Extending the eviction ban is a cheap trick – UK businesses need real support

Just a couple of days after Boris Johnson airily dismissed the idea of extending the government’s support for the economy to go along with extending the remaining Covid restrictions for four weeks, we have the first crack in the dam.  

The ban on commercial landlords evicting firms for unpaid rent, which had been due to end this month, is now being extended until next March. 

Treasury minister Stephen Barclay belatedly admitted that the delay, announced on Monday, presented “additional challenges" to businesses. No kidding. 

Barclay may be one of the government’s dimmer lights – and I know that’s saying something – but it seems that there are at least some still on in his department. 

Offering up an extended eviction ban in an attempt to damp down the hospitality industry’s fury is a neat, some would say cheap, trick because it’s a concession that doesn’t put any more Treasury skin in the game. 

Commercial landlords are the ones being told to take one for the team and landlords don’t, as a rule, get a lot of love from the public, despite the potential implications this move could have for their pensions. So this is a relatively easy concession to make. The downside from the government’s perspective is that I suspect there may well be a Tory donor or two among them. They could make life quite uncomfortable for the next central office drone that rings them up begging for cash.

In theory, because businesses affected by the extended restrictions can now safely withhold rents for the next nine months they might be able to afford the ten per cent of furloughed employees’ salaries they’re going to have to start paying in July. 

But there are no guarantees. There are plenty of employers who will say thanks for the assist but we’re still firing people. This is what’s happened every time the furlough has looked like it’s on its way out. 

Extending the latter for four weeks would have buttressed economic confidence while saying “we stand behind you” to workers. It was an open goal, which the usually sure-footed chancellor Rishi Sunak surprisingly missed. A Labour Party on its game should be able to take advantage but … right. 

The other problem with this one from an economic standpoint is that it kicks the can down the road. It may provide some breathing space for businesses in affected sectors. It’s possible some may be saved if the recovery is sufficiently strong for them to get back on their feet and paying rent again come March. But for others, it will simply put off the day of reckoning. 

Insolvencies are an under reported economic stat. The fact that they’ve been running at sometimes historically low levels through the pandemic is a testament to the effectiveness of the economic support the government has delivered, as much as is the low rate of unemployment.

The latest figures, issued earlier this week, showed another fall in the latter. On the other hand, corporate insolvencies went in the other direction, jumping by 8.8 per cent to 1,011 in May 2021. That compares to April’s figure of 929. It’s also an increase of 6.9 per cent compared to May 2020’s figure of 946.

The insolvency practitioners trade body R3 said it was “too early to say” whether this could be “the start of something bigger”. 

However, I get the distinct impression that we’ll be sitting here in six months talking about this as the point of derailment that led to the train crash for many businesses. Hospitality, in particular, is in a parlous state. 

The government’s decision to pause reopening was necessary given the virus data and the need to increase the numbers of people with two shots, which matters a lot in the case of the dominant delta variant. 

But, as I argued earlier this week, its failure to extend the various support schemes (now with the exception of evictions) alongside that could be the straw that breaks the camel’s back for many businesses. 

The economy is still in recovery mode, and that’s very welcome, but don’t be fooled. Things could still get very messy.