Safer, supported and sustained – Retail & hospitality

Safer, supported and sustained – a three-point plan to help central London’s retail and hospitality sectors through COVID-19

Guest blog by Steve Hughes, Associate at WPI Economics 

Photo by Voist Ltd.

COVID-19 has hit retail and hospitality businesses in central London particularly hard. Bars, pubs, restaurants, shops and attractions were forced to close their doors during the national lockdown. When they reopened there was only a muted recovery in footfall and spending (and a much weaker recovery than in smaller cities). The imposition of a curfew and the impending tighter local restrictions under a move from Tier 1 to Tier 2 have snuffed out hopes of a return to normality in the near future.

Why have the retail and hospitality sectors in central London fared so badly during the pandemic?

One reason is the types of workplaces in central London – they are dominated by occupations that can be more readily done from home. Hundreds of thousands of former commuters are no longer picking up that morning latte, buying that lunchtime sandwich or having that post-work drink.

Another reason is the collapse of the visitor economy. Millions of people a year used to come to the capital as tourists, on business or to see family and friends. They collectively spent tens of billions of pounds, the majority of which was in inner London boroughs (see Figure One, below).

Figure One: Proportion of domestic visits and domestic visit spending in central and outer London

The above all said, throughout this challenging period there are some businesses which have benefited simply from being located in places that are more residential. Many of those aforementioned commuters will now eat out, drink and shop closer to their home.

Figure Two, below, demonstrates where this benefit may occur across the CLF geography. The lighter shaded parts of the map are the places with more residents for every retail and hospitality business and are likely to see the largest potential gains. The darker shaded areas – particularly the very centre of London – have fewer residents for every retail and hospitality business and are likely to see the largest potential losses.

Figure Two: Ratio of residents to retail and hospitality businesses in central London (darker shades are where there are fewer residents for every retail and hospitality business)

Despite there being some positives for some retail and hospitality businesses, there can be no escape from the fact that the sectors as a whole will face extremely challenging conditions for the foreseeable future.

Action is needed to help alleviate the worst consequences of these challenging conditions. The cost of not acting – or of poorly targeted intervention on insufficient scale – is stark. If central London’s retail and hospitality businesses cannot survive and rebuild:

• It will make London’s unfolding unemployment crisis worse. It is inevitable that jobless rates are going to rise substantially in the coming months. Retail and hospitality job losses will disproportionately affect those that are younger and lower-skilled.
• London will become less competitive on the world stage. The capital’s ability to attract investment and human talent will be irreparably damaged. Other major cities, from Paris to Berlin, and from New York to Tokyo, will take advantage. This will have an impact on productivity and on London’s success.

The following three-point plan is an outline for what form action to help retail and hospitality businesses in central London could take:

1. Make retail and hospitality safer. People need to feel safe using public transport so that they can travel in and around the city (once government messaging changes) without putting themselves at undue risk. Using technology to provide information on capacity levels on public transport, encouraging alternative forms of travel – such as walking and cycling – and ensuring that pedestrianisation and outdoor seating availability are widespread are all measures that can be taken.
2. Give retail and hospitality support. If central London is safe, people need to be made aware of it so that they can spend with retail and hospitality businesses – public information campaigns could raise this awareness. New schemes along the lines of Eat Out to Help Out could be used. Business advice on emerging issues such as on rent negotiations with landlords should be widely available. Surveys and focus groups of retail and hospitality businesses should be regularly undertaken to understand the challenges that they face.
3. Ensure retail and hospitality can be sustained. The costs of business rates could be alleviated in 2021/22. Grants could be provided for businesses to be adapted to a new normal. Data should be collected to ensure that businesses have information on the opportunities that are open to them, such as where empty commercial space exists.

This plan will not save every retail and hospitality business. But it will help to save some. These businesses are the foundation of London’s reputation as a world-beating place to live, work and visit. Without them, the recovery from COVID-19 will likely be longer and harder than it otherwise would be.

The full report can be found here.

16.10.2020