussions about what they can afford to pay in rent, and on what basis it should be calculated, according to head of property and partner at the firm, Heather Powell.
She said: “It is in everyone’s interest that retail businesses to thrive, but to do that they need landlords who are also thriving – a liquidator who is appointed by a landlord will only be interested in extracting maximum value from the property in the short term, which is very unlikely to be in the best interests of a retail tenant.
“Sensible, honest discussions are key to the long-term success of both parties.”
Powell explained that large retail chains are entering into Company Voluntary Arrangements (CVAs), which allows a portion of the debt to be paid back but these arrangements impose massive changes on the terms of the leases they have entered into with landlords.
She added: “Smaller retail businesses may not have landlords imposing these arrangements, but do need to focus on how they are going to pay rent when the rent deferral scheme closes. From October, landlords will be able to start actions to evict tenants, so businesses who want to continue from well-loved premises need to sort their rent out now.”
Powell explained that the planning changes announced in the summer gives landlords opportunities to redevelop their properties that did not exist pre-lockdown, and some may think that is a much better option than struggling with an investment in a retail unit.
She said: “Landlords and tenants need to come together to move things forward, but they should do it now, or both parties will lose out.”