20 Jun 2018
Policy area: Town centre & Retail
Published in Estates Gazette this week, our Chief Executive Melanie Leech discusses why retailers and property owners need to work together in the wake of CVA controversy.
Football fever has temporarily gripped the nation and those in the retail business will be hoping for a long run for England and a long, hot summer to follow. The feel good factor has been hard to spot recently on some of our high streets with a string of announcements of companies contemplating or entering into Company Voluntary Agreements (CVAs). It is not, however, all doom and gloom – and we should be careful not to talk down a vital sector of our economy and a key part of our lives – but it’s clear that fundamental change is happening on many of our high streets and in our town centres as we change the way we shop.
Retailers and property owners need to work together to rise to this challenge, and to plan and navigate to a successful future. So, it’s disappointing that CVAs have become more and more controversial – with property owners feeling that their original purpose is now being undermined and that some recent announcements have prejudiced their interests with little hope of a fair outcome for the savers and pensioners whom many retail property owners represent.
It goes without saying that we support the rescue culture CVAs were intended to engender. Property owners do not want empty stores. They will support CVA proposals as part of a wider restructuring programme to get to the heart of a struggling business’s problems and return it to long-term health.
Increasingly however it feels as if the CVA is seen simply as a tool to shed underperforming assets within a portfolio – and to enable a tenant to walk away from their lease liabilities – without that business tackling its wider challenges. Or, indeed, entering into a conversation which asks all of its creditors, and not just property owners, to take a share of the pain. Ultimately, this tactic is likely to be self-defeating – simply cutting some rents and getting rid of a few stores will not restore the fortunes of a business.
The real damage can be seen in how confidence is being destroyed in the CVA process itself. Everyone involved – property owners, retailers, insolvency practitioners and advisers – should be concerned about this at a time when the reputation of business generally is being challenged, and when the decisions being taken and the ultimate outcomes have such a fundamental impact – on people’s jobs, on pensioners and savers and on our communities.
That is why the BPF has called on government to conduct an urgent and independent review into the use of CVAs. We recognise that this will take time, so we have also called for a number of measures to restore some confidence in the interim: the earliest possible engagement with property owners in line with BPF’s best practice guidance; the involvement of an independent third party for larger CVAs; and codification of voting rights and structures for CVAs through a Statement of Insolvency Practice.
This is not time to pit retailers and property owners against one another in battle – we all want to see UK retail succeed up and down the country. Let’s re-create a sense of a shared agenda and collaboration that lasts longer than the month in which we all come together to celebrate (or despair of) the beautiful game.