5 June 2020
DRD Partner and Chief Executive of the Association of International Retail, Paul Barnes looks at how social-distancing will affect sectors of the economy as we emerge from the lockdown, and what the Government can do to assist businesses in these sectors.
Just when Britain is launching itself out into the brave new world beyond the EU, its 14-day quarantine period for international arrivals comes into force next week. This policy is telling the world that the UK’s doors are closed in the vain hope of keeping in a horse that bolted months ago.
The move announced earlier this week has killed-off international tourism, not just for the next three weeks but for months ahead. 95% of all visits to the UK last fewer than 14 days and, because most people book their trips months ahead, the uncertainty of the rolling three-week quarantine review means travellers will simply remove the UK from their sights for the foreseeable future.
Of course, public health is the priority. But the move doesn’t seem to be backed by the science (which makes it more difficult to repeal “when the science changes”). And other, equally concerned, countries have found ways to reduce the risk without a shutdown to visitors such as pre-flight testing and airbridges.
This is just one example of the impact that the pandemic is having on the hard-hit retail, tourism and hospitality industries. And surviving in the post-COVID-19 environment is probably going to be just as damaging as the lockdown. How businesses and government respond as COVID-19 develops is going to mean life of death for many of these businesses.
Two metre social distancing is a major brake on reopening these parts of the economy that depend on capacity and footfall.
Theatres need 70% occupancy to break even. Social distancing allows 15%. And actors on stage and backstage can’t reasonably maintain that distance either.
Most pubs and bars can’t operate profitably at two metre distancing either.
Mass transport systems don’t work without the mass. And without public transport, people can’t get into city centres for work or for shopping and entertainment.
The situation is particularly dire in London’s West End International Centre where it is the eco- system of world class shopping, theatres, restaurants, hotels and cultural attractions that makes it a global centre, attracting investors, travellers, talent and students from around the world.
Staggeringly, the West End generates as much wealth for the UK each year as the whole of Wales.
And as Britain sets sail into unchartered waters of a post-EU world, London and its West End is one of the big cards that it still has to play. Bankers want to work in The City partly because Saturday night is more fun in the West End than in Frankfurt city centre. Students love the bars of Soho. Businesspeople love shopping on Bond Street, staying in glamourous hotels and eating in some of the world’s best restaurants.
More than half of the 23 million international tourists to the UK come to the West End, spending most of their £22 billion in London. Britain simple cannot afford to lose its international centres, whether in London, Manchester or Edinburgh.
So, is there any light at the end of this gloomy tunnel? Let’s do the bad news first. This isn’t going to end particularly well. Town and city centre businesses have been hardest hit and will be the most difficult to recover given social distancing needs. Many businesses will close. People will lose their jobs. There is no easy way out of this but there is hope.
First, the Government recognised early on that healthy businesses need to be supported during the lockdown to reopen and contribute to the recovery. There is still scope for persuading ministers that for some businesses, just opening-up without customers will soon lead to permanent closure, wasting all that money spent on furlough and weakening the recovery. The Association of International Retail (AIR), run by DRD, is actively arguing to Government that businesses that cannot yet reopen profitably will need a few more months’ support.
Secondly, we are talking about some of the most innovative and creative people in the world. By persuading Government to provide more flexibility and fewer regulations, many of these businesses will find ways to make things work.
The alternative treatment of international arrivals is one example. But adjusting social distancing to, the WHO-recommended, one metre moves pubs and bars up from 30% capacity to over 70% capacity. They can just about survive on that until things get better.
If you give a UK-wide blanket planning and licencing permission for bars and restaurants to use outside space during the summer you could kick start town centres as tables flow onto the pavements and into the parks, allowing social distancing without cutting customer numbers.
Andrew Lloyd Weber has already offered-up the Palladium as a testing centre for cast and audiences to get a theatre passport, allowing less social distancing without increased risk.
And although international visitors usually spent £22 billion each year in the UK, British people spend around twice that abroad. With international travel not expected to re-start until 2021, that’s a big alternative market for British businesses to go for with the right effort and support.
The longer-term economic impact of COVID-19 is just about to be felt. Many businesses will survive and eventually prosper but some will need a little extra help to secure very targeted government support and flexibility to get them over this hardest time. The fight against the impact of COVID-19 has just begun.
DRD’s core mission is to build, manage and protect our clients’ reputations at moments of challenge and of change. There has been none greater in our lifetime than Covid-19.
The Association of International Retail is run by DRD Partner Paul Barnes. For more information on the work of AIR please see their website www.internationalretail.co.uk
business, business, business, LinkedIn