The retail industry has called on the chancellor for support in underwriting rents that are becoming “unpayable” as a result of retailers having little or no turnover during the government lockdown.
The British Retail Consortium (BRC), British Property Federation (BPF) and commercial property body Revo have written to chancellor Rishi Sunak asking for government support to underwrite rents in the retail and leisure sector.
It proposes the introduction of a Furloughed Space Grant Scheme (FSGS), by which the state would supports the fixed costs – including rents – of businesses that have experienced dramatic falls in turnover. It would mirror schemes being introduced in Denmark and other European countries.
The letter reads: “After payroll, the most significant cost for businesses is often the cost of property occupation: rents, business rates and service charges. You have removed one of these, business rates, for the current financial year. Relief from rates is very welcome for those businesses that can benefit, but it leaves, broadly, two-thirds of the property costs still payable.
“Businesses and their landlords have been working hard to find solutions, such as rent deferrals and rent-free periods, that try to balance the needs of both parties, but the truth is that with little or no turnover from trading, ongoing payment of property costs will imminently become impossible.”
The industry bodies argue that the introduction of a time-limited FSGS would incentivise landlords, lenders and tenants to work together to bear the impact of coronavirus.
A proposed working would be that the government would commit to meeting the fixed property costs on a sliding scale basis: “So 25% of the costs would be paid by government [to businesses] for a drop in turnover between 40%-60%, 50% if the drop in turnover is 60%-80%, rising to 80% for a drop in turnover between 80%-99%, and 100% where a business is not trading at all.”
Vivienne King, chief executive of Revo, added: ”We welcome the government’s action on business rates, although would wish to see it now applied to landlords’ empty rates, but with retailers either unable to trade, or severely restricted in their ability to do so, payment of rent is becoming practically impossible even for businesses that were financially sound prior to Covid-19.
“With June Quarter Rent Day fast approaching, time is of the essence and we are calling on the government’s support to underwrite rents for those businesses in desperate need, many of which are major employers and part of the fabric of high streets, town and city centres.
“We know the majority of landlords are open to negotiate and work with retailer management teams to keep our high streets and retail destinations vibrant and appealing to consumers in the future, but this now needs to be underpinned by rental support from government.”