Covid and the City: How pandemic hit UK business on first anniversary of lockdown

The government provided top-up grants and  bounce back loans, but many firms complained that these barely scratched the surface of their rent bills and other costs while shuttered.

UKHospitality data shows at least 7,659 licensed premises closed permanently between December 2019 and January 2021.

The night-time economy fared worst, having been closed throughout much of the year.

The government implemented a moratorium on business evictions last April. Since then firms have built up huge rent debts, and gym and restaurant bosses are now warning of a looming "cliff-edge"when the moratorium is lifted.

UKHospitality chief executive Kate Nicholls, said: "The past twelve months have been nothing short of disastrous for hospitality. We have taken the hit harder than perhaps any other sector. Businesses have folded, many jobs have been lost and, although the reopening dates are in sight, it would be no exaggeration to say many businesses are still barely surviving.”

Many bosses now say their companies have streamlined and are poised to bounce back as soon as restrictions are eased.  Cost cutting measures implemented over the past year, including redundancies, do mean many are leaner businesses. Some ventures, such as Rooney Anand’s RedCat Pub Company, are backed by serious cash and are actively looking to invest in the sector while distressed companies and empty sites left by closed chain outlets are being offered on the cheap.

Nicholls warned that even though many businesses can reopen in April and May under the latest roadmap plan, they "are likely to trade at a loss due to Covid restrictions". She said that "it won’t be until 21st June, when social distancing measures are presumably lifted, that we really have an opportunity to recover".

The moment ‘non essential’ retailers were told to close last March marked the start of what was to become a turbulent and unpredictable 12 months, where revenues dived for scores of businesses and a number of firms collapsed.

Fashion and jewellery shop chains are among those that have been subject to three lockdowns, weaker footfall due to travel restrictions and huge online competition. Key trading periods were also missed by many including Christmas. On top of that firms have had to invest to make stores Covid-secure, with spending on PPE and social distancing signs for example.

A business rates holiday and furlough scheme were among support measures given by the government to help firms ride out the virus crisis. However, for many retailers lockdowns came on top of existing headwinds, from high bills to biting online competition. This meant some bosses had to look at redundancies and shop closures to secure a future.

Latest restrictions are due to ease next month in England, but that has come too late for a number of firms.

Professor Joshua Bamfield, director at Centre for Retail Research, calculates there were around 14,809 UK permanent retail store closures between March 2020 and February 2021 with over 180,000 retail jobs lost. That was deeper than 14,436 and 127884 respectively in the prior year.

The figures include: net losses from administrations and CVA restructures, plus stores closed and employees made redundant by continuing retailers that were unable to keep all their shops going.

More closures are likely in 2021 with a number of recent purchase deals for brands such as Debenhams and Topshop including digital assets but not physical real estate.

The demise of some chains will mean some retailers may find they can negotiate good rent deals for prime spots, as landlords look to avoid having empty shops in their portfolios.

Looking ahead, Helen Dickinson, chief executive of the British Retail Consortium, said: “The Government has a great opportunity to put retail on a stronger course through its upcoming business rates review, to fix the broken business rates system which is holding back investment in our local shopping destinations, and putting at risk tens of thousands of retail jobs.”

Across the wider industry, many online focused retailers have seen sales soar during the pandemic and they have won over waves of new customers.

If we look across the property sector, there are some parts that have performed very well. Take some housebuilders, which have seen scores of customers eye moves and take advantage of a stamp duty holiday. Then there were warehousing landlords that saw record demand for space as online retailers sought extra room to cope with a spike in customer orders.

But for high street and office landlords, 2020 is a period they would rather forget. Companies that let shops or bars to operators faced a fall in rental income as tenants were forced to close for lockdowns.

A ban on business evictions was introduced to help high street firms, and it has since been extended. While some tenants agreed rent holidays and deferrals with landlords, building owners claim some occupiers refusing to pay rent are big, profitable companies.

The British Property Federation estimates total rent unpaid for UK commercial property between late March 2020 and the end of June 2021, will be up to £7 billion if the current rate of rent non-payment continues.

Over to London offices, and the sector faced major disruption. Scores of office staff have worked remotely since last March, and a number of companies are examining whether they will embrace more flexible working post-pandemic.

Lettings dropped last year, while transactions of central London offices fell to £8.7 billion between March 2020 and February 2021, from £13.2 billion, according to Colliers International.

Sales were impacted by travel restrictions making deals trickier and as some buyers paused to see how demand for offices might change.

While a number of firms will look to reduce the amount of office space they occupy, in encouraging signs for the market, a number of new London HQ deals have recently been signed, including with TikTok and Calvin Klein parent PVH Corp.

London's streets standing deserted at the height of the lockdown will be the defining image of the sheer enormity of how hard the pandemic hit Britain's economy, according to former Bank of England heavyweight Sir Charlie Bean.

Like the lines of people queuing to withdraw money from Northern Rock before its dramatic collapse in the financial crisis over a decade ago, seeing normally-bustling Trafalgar Square left empty will stay with him as a symbol of the devastating economic consequences of Covid-19.

Sir Charlie - former Bank of England deputy governor and current member of the UK's fiscal watchdog - said the "notion of closing down large chunks of the economy is a huge and unprecedented step", and one he never expected to see in his lifetime.

Having served at the Bank under Governor Lord Mervyn King throughout the financial crisis, Sir Charlie witnessed events that brought the banking system and global economy to its knees.

"At the time we thought that was a once in 100 - or even 200 - year event," said Sir Charlie.

"We've now had two extreme events happening in the space of a little over 10 years."

While the financial crisis had a long and painful impact on the UK, it pales in comparison with the economic shock and the cost of the coronavirus crisis so far.

Covid-19 sparked the biggest fall in UK gross domestic product (GDP) - a measure of the size of the economy - for more than 300 years in 2020, sending it plunging by a record 10%.

That is twice the size of the contraction caused by the financial crisis and the Great Recession that followed.

Sir Charlie - one of the committee members at the Government's independent forecasters, the Office for Budget Responsibility (OBR) - said while there had been previous financial crises to provide a template for action back in 2008, there was no handbook for a health crisis on this scale.

This presented challenges not only to fledgling Chancellor Rishi Sunak, but also to the likes of the OBR and the Bank of England - both looked to their forecasts on the expected economic impact.

Sir Charlie revealed that during the initial number-crunching for the size of the economic shock the UK was facing, the official forecasters were left wondering "could it really be that big?".

He admits the OBR "over-egged" the predicted decline in GDP at the start of the crisis, when it warned the economy could fall by as much as 35% between April and June.

It did, however, still fall by an eye-watering 19%.

Sir Charlie said the strength of the Government's response to the pandemic has been one of the biggest surprises of the past year, having launched an "astonishing" £400 billion of Covid-19 support measures.

Likewise, he said the furlough scheme, which has cost £54 billion so far, and at one stage covered the bulk of the wages for almost a third of Britain's workforce, was "almost unheard of".

The Bank of England helped cushion the blow of the economic shock by slashing interest rates from 0.75% to the all-time low of 0.1%, while expanding its quantitative easing (QE) programme to a mammoth £895 billion.

Sir Charlie, who is also a professor at the London School of Economics, said while monetary policy "played a supportive and helpful role ... this was a time for governments to step up to the plate and the Chancellor has done that in spades".

This has not come without its cost, with government borrowing predicted by the OBR to reach a peacetime record of £355 billion in the year to the end of March - equivalent to 17% of the UK's national economic output.

Despite the blunderbuss approach to pandemic support, Sir Charlie said it will not be enough to prevent some unavoidable long-term scarring.

The OBR is predicting the UK economy will be 3% smaller in five years due to the crisis than it would have been, but it could be as much as 6%.

Official data for January shows 726,000 fewer workers on payrolls since the start of the pandemic, even with the furlough support, and the OBR predicts the unemployment rate will soar to a peak of 6.5% by the end of 2021.

The impact has been unequal through the economy, with some sectors thriving while others - such as retail and hospitality - have been decimated.

Faced with this and the long-term consequences of the pandemic, Mr Sunak now faces considerable "new challenges", Sir Charlie warned.

"He needs to support the recovery ... but getting the timing right is important and making sure the economy rebounds at an appropriate rate - not too fast and not too slow," he said.

Sir Charlie and his colleagues at the OBR are predicting a strong bounceback in the economy thanks to the rapid rollout of the vaccine programme.

While forecasters are keen to stress the uncertainties that remain in this pandemic, there is hope that by the end of 2021, the sights of Trafalgar Square standing empty will be firmly consigned to history.

Business owners and industry experts have said London has witnessed its "biggest change in living memory" after the coronavirus pandemic emptied the streets of the Capital.

Bustling tourist hotspots and busy City office blocks went silent in March as the Government lockdown forced the vast majority of people to work from home and visitor numbers dried up.

A year later, just over half of UK workers have returned to their workplaces but the impact on the City of London is still particularly stark.

Mark Dixon, chief executive of office giant IWG, told the PA news agency demand for central London office space has shrunk over the past 12 months, with more firms eying up opportunities outside the M25.

He said the company has seen demand in the City fall by 26%, with a 175% increase in Uxbridge and 52% rise in High Wycombe.

He added that the high cost of living in London has particularly weighed on its recovery in demand.

"For a lot of young people, working in London is a fantastic place - if they didn't have to commute," he said.

"So, if they could have a short tube ride to go from A to B, fantastic, but the cost of living in London can sort of be prohibitive.

"What we saw during Covid is that liveable cities were less affected than what we called 'unliveable cities' or very expensive cities.

"So, if you looked at cities like Copenhagen - where there's lots of affordable housing, it's very easy to get to work, there's a reasonably priced and very good public transport system - it was much, much less affected."

However, commercial property experts have said there have been green shoots of recovery in recent months with an improvement in investment in the City.

Andrew Thomas, head of international capital markets at Colliers, said: "As the first signs of spring are beginning to show, so are the first signs of the UK workforce being able to leave the enforced hibernation of lockdown working.

"The last 12 months have created the biggest change in living memory for London and we are only at the beginning of the journey.

"The panic that pervaded this time last year on the failure of urbanisation and the death of the office has disappeared with more voices now coming out in support of living and working in our city centres."

He added that property portfolios have shifted over period with investors and developers looking increasingly at smaller projects in the capital.

Colliers said that demand for the largest developments has dropped 64% year-on-year, although total activity it only down by 20%.

Property giant Savills also reported another rebound last month, with it reporting £346.5 million in sales in February after a quiet January.

However, it said this was still 30% down on February 2020 despite hopes regarding the impact of the UK's positive vaccination roll-out.

International investment has improved in recent months, but international travel into City has remained thwarted by international travel curbs.

Robert Franks, co-founder of luxury trainer retailer Kick Game, said trade has been hit hard by closures but that store sales have seen their recovery held back by low numbers of tourists in the capital.

The retailer, which specialises in limited addition items, warned that there is still a shadow of uncertainty as to how the tourist market will recover in 2021 despite the Prime Minister's road map.

"We are really reliant on people from the Middle East and China in the summer - that trade can make or break our year," he told PA.

"Online has been great and kept us moving forward over the past year but we really want to see those customers back this summer."

However, Franks highlighted that the impact on the retail property market had created opportunities for independent retailers to move into sites they previously could not have afforded.

"Everything is weird. Stores have been hit so hard but we've been able to open our new ones because landlords have been happy to agree turnover-based rents.

"If you would have told me a year ago that we would have opened stores in Burlington Arcade and in Covent Garden opposite the Apple store I'd have thought you were mad."

London's hospitality sector has also seen a major shift in the property market, with many closing sites for good and competitors such as Wetherspoons revealing plans to target more central London sites.

Greg Sage, corporate affairs director at pub giant Greene King, said he hopes the Government will encourage more people back into city centres to aid the recovery of its hospitality venues.

"It's been an incredibly challenging year for our central London pubs, which have had to cope not only with the numerous closures and restrictions brought about by the pandemic but also a complete absence of tourists and workers in the capital when pubs were able to trade," he said.

"We're looking forward to reopening some of our pubs on April 12.

"However, given the lack of outdoor space in the city, we expect to open just 33 of our 176 London pubs on that date.

"Even with the positivity around the rollout of the vaccine and plans to end social distancing this summer, we need Government and private sector action to encourage a return of people to city centres."