Yahoo Finance Hospitality firms urgently need clarity from Sunak about £2.5bn of unpaid rent
If it really is a case of “one more heave” on vaccinations before restrictions on the hospitality sector can be eased, what’s the best way to ensure the country’s pubs, restaurants and nightclubs survive to take a shot at recovery?
The two most important measures may be these. First, an extension of six months to the ban on landlords evicting tenants. Second, a government-backed framework for the two sides to share the accumulated pain of unpaid rents.
As things stand, the moratorium on evictions is due to end suddenly on 30 June, and it requires no imagination to envisage chaos. Hospitality firms, broadly defined, are estimated to have built up £2.5bn of unpaid rent during the pandemic and the hardball class of landlord will want to grab what it can. Fear of being at the back of the queue of creditors will tempt some to make demands for unpaid rent on day one, potentially killing thousands of businesses before they’ve had a chance to try to trade their way out of crisis.
Rishi Sunak is obviously aware of the problem since he’s been lobbied from all sides. The chancellor does, though, need to announce his decision very soon, meaning this week. For many pubs and restaurants, uncertainty over rent arrears is a bigger worry than any tweaks on business rates that may or may not be granted (an extension to furlough, it seems, is not on the cards).
A sketch of a framework would put a ringfence around rents accumulated during lockdown, with landlords and tenants given six months to negotiate a solution between themselves. If they can’t agree, arbitrators would then impose a deal.
That, more or less, was a model proposed in April by British Land and Landsec, two property giants that can afford to take a long view. It is also, roughly, what trade bodies in the hospitality industry want.
A critical detail would be the instructions given by the government to arbitrators. A default assumption of a 50/50 split in the bill would not work in all circumstances or all sectors. Some “essential” retailers have been open and trading during lockdown but have still not paid full rent; it is hard to see why they should be treated as generously as a pub or nightclub that suffered a full blast of restrictions.
But the broad principle of “burden sharing”, or rent forgiveness, in the hospitality sector seems sound. It is only the government that can make it happen in a semi-orderly fashion. Sunak needs to hurry up.
GSK spin-off will be crunch time for its boss
The main course at GlaxoSmithKline will be served next week when the group reveals how, precisely, the consumer healthcare division will be spun off and what long-term revenues it thinks the core pharmaceutical and vaccines operation can achieve. To put it mildly, Dame Emma Walmsley, the under-pressure chief executive, needs to impress.
In the meantime, though, she produced an amuse bouche on Monday in the form of a deal worth up to $2bn to collaborate with a US biotech firm, iTeos Therapeutics, on a cancer treatment in early-stage trials. In a small way it was a reminder to investors, including the prowling US hedge fund Elliott Management, that she has at least addressed one strategic headache during her four years at the helm: GSK’s confusing on-off commitment to oncology.
Back in 2015 her predecessor, Sir Andrew Witty, sold GSK’s portfolio of established cancer drugs to Novartis for $16bn, a deal that now looks a clear strategic error. It was a moment when “next-generation” immuno-oncology cancer therapies, which use the body’s own defences to fight the disease, promised big advances. GSK risked missing a major development.
Walmsley hired an oncology specialist as chief scientific officer and authorised a rebuild. It was a potentially hazardous ambition given the high prices for promising cancer treatments, but GSK hasn’t obviously messed up.
Zejula, the key ovarian cancer product from the £4bn purchase in 2018 of Tesaro, a US biotechnology firm, is on the market and selling well. The wisdom of the iTeos deal will depend on results from the labs, but GSK can claim to have a functioning oncology operation again: potential therapies account for a quarter of the development pipeline.
That detail will be irrelevant unless next week’s portrait of the overall pharma business is deemed ambitious and credible. And even if it is, Walmsley faces a battle to convince doubters that she should lead the pharma business after demerger. But her deal-making record, in oncology at least, looks better than her predecessor’s, which is something.
