Rishi Sunak made his Summer Statement earlier this week. What does the package of announcements mean for place managers and leaders? We asked Professor Cathy Parker, Co-Chair of the IPM and Christian Spence, Head of Economic Analytics at Manchester Met’s Future Economies Research Centre, and Fellow of IPM, to reflect.
The summer statement announced a package of support for the economy, under the title of ‘A Plan for Jobs’. Whilst supporting jobs was certainly a theme - the package also included a stamp duty holiday, green capital expenditure, a VAT cut, and a discount scheme aimed to boost eating out in August. We look at all these measures and give you our views on what they might mean for places and place management.
Stamp duty - a stamp duty holiday on house sales up to £500,000 is not really an announcement of much interest for place managers. It will speed up transactions on house sales of less than half a million, as people will want to move before the March 31st deadline to make the saving (on average £4,500). Money saved in stamp duty (or at least some of it) is likely to be spent on furnishings and/or improvements which may benefit some local businesses.
Before the Internet, this particular announcement would have, no doubt, driven much more footfall to the town centre, as people visited estate agents. However, ‘window shopping’ for house movers (or dreamers) has shifted, almost entirely, online now.
Jobs retention bonus - £1,000 paid to employers for each employee that is continuously employed November to January (and paid more than £520 per month). Relevant for all organisations in your area (it is not sector-specific) and could help some BIDs who might have furloughed staff.
Kickstart Scheme - will directly pay employers to create new jobs for any 16 to 24-year-old at risk of long-term unemployment. Funding pays 6 months wages and some overheads.
Many successful smaller businesses, especially family businesses, lack succession planning - in other words they don’t have young people trained and ready to take over. This is especially a problem for independent retailers and, in particular, market traders. Whilst the scheme is not going to take a school leaver and make them a CEO overnight, it can bring a new generation with new skills and representing a new market into established businesses.
There is more support coming for young people - more traineeships, apprenticeships, sector-based work academies, and career guidance. As usual different agencies will provide different bits of the jigsaw, with little of it joined up in terms of a place-based approach. Therefore, there is an opportunity for place managers to represent the needs of businesses and act as a coordinator or conduit between those offering funding and services, and those that can benefit. There is also the opportunity to attract more young people into a career in place management.
Returning to work - more help to support the unemployed to find work. Most of the support here is to expand schemes that are already running, for example the use of Work Coaches. Same advice as above, can you reach out to the people providing these schemes (eg Job Centres) and make sure they understand what the needs of local businesses are? Place managers can ask is it possible for more of the services to be provided locally (eg in their town centre, or industrial park). Can your place management scheme offer employment, a placement or other support to these schemes?
Capital investment - On top of the £88 billion of capital funding announced this year for roads, schools, hospitals, towns fund etc an additional £2bn was announced for green homes and £1bn to improve the energy efficiency of public sector buildings. With many public buildings located in town centres this could help the longer-term green ambitions of some places. Investing in infrastructure is what governments do to try and fend off recession or spend out of recession and it obviously puts money into the economy. However, it is the largest companies that are likely to get these contracts, which does reduce the amount of impact these contracts have on local economies. The Preston Model shows what a difference local procurement strategies can make. For capital investment projects that are managed locally (e.g. the Future High Streets Fund and Towns Fund) much more bang for the buck can be had for the local economy through awarding contracts to local or regional businesses, and they can often be delivered faster and for better value, too. As a place manager/leader please do make sure you get an invite to the table to make this point. If you need help/evidence then get in touch and we will provide!
VAT Reduction - From Wednesday 15th July to Tuesday 12th January, VAT on eat-in or takeaway hot food, accommodation and attractions (e.g. cinemas) will be cut to 5%. This is one of two sector-specific measures to help, in the words of the Chancellor, the “pubs, cafes, restaurants, hotels and B&Bs that bring life to our villages, towns and cities.” The other stimulus being...
Eat out to help out - during August meals eaten at any participating business (ie those that register for the scheme), Monday to Wednesday, will be 50% off for the consumer, up to a maximum discount of £10 per head. The discounted amount will be paid by the Government, direct to the business, by bank transfer (within 5 days).
We’ve already seen The Treasury can administer large-scale projects like this very efficiently. Combined with a bigger VAT drop for hospitality and tourism what’s not to like? Well, these measures whilst welcome don’t compensate enough for the loss of footfall and income to many businesses and places caused by social distancing.
The pubs, cafes, restaurants, hotels and B&Bs that we rely on to bring life to our villages, towns and cities have to operate at capacity levels that, in many instances, are not profitable. In order to offset the loss of income, prices may go up. In reality the benefit of the VAT cut is likely to be shared between the consumer in some lower prices and the businesses with some increased margins. Eat out to help out will help out, in August. But what happens afterwards? Especially as the nights start drawing in and the allure of eating outside becomes less attractive in October and November.
Places are complicated ecosystems. We have larger towns and cities where social distancing means fewer employees in office jobs, and so less footfall for the retail, bars and restaurants. In commercial areas, many hospitality and retail businesses are just not going to be viable as they have lost nearly all of their customers. No amount of VAT cut or eat out schemes can entice their customers back as so many are physically elsewhere, working from home. Conversely, in other towns and areas the opening up of hospitality is the missing pieces of the offer. Browsing and buying is not so much fun, without a break for a coffee or lunch. So, with restaurants, bars and cafes opening again this can help the retail and other businesses too. The ‘Eat out to help out’ scheme is likely to benefit multifunctional, speciality and holiday towns.
In conclusion, there is a lot to be thankful for in Rushi Sunak’s Summer Statement - but we are left with the overall feeling it is a statement for an ‘old normal’ type of economic recession - not one caused by a pandemic where the need to socially distance and the fear of contagion remain until a cure or vaccine is found. COVID-19 fundamentally changes consumer behaviour and the way our economy can operate and it’s not clear that government understands this. More help will be needed as sectors remain restricted or closed and future lockdowns are still possible.
Read the full transcript of the Summer Statement here