Covid-19: Recovery of Central London Businesses

Nickie Aiken Excerpts

Tuesday 22nd June 2021 Westminster Hall

[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.