Covid-19: Recovery of Central London Businesses

Tuesday 22nd June 2021 Westminster Hall

11:00

[Nickie Aiken (Cities of London and Westminster) (Con)]

I beg to move,

That this House has considered the recovery of businesses in central London from the covid-19 outbreak.

It is a pleasure to serve under your chairmanship, Sir Christopher. I am delighted to have secured this extremely important debate on business recovery in central London following the covid-19 pandemic. It has been very clear from my weekly meetings with business representatives from across Cities of London and Westminster that businesses, restaurants, shops and hotels are all part of a larger ecosystem, which also relies on the huge cultural offer that my constituency provides. Covid has proven that if we take one part of that ecosystem away, for example by not allowing theatres to open to their full capacity, there is a vast knock-on effect on all surrounding hospitality businesses, as well as on other cultural offers such as museums and galleries. I am confident that London will bounce back, but the Government have a choice on how quickly that happens.

Cities of London and Westminster is home to the monarch, to the Head of Government and to Parliament. It is also home to the nation’s high street, Oxford Street, and to the cultural and entertainment powerhouses of Soho and Covent Garden. On the one hand, Westminster’s businesses supported in excess of 715,000 jobs and contributed £53.6 billion annually to the national economic output, the highest contribution of any local authority in the United Kingdom. To put that into context, before the pandemic the Oxford Street district alone generated £13 billion of gross value added—25% of the entirety of Wales’s GVA. On the other hand, the UK’s world-class financial sector, based in the square mile in my constituency, is the underlying strength of our international trade and total services exports. The City of London has the largest financial services cluster in the world, with nearly 60,000 companies and hundreds of thousands of jobs for workers commuting in, pre-pandemic.

A key concern regarding the London recovery is business rates. The system, born in the 16th century, is wildly out of step with the modern digital age. Even before the covid-19 pandemic, it was not working—it was not fit for purpose. Empty retail space was on the rise, footfall was in decline and the sector was grappling with systemic shifts in customer behaviour. The pandemic has only accelerated that. It has also laid bare the urgent need to create a fairer and more sustainable tax system that relies less on property and that does not go only one way—up.

Without action on rate reform, the viability of much of the retail sector and the substantial taxes that it generates will hang in the balance. Specifically for central London, it would be useful if the Minister considered whether the business rates relief cap of £2 million could be temporarily removed so that businesses can secure the relief that they need right now. The cap effectively means that many mid-sized chain businesses, which typically pay well above £2 million in business rates, face bills that, according to UKHospitality, could force them

“to prioritise paying tax over paying wages.”

The large hotels and event spaces that depend on business conferences and meetings will be particularly hit by the cap and will be paying business rates in full by the end of July, with no realistic prospect of an uptick in income until at least the autumn. That is simply not good enough.

Covid-19 has created new challenges for the business rates system. I know that the Government have called for its review and for fundamentally reforming business rates, but we need that to be accelerated and temporary relief in the short term to be announced as soon as possible. There is no doubt that that reform is a crucial part of the puzzle as our economy recovers from the impact of the pandemic.

That leads me to my third point. The beating heart of the west end is our significant cultural offer.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

Does the hon. Member agree that major tourist attractions in her constituency and in mine, such as the London Eye, rely on visitors and tourism from across the world? Does she agree that the Government need to consider business rates relief, additional employer contributions on furlough and flexible loan repayments, all of which need to be in place over the summer to help businesses once lockdown restrictions are eased?

[Nickie Aiken]

The hon. Lady makes the clear point that tourist attractions in central London, whether in her constituency or in mine, are suffering due to the lack of international visitors.

Theatres in particular have a significant multiplier effect for the local economy. It is estimated that people who buy theatre tickets will spend up to five or six times more in the local economy, whether in restaurants, hotels or wherever. To remedy the situation, we should urgently address several areas in our recovery from covid-19, which will no doubt have a significant impact on the central London ecosystem.

First, and in light of recent decisions, I ask the Government to give due consideration to a Government-backed insurance scheme to help event organisers plan for the risk of covid-19-related cancellations. Indeed, UK Theatre’s May 2021 survey of members’ planned economic activity up until June next year on productions, both planned and currently running, was 67% of 2019 levels. Of that, 66% was planned for stage 4, which has now been delayed. Without a Government insurance package, theatres expect that proportion to fall to around 35% to 50%, which will be a devastating hit to both the sector and those who rely on its influence to draw in consumers.

Secondly, UK Music noted that extending the 5% VAT freeze on cultural tickets until the end of the financial year 2021-22 would go a long way to incentivise activity in the capital and support investment. Indeed, by keeping VAT low the Government will be allowing more money to be invested into venues, recapitalising and paying off pandemic debt—we know how much pandemic debt many of these companies have.

On another note, I am glad that the Government’s tourist recovery plan, launched this month, acknowledges that London is the gateway for international tourism and, as such, is an integral part of the wider UK levelling-up agenda. Support and investment for central London must reflect that and help mitigate its reliance on high-volume footfall from tourists and workers. In central London, international visitors account for 50% of all spending, even though they make up only 25% of visitors. With the international travel market not likely to start growing again until early next year—possibly into spring next year—shops will open with the return of all the costs that entails, such as business rates, rents and employee costs, but they will not yet have the major customer footfall spending money in their premises. That will put new pressure on businesses that have already exhausted their reserves.

How can we mitigate that? It could be as simple as allowing Sunday trading hours to be extended from 6 pm to 8 pm in the international centres of the west end and Knightsbridge in order to accommodate new patterns of opening hours. I raise this now because, prior to the pandemic, few theatre productions ran a Sunday matinee, for example. Now, however, theatres are increasingly looking at scheduling Sunday matinees and it is likely that Sundays could become as busy as Saturdays, and with that comes increased need for the consumer.

With most other global international centres—New York, Dubai, Tokyo, Beijing, Hong Kong and even Edinburgh—having no restrictions, we are at a competitive disadvantage in London. Allowing longer Sunday trading in an international centre would have a localised impact of up to £290 million net in additional sales, and 2,000 full-time jobs. That is not to be sniffed at. The support measures would cost the Government nothing but could mean the world to businesses in London.

I also urge the Government to work with businesses to seek new ideas and encourage more visitors, especially high-spending ones, to our areas. Most experts estimate that international tourism will not return to 2019 levels until 2023 at the earliest. The Government should do all they can to accelerate tourists’ safe return, with plans to promote London globally as a place to visit and do business.

On a similar note, how office workers react post pandemic will be important for business recovery in the capital. The Government need to do all in their power to stimulate a safe return to the office. Right now, only about 10% of office workers have returned to full-time work in central London, which is woeful. Business representatives from across my constituency, and from multiple sectors, all concur that they do not expect to see any big return until at least September—that is three months from now, and costs will be increasing from next week.

What I find most concerning about this situation is that the shortfall in workers returning to the office is due to a distinct lack of confidence in public transport and changing work practices. As we emerge from the pandemic, the Government must help by encouraging the return to work and encouraging confidence in the safe use of public transport. It is imperative for Government Ministers to encourage civil servants in their Departments to lead the charge and to come back to their desks. I appreciate that we will not see the same volume of office workers over the summer and into the autumn, but even seeing a return of working on a flexible basis—say, two or three days or week while we recover in the short term—would have a huge impact on the economy of central London. For that reason, I welcome this week’s announcement by the Government of the new flexible season tickets. Within London, we need a robust transport system that commuters are confident to use again, with the Mayor working constructively with the Government to ensure that is the case.

I will leave it there for now, because I am confident that London will recover from the covid-19 pandemic, as it has recovered from previous shocks, be they plagues, fires or world wars. I want to see London getting some recognition from central Government for the key role that it plays in supporting the UK’s economy, and we need that recognition to be married to a clear vision for business recovery in central London.

11:13

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) on securing this really important debate. I thank her for all the work that she is doing to engage with businesses and ensure that their voices are heard in this place and across London through the Mayor, the Greater London Authority and all the boroughs. It is so important that, as she says, we work together really constructively in this area, because that is the only way we will bounce back.

As my hon. Friend says, London normally bounces back every time. It normally leads the charge in the UK for bouncing back from adversity and every recession. I have no doubt that the same will be true this time, but rather than leading the way, it is clear from the feedback we are getting from the cultural and hospitality sectors that London is lagging behind, and my hon. Friend outlined some of the reasons why.

London is three times the size of the next biggest European city, never mind UK cities, so it has a centre of gravity that is mainly based on public transport. We must give people the confidence to come back in, as my hon. Friend says, and enjoy the benefits of being in the workplace and what London has to offer. It goes beyond confidence: I describe it as confidence and joy. We can get people back in the first time, but if things are too onerous and difficult in hospitality terms, they will perhaps go back and rely on a ready meal and a bottle of wine in their back garden. That might be great every now and again, but it is the last thing we want if we are to help London’s recovery and ensure that it remains the greatest city in the world in which to live, work and bring up a family, and to really enjoy.

I have lived on the outskirts of London for the best part of 30 years, and the greatest thing about it is that I can enjoy the green spaces and schools in outer London, and raise a family there, but I have London on my doorstep. As well as the benefits of the suburbs, I have the benefits of the city—the theatres, the London Eye, as the hon. Member for Vauxhall (Florence Eshalomi) said, and the restaurants that rival anything available elsewhere in the world. We can go around the world within the few square miles of Greater London. That is so important.

When we talk to business that are encouraging people—or not, as my hon. Friend the Member for Cities of London and Westminster said—back into their workplaces, we have to remind them that London and the businesses that serve people in their workplaces cannot sit there and wait. They cannot survive on fresh air. They cannot be there for people if people do not come back and use them. That is why it is important that we encourage people to come back into London. London generates 25% of the GDP of the entire country, and the west end generates 4% of the country’s gross value added—that is before we get to the City and Canary Wharf. That is testament to the work of my hon. Friend and all the people she engages with; it is important that we celebrate and showcase it.

My hon. Friend talked about business rates. Clearly, London has a particular issue because of the cost of property here, and the business rates that follow. She will be aware—she referenced this—that we have a fundamental review, which is due to report back in October. I hope it is as fundamental as it suggests. My hon. Friend is right that, due to property costs, business rates particularly affect London.

One of the things that I discovered as I was working through the covid support measures that we were putting in place is that the grant system—seemingly the easiest system to deliver—still had its challenges. It was seemingly the easiest because local authorities across the country knew exactly who qualified, because in the first tranche of grants they knew which retailers, who in the hospitality sector and which small businesses were getting small business rates relief. However, they did not have the bank account details or know who to pay it to. The challenges were about fundamental things such as that. Sometimes the local authority’s relationship with its local businesses was not quite as close as it might have liked and expected. We have had to work through all those unintended consequences at pace over the past year, which led to me speaking to something like 112 local authorities across the country to see what more we could do to help them along.

In London, there was the grant scheme. I am pleased that with all these schemes, we were able to flex, following representations from colleagues such as my hon. Friend, to iron out some of the unintended consequences. Indeed, the early discretionary grants were based on the residents living in those areas. That obviously affected my hon. Friend’s constituency. There are not that many people living in the City of London, but there are a lot of businesses. That was an unintended consequence that we were able to correct in later iterations of the discretionary grants. That is testament to the fact that we have been able to flex and work in what were, frankly, completely unprecedented times. We have had to work at pace to change and develop the support accordingly, and we will continue to do that.

We have put in £352 billion to date—it is £407 billion when the various types of fiscal support are included, with the following year to come. As a small-government, free-market Conservative, having just made one of the biggest interventions since the second world war, that gives me 407 billion reasons why we have to get the next bit right. Having protected those jobs, businesses and the spirit of London, we have to make sure that we keep those gains.

[Florence Eshalomi]

I thank the Minister for giving way and for his crucial point on jobs and opportunities. Obviously, today we celebrate the 73rd anniversary of Windrush Day and the contributions of so many people who came to the UK to rebuild our country on the back of the war. Does the Minister agree that many people who work in businesses in his constituency and mine, and in that of the hon. Member for Cities of London and Westminster (Nickie Aiken), rely on people from a diverse range of backgrounds? What more assurance can he give to struggling businesses that want to help Londoners get back to work, but that are struggling financially?

[Paul Scully]

The hon. Lady is absolutely right. My father came over not on Windrush, but from the other direction—from Burma—in the 1950s, at around the same time. He completed his apprenticeship here in the UK, having started it in Rangoon, as it was, after the war. At the time, he had that shared experience of helping Britain to recover through his engineering work. The interesting point that she raises about how we support that particular section of the workforce is crucial—I talked about the spirit of London—in making sure that we get the recovery right for everybody.

I have talked about the Mayor of London, and my hon. Friend the Member for Cities of London and Westminster is absolutely right that we have to work constructively together. Now we have the London elections out of the way, although we will always do party politics and the ding-dong, we have to make sure that we collaborate closely together.

My fear has always been that he wanted to have the title of Mayor, but did not work out which city he wanted to be Mayor of. It is important that he is the Mayor for all London; otherwise, we will have a Gotham City scenario. Frankly, I do not think he would mind it if he was the mayor of Gotham City. What do I mean by that? In Gotham City in the Batman movies—“Joker” and so on—there is the holistic city that has the ultra-rich, who can be insulated from all these sorts of things, because they have the money to be able to support it. There are then the lowest-paid in society—the people who service all the workforces and workplaces, and who have to travel into the middle of town. There are then those in the middle, who live in areas like mine on the suburbs and outskirts, who can opt out. They can sit in their back gardens with their ready meal and a bottle of wine, and shop locally in their outer London high streets, which are starting to bounce back quite well.

That leaves a massive gap in the city centre—in the central activity zone, as it has slightly unromantically been titled over the last few years. Essentially, that is the west end, the City of London, Canary Wharf and those areas that people around the world know so well. People look to London, invest in London and want to travel to London because they know those areas. Those are the areas we see in the films and tourism brochures.

We then get to the question: how do we attract international visitors to go into those areas and beyond, across the UK? That is why the tourism recovery strategy is so important in making sure that we start that slow burn, because we know that it will take time to get international visitors back to the UK. However, we must do it.

We also have to get domestic tourists to London. That is why I absolutely agree with the Mayor that his campaign, Let’s Do London, is a far better campaign than we have had in previous re-openings after lockdown. It is a real call to action. If one looks around London, whether at the London Eye, the Tower of London—which I had the privilege of going to the other day—the Museum of London, the British Museum or the Royal Opera House, there are no queues. People who live in the south-east and who walk past those areas on their way to work or when they are in the workplace should go to them, because they will not have another chance to do so with no international tourists and without having to queue up for half an hour. They can see some of the best places, the best cultural buildings and the best institutions in the world right on their doorstep. That is what Let’s Do London is all about—getting people to rediscover the spirit of London.

There are two more types of people we want to encourage back, as we start to reopen. One is students. There are 40 universities in London—a massive chunk of organisations that attract young people who will want to spend more time in London after their studies. They will get jobs and fill some of the roles in the City and elsewhere that my hon. Friend spoke about. We also want to get people back into their workplaces.

The Prime Minister rightly wrangled with the decision over when to reach stage 4 of the road map. He did not make that decision easily because there were so many factors to consider, but it was the right one to take when making the argument that we want to ensure that we are moving in only one direction. The big lesson of last year is not to chase the virus and not to have the stop-start, because that costs businesses even more. A cautious reopening, put back a few weeks, is the right thing to do.

However, one of the unintended consequences of moving the reopening to July is that that leads quickly to August, which tends to be a quiet month for London. We want to ensure that we are working with big employers now, and looking at what more we can do to be flexible and encourage people back to their workplaces.

I am glad that my hon. Friend welcomed the flexible season ticket. We are demonstrating—not just doing it—that Transport for London has never cleaned the tube network as many times before. The problem is that that is being done at 2 o’clock in the morning, so we need to show people what is being done. Public transport is safe. I have been taking it most days for the past year and I have never worried about it. I encourage people to try it and see for themselves. They should spread their journeys out beyond rush hour to maintain space, because hands, face, space and fresh air are still important. We are not going to kill the virus in one day when we reopen and get to step 4. This is not like a thriller where the baddie is killed and the credits roll. We are going to be living with this for some time, but that is no reason to stay closed.

Finally, my hon. Friend talked about Sunday trading. I have been speaking to the Heart of London Business Alliance and the New West End Company about that. It is a tough one. We have looked at it time and again in Parliament, and it has always been incredibly controversial. Although she talks about international centres for it, it still needs primary legislation. We will keep it under review and work with colleagues to see what the objections are and get the balance right.

We will continue to look at what we can do with business rates. My hon. Friend talked about VAT. Something like £27 billion of support has gone into the VAT reduction. The Chancellor needs to look at measures in the round and holistically, just as she talked about looking at London holistically.

London is an ecosystem. People do not stay in a hotel in London just to sleep in another bed; they do it because of the theatres, the restaurants and all the other things London has to offer. That is what we have to protect. We will continue to try to do that, working together with the Mayor, the boroughs, this place, and our businesses and communities.

Question put and agreed to.

11:28

Sitting suspended.