Why did it take so long for landlords to agree rent cuts?

CANTILLON: INSIDE THE WORLD OF BUSINESS

The Atlantic Homecare rescue plan approved yesterday by the High Court delivered a better than expected result.

The company had originally expected to shut five stores, but instead it is closing two, in Newbridge and Limerick.

Instead of axing 114 jobs, it will be laying off 44. It may be small comfort to those who are losing employment, but saving 70 jobs in the current climate is almost as good as creating them.

The interesting thing to emerge from it all was that a number of landlords were prepared to accept lower rents rather than lose a tenant.

Hence, Atlantic’s parent, Grafton, was able to hang on to three of the five stores originally earmarked for closure.

Atlantic was paying around twice the going rate on some of its leases. In other words, had it opened those outlets today, rather than back during the property bubble, its landlords would have charged half the rent.

The question has to be asked, why did it take a long and expensive court process, examinership, to convince landlords to cut rents to more realistic levels?

Surely, it would be easier and cheaper to sit down with tenants and agree this in the first place?

It is a fairly simple proposition, if landlords do not agreed to cut excessive rents, they risk putting tenants out of business.

The result is that they either lose income on the property altogether, or they have to lease it at a lower rent.

It is common sense, or at least you would have thought so.

While Grafton and Atlantic have sorted out their problems, what do smaller businesses, without the clout or resources of a publicly quoted company, do, when their landlords continue to insist rents that do not reflect the reality of the market?

The answer is that they either sit and suffer, or go to the wall, with the loss of jobs, and from their property owner’s point of view, rental income.

Just what is the purpose of a job reference these days? While employers already know that references rarely offer a “warts and all” view of the applicant, bizarre new proposals from the British business secretary Vince Cable suggest some UK references may be complete fairytales.

Or at least even more worthless than the current crop that come attached to CVs these days.

Mr Cable last week announced proposals to make it easier for business to dismiss staff, though not the “fire at will” rights they were seeking. The proposals include maximum compensation payments for fired workers and legal protection for offers to get poorly performing workers to quit.

Under last week’s package, the maximum compensation that can be paid for unfair dismissal will be set at one year’s pay, rather than the current, but rarely reached, limit of £72,000. Just 6 per cent of existing awards currently go above £30,000.

Mr Cable also proposes that employers unhappy with an employee will be able to make them a pay-off offer to quit.

The proposals have invited the usual array of welcome and wrath from the various vested parties in Britain’s business and union communities.