It seems a day can hardly go by without shop closures and job losses hitting the headlines.
As public concern intensifies, and political scrutiny attempts to investigate who or what is to blame, our reputation as a responsible and vital business sector is being put to the test – a test we ought to pass.
Headlines about landlords waging war on retailers don’t help matters, particularly when people’s jobs are at risk, and do not accurately reflect our sector and what we strive to achieve, including our contribution to the economy and people’s lives.
While Mike Ashley told the housing, communities and local government select committee that “landlords and retailers by definition have always been uneasy bedfellows”, for the most part, we know in reality this is not true and doesn’t have to be the case.
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Of course, it’s the surge of CVAs and misuse of the process in the past year that have added fuel to this fire. For some retailers, CVAs have wrongfully become a tool to simply shed underperforming assets – and enable a tenant to walk away from lease liabilities – without tackling the wider challenges it might face.
It is disappointing that CVAs have become so controversial.
They were designed to help retailers through tough times – to put a struggling business back on its feet as part of a wider restructuring – a rescue culture the BPF still supports. Property owners do not want empty stores. They want thriving businesses and vibrant town and city centres.
Retailers are our customers and our success is intertwined with theirs. Now, more than ever, partnership will be key, but the CVA bad practice must stop.
The CVA process can be improved by working hand in glove with retailers and insolvency practitioners. The BPF Insolvency Committee is working tirelessly to invite retailers and insolvency practitioners to discuss CVA proposals before they are launched.
This ensures that property owners’ interests are better understood and insolvency practitioners have a sounding board as they advise clients. It never means the BPF has approved a CVA, but it is right to acknowledge when a retailer or insolvency practitioner has demonstrated best practice by engaging early with us and welcoming our input.
Through a better dialogue, the BPF has influenced the approach to CVAs and flagged up proposals that are likely to be difficult for property owners to support.
“Retailers that aren’t taking a long, hard look at themselves and coming up with a plan to transform their business will flounder”
There will always be give and take, but there are also red lines. The BPF has developed a CVA engagement guide including our top 10 red-flag clauses asked for by insolvency practitioners or retailers, but considered unacceptable to a property owner. For example, rental discounts must not survive the termination of the CVA.
Our message to retailers and insolvency practitioners is that simply cutting rents and closing a few stores will not restore a retailer’s fortunes. The high street is undergoing fundamental structural change and facing unprecedented challenges.
Retailers that aren’t taking a long, hard look at themselves and coming up with a plan to transform their business will flounder. As a sector, we must keep our eye on the bigger prize – effective leadership and policy that allows local authorities to plan, and ensures that retailers, property owners and local authorities work together, leading on innovation rather than simply reacting to it.