Agenda item
Impact of COVID-19 on Local Business
Minutes:
5.1 Andrew Roughan introduced himself as the managing director of Plexal and has been with HereEast since 2011 when the company took over the area that used by the broadcast and media team during the Olympic games. HereEast is hosts a collection of Universities, and large & small businesses.
5.2 Andrew Roughan advised that they have moved to predominantly remote working. 1,700 students are using the service with none of those being on site now. There is a major concern from universities restarting the academic year after the summer both in terms of the validation of the receipt of student fees from international students, and the ability of domestic students to return.
5.3 Andrew Roughan advised that most of the large businesses have dispersed to remote working. Andrew gave the example of B.T. Sports who have been forced to focus on creating content unrelated to live sport and thus utilising fewer employees. He also gave the example of Ford & Ladbrokes Coral, both of which have been materially affected by COVID-19 in a way that has reduced the number of staff working on site through furloughing.
5.4 Andrew advised that in recent consultation with these businesses, it was confirmed that it was unlikely to see a major return to site at HereEast until September, and many of those business approaching autumn with caution with many considering restructures.
5.5 Andrew moved on to speak about Plexal which is more a reflection of small business in Hackney. Plexal is home to 123 businesses with varying numbers of employees from just one to larger groups of teams from larger businesses. Andrew explained Plexal principally does three things: House and accommodate those businesses, have an event program which is relevant to those businesses, and they run a consulting team that focuses on government initiatives, technology, and change.
5.6 Andrew advised that in terms of business, Plexal has lost approximately 20% of their customers either through companies going through administration or terminating their contracts with Plexal because of being more prudent with their discretionary spending.
5.7 Plexal has deferred costs of about 60% of it’s customers, and their events business is effectively paused with Andrew expecting that to be the case for the next 9 months. There is a risk that during that time, corporates will have lost confidence in mass events and Plexal is aware this aspect of the business may not return fully for a substantial period.
5.8 On the consulting side, Plexal has a contract with DCMS which is linked to national and cyber security. Plexal is awaiting the next steps from the government to see how that aspect of the business will be affected.
5.9 Andrew advised that Plexal are long-term stakeholders in the Legacy Program, and they have shareholder confidence despite some of the financial setbacks that COVID has presented.
5.10 Andrew wanted to raise three things to the commission to move forward with:
i. The discretionary grant fund is providing welcome relief to many businesses, however many businesses are not eligible to apply due to their property costs being under 30% of their turnover, which excludes many of the businesses utilising co-working spaces like Plexal. Andrew pointed out that he has raised this w/ the Group Director of Finance and Corporate Resources at Hackney
ii. The biggest challenge over the last 8 years for Plexal was convincing people to come to site using public transport links. If public transport continues to be utilised less due to COVID-19, this could prove terminal for Plexal unless an alternative solution is made viable. Andrew advised they are working with the LRDC who will have sent a communication to Hackney regarding working on the recently announced e-scooter scheme. Between Newham and Hackney councils, Plexal would like to agree a routing for people to get to HereEast.
iii. Plexal is also conscious that retail businesses, the leisure & hospitality offerings specifically, may need increased flexibility on licensing regulations; In particular, extensions of their ability to operate outside. Andrew hopes that the licencing committees can assist with the large number of requests that must be coming in regarding this.
5.11 Andrew advised that the loss for Plexal’s revue due to the pandemic is likely to be £2m. Andrew advised that there are still long-term plans for the business to operate during the next decade and as such will be available to do businesses with smaller businesses.
5.12 Daniel Maher introduced himself as the managing director of Boulevard Events. They are an event caterer based in Hackney Wick. It is a 2nd generation family-run business that has operated for 30 years. Their business is predominantly comprised of non-concession events such as weddings, awards dinners, and conferences.
5.13 The company began to see events cancelled during the first week of March. Their events typically range from 100-200 people, but some can be up to 2,000, but since lockdown the number of events has dropped to zero. 100% of their usual turnover disappeared.
5.14 The business has started a local meal-delivery service to recoup some turnover and have achieved around 5% of their usual income. This amount however does not cover the wages of the non-furloughed staff that they have, essentially meaning that Boulevard Events is operating at a loss, however the benefit of staying engaged with the community is key for them.
5.15 Daniel advised that the great challenge is that their business tends to be cash-based, usually taking large cash deposits for events up to 50% of the overall charge for the event. The company does not have confidence in using any of that money to operate at the moment due to the threat of people cancelling their events rather than postponing them, and there is no coverage from the company’s insurance to cover losses of deposits.
5.16 A more significant challenge still is that when lockdown measures are eased, and people can make use of hospitality businesses more and more, that the benefits won’t filter down into the events business for months. The company has massive clients with them such as Google, Facebook and other tech companies, that have said that they won’t be looking to hold events until May or June 2021, which is a considerable period of time for the business to have to survive under current conditions.
5.17 The company has been able to access some support measures. 13 of their 15 staff are currently furloughed, however, none of the hospitality grants & rate relief packages that were announced are available to Boulevard Events due to certain criteria that they do not meet, particularly how their business premises is rated; their building isn’t open to the public, and so essentially the event spaces the company works in will receive the grants, but Boulevard Events will not.
5.18 The company was expecting relief in terms of grants but has benefited from a rent-free period as a sub-tenant of Hackney Council of 3-months. The hope is that these measures may be able to be extended.
5.19 The next step for the company is consider the use of loans, however, being in a precarious position in terms of revenue, this represents a substantial risk.
5.20 Jo Hemmant introduced herself as Executive Director of Hackney Empire, and extended that the Hackney Empire does feel very supported by the Culture Team & Cllr Nicholson who have proved to be allies during this difficult period for theatre, particularly in becoming an official friend of Hackney Empire and tweeting that fact has made a positive impact on their Friends membership scheme.
5.21 Jo advised that Hackney Empire closed on March 16th, and while they do receive funding from the Arts Council, that only accounts for around 12% of turnover leaving an 88% gap to fill. With no present ability to sell tickets or hire out the space, this is proving difficult.
5.22 It was pointed out that due to nature of the space, operating under social distancing would be a substantial challenge to make viable.
5.23 Jo and the Artistic Director took over the business in 2018, and with assistance from Cllr Nicholson & the Culture team, the business was stabilised and was on the verge of opening the new financial year in the healthiest position that the Empire has been in for a long time.
5.24 The business is currently focusing on its work with young people, which is now online, and so the business is maintaining its contribution to creative futures and creative learning.
5.25 Jo advised that the café attached to the Empire is closed, and so the public face of the business is gone now apart from the online engagement.
5.26 Jo highlighted that serious support could be lent around licencing. The company pays 2 licences, one for the theatre itself, and another for the café, as well as outdoor furniture licences. Jo suggested that any sort of holiday from the cost of these would be welcomed.
5.27 Jo advised that every avenue of assistance currently made available has been utilised in terms of furloughing, and in the efforts to stabilise the business, everything that can be cut has been cut already.
5.28 It was expressed that everything is being done to ensure the survival of the iconic building, and to ensure the protection of jobs for residents.
5.29 The chair at this point expressed that the Commission would do everything it can to aid the survival of the Empire.
5.30 Dominic Goudie was introduced as the Head of International Trade for the Food and Drink Federation.
5.31 Dominic advised that they are a trade body representing manufacturers of food and drink. They are the largest such entity in the UK, but there are approximately another 150 similar organisations.
5.32 The Trade and Drink Federation works in close partnership and works collaboratively with many of the smaller organisations, and it has put together a group that meets twice a week in response to COVID-19; that group represents 70-80% of all the businesses in the UK’s largest manufacturing sector. They also work with the hospitality industry as a key partner and customer.
5.33 The work they have done is focused on two areas. Firstly, despite being one of two industries alongside the pharmaceutical sector that has kept operating during COVID-19, the workers themselves are deeply concerned over safety and there are considerable efforts being made around making sure those workers are safe at work.
5.34 The long-term challenge is in reopening the hospitality industry, which is critical to what the FDF do. Whereas some of the companies under their umbrella are doing quite well in terms of orders and increased sales in supermarkets, their margins overall have taken a hit due to the low margins available in that aspect of their business. The whole food and drink supply chain is dependent on the hospitality industry reopening successfully.
5.35 In order to ensure the hospitality industry reopens, Dominic highlighted several actions. He advised that most insurers of the represented businesses have failed or refused to honour claims against these losses. This has affected huge high street chains, and the government has only recently stepped in to introduce measures to assist, and there is more to do. Dominic highlighted that the FDF is there to assist in whatever way it can to struggling hospitality and food supply businesses and help them understand what support is available to them.
5.36 Dominic advised the talks around Brexit have reopened and will have an effect. Its been made clear that the negotiation period will not be extended due to COVID-19, and delivering everything the government has said it would in the quoted timescales looks to be difficult to achieve for people in the world of Trade.
5.37 Dominic highlighted the practicalities of the Brexit difficulties. 40% of the food eaten in this country is imported, and for them to reach consumers they need to pass customs & boarder processes, and presently no one knows that these barriers will look like post-Brexit. Many of the altered processes will take months or years to prepare for but could potentially be implemented in January 2021. It is difficult for businesses which are struggling to survive during COVID-19 to also implement the changes in the new year.
5.38 Cllr Coban thanked Dominic for the good work of the FDF and moved to the question section of this item.
5.39 Cllr Pallis offered sympathies to the speakers for the difficulties presented by COVID and offered a question to Jo Hemmant of Hackney Empire about theatres and the culture sector. Referencing an article from stage director, producer and screenwriter, Sam Mendes in the Times about how the Government could support theatres moving forward, he asked what the Empire’s thoughts are on that, and whether the funding provided by the Arts council is the source of finance for their work with young people.
5.40 In response, Jo advised the funding from the arts council is unrestricted in terms of its use, so it can be used toward running costs of the organisation, but it’s the total investment in the business that is around 12%, not just the Arts Council funding, and so it includes money from LBH for the Service Level Agreement to do work with young people. Jo also advised that the Empire supports 4,000 young people a year by providing free services to them, and they are currently communicating with the bodies who have provided them with grants to seek permission to use the grants for general usage as long as it doesn’t contravene the basic principles of what the funding was for.
Jo also commented she’d seen the Sam Mendes article and the Empire is a member of the UK Theatres Body, and there is a cultural renewal taskforce set up to look at investment for the future. Empire is quite different from a lot of those Theatres as they typically receive 70-80% funding from the Arts Council as opposed to the Empire’s 12%. Jo also commented that with the exception of the pantomime, that no work can be created from scratch under present conditions. Jo spoke in support of the model put forward by Sam Mendes, but clarified that the model doesn’t specifically help the Empire because they’re not yet at the stage where they can make an entire production without co-producing it with someone else.
5.41 Cllr Pallis asked whether there are models that exist that could be a viable alternative.
5.42 Jo Hemmant advised they’re speaking with other organisations such as the Roundhouse to continue conversation about alternative ways of making it through COVID-19 and are hoping to nurture larger community representation and dialogue. There is also existing pressure for the government to increase the tax relief fund for theatres.
5.43 Cllr Coban commented that he doesn’t believe the furlough scheme will be extended beyond October.
5.44 Cllr Race asked the speakers about the balance between businesses needing increased national funding in order to survive and the work required around loosening national regulations; he gave the example of restaurants having licencing restrictions eased to serve food outside over summer. He surmised that he wanted to know more about the interplay between the need for further funding and the need for easing of restrictions.
5.45 Cllr Lufkin asked a question of Andrew Rouhan of Plexal as to what the most likely method of transportation for their staff to get to site, and, in reference to the idea of electric scooters whether a hire scheme could be implemented.
5.46 Cllr Billington asked what kind of support any of the businesses have received at present to enable them to transform their business model. Cllr Billington also commented that this situation may go on for a substantial period.
5.47 Cllr Smyth posed questions to Plexal and Hackney Empire about how diversification of their model could be changed in line with some of the present growth-sectors (healthcare, social work, nursing, teaching, warehouses), and whether they could utilise these industries to resolve some of their issues. Cllr Smyth used the example of a football club that allowed children to come in and use the stadium to socially distance while they learn, and whether the Empire could repurpose its space thusly.
5.48 Andrew from Plexal answered the question regarding transport commenting that there are several options presently available: walking, car, bus. He commented that if they could commandeer a socially distanced bus route for their exclusive use, they could transport 100 people an hour to site. With 4,500 people on the HereEast campus as a maximum capacity, that doesn’t represent a viable solution.
Those who are close can walk and should continue to do so.
Andrew commented that the multi-story carpark adjacent to HereEast can be utilised, that extensive store bike storage and showers is available. 600 bikes can be safely stored.
On the e-scooter question, Department of transport says it must be operated as a hire scheme and that must be generated by the local authority rather than HereEast, hence the suggestion for collaboration between Hackney and Newham. He commented that’s its regulated, requiring a driver’s licence and insurance to use.
5.49 Jo responded to the question around further help suggesting that shared resources would be beneficial such as Legionnaires disease tests of the water when the water is turned back on in the premises. Jo also commented that alternative business models are being explored consistently and they are exploring using the space for conferencing/ university usage, but the issue exists that such events need to be staffed, and the inherent finance has to be there.
Jo commented repairs work is underway during this downtime, but shared resources and leeway around licence payments would be helpful.
5.50 Daniel Maher from Boulevard Events responded to the same question around additional help commenting about effective COVID testing being made available to allow larger events to take place and minimise the risk of spreading the virus at large, catered events. He also commented that the furlough scheme has been beneficial but expressed concern that when they do have to contribute more to wage support that it won’t be sustainable. He also said that more flexible hours for staff would be useful. Daniel expressed that financial support is remains the most pressing issue.
5.51 Cllr Coban welcomed Cllr Nicholson to speak on the challenges of the invited business and what kind of position the economy is now in. He also highlighted that Cllr Williams is in attendance.
5.52 Cllr Nicholson began with a summary of council efforts so far. £100m has been distributed into the local economy by the council, the money being distributed to large numbers of businesses in the form of grants and rate reliefs. 350 commercial tenants have been included in phase 1 of the rent deferral program. They are not obliged to pay Q1 rent and there are ongoing conversations about Q2 payments to be deferred or even written off.
5.53 In response to Andrew Roughan’s comments on discretionary business rates grants scheme, Cllr Nicholson advised that central government have given LBH £3.4m to allocate under this initiative. The estimate is that that there are 7,000 businesses entitled to make an application, and the reality that is that if they all applied and were successful in that application, each busines would receive approximately £485.00, obviously not sufficient to alleviate liquidity or solvency issues.
5.54 Cllr Nicholson agrees that the economy needs to be open but acknowledges central government hasn’t necessarily been clear about the relationship between the necessity to reopen and the necessity for social distancing.
5.55 The need for close collaboration between public and private, and business and council was highlighted by Cllr Nicholson. He commented that the number of businesses in the Hackney Business network have increased since lockdown and increase of 5,500. It is important to recognise this relationship and conduit of communication.
5.56 Cllr Nicholson said he would speak to the Director of Finance about the issue of many businesses being ineligible for grants.
5.57 Cllr Nicholson expressed the need for confidence for customers and consumers to re-enter premises and stimulate the economy. The necessity for effective communication to ensure the success of this was highlighted.
5.58 Cllr Nicholson went on to say that the success of the emerging Inclusive Economy is reliant on the economy thriving, and those ambitions may be in jeopardy if the council fails to appropriately invest in the businesses in the community.
5.59 Cllr Nicholson acknowledged that there are more questions than answers as we move into Q2, but that serves to emphasise further the need for increased collaboration and communication.
5.60 Cllr Coban thanked Cllr Nicholson for his comments and observations, echoing the Cllr’s statements around the inclusive economy being in jeopardy due to this situation.
5.61 Cllr Coban introduces Shekeila and Jermain from the Young Futures Commission as the first speakers on item 6.
Supporting documents:
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