This year, October 31st will not just be the catalyst for spooky pranks, witching tales and bumps in the night because, as if Halloween were not scary enough, the date also marks the beginning of a potential bloodbath for our industry.
I’m dead serious because at the end of this month the furlough scheme ends, the initiative that has allowed many a business to hang on to life by their fingernails. The truth is that whilst the pandemic has been devastating in many ways, there were already an awful lot of estate agency firms on the edge even before the virus hit; and which Rishi’s business support measures and stamp duty bonus have inadvertently resuscitated.
The question I pose therefore is, will some of them now use Covid and the end of furlough as ‘cover’ for imminent redundancies and branch closures?
Cover? Yes, see also ‘kitchen-sinking’, the method whereby companies and politicians use the cover of a crisis to mask bad-news hoping that some of the noise will get lost or be better accepted. Utilising a problem such as Brexit, bad weather, political turbulence or a terror event, or in this case a global virus, to ‘explain away’ poor performance, a mistake or even an unsustainable business model that’s in the doldrums. Also known as a ‘Jamie Oliver’.
Consequently, here’s what I think will happen amongst the bigger estate agency players soon…
First the bad news
To the sound of howling in more ways than one, furlough ends on Saturday night. And the full reinstatement cost of thousands of estate agency employees will be deemed unsustainable/undesirable by certain property bosses despite a well-intentioned, hastily introduced Job Support Scheme (JSS) but which requires a multitude of hoops to be jumped through in order to claim, especially for those businesses with more than 250 employees.
Whilst pipelines have been artificially bolstered since June, FDs and CEOs will already have discussed that there’s a cliff-edge coming once the stamp duty holiday ends. April, May and June 2021 will not resemble anything like what many of you think August, September and October 2020 have represented as some kind of ‘new normal’.
Q2 next year will be a barren, revenue-wasteland by comparison complete with double helpings of tumbleweed, dust and rigor mortis.
But canny, albeit rather unscrupulous bosses will have gathered that the JSS can be used to pay staff their notice before they are marched out of the door and, quite remarkably, will also be allowed to sustain outgoing employees’ salaries during statutory redundancy consultations therefore making it ‘attractive’ for some agency firms to pull the trigger on lay-offs now, knowing that the tax-payer is funding the walk to the exit.
So, as the person in charge of the P&L, especially in a publicly listed business such as Countrywide for example, already horrendously wounded and gasping for air, would you deplete the rich flow of temporary cash by spending it on reinstating people in November? Likely not, preferring instead to hold Covid up as the reason to oust busloads of staff and offices starting soon. After all, why else would the meeting rooms at Countrywide Towers be filled with discussion around re-capitalising their coffers via the ‘generous’ lot at Alchemy to the tune of £90m, a sum that it does not need – unless this were to be earmarked for future redundancy payments and branch closure contingency monies? I’m afraid that if it is so, you heard it here first.
On the further subject of Countrywide, Property Industry Eye has this week reported that 23% of their branches have allegedly shut. This then is some kind of proof that although lacking any actual strategy – merely death by a thousand cuts and a series of knee-jerk, desperate moves seemingly – the corporate agencies are indeed beginning the slim down, albeit under the radar. Foxtons, LSL even Connells – have all quietly shuttered offices where they can get away with it and on a piecemeal basis to avoid one mass redundancy cost.
The direction of travel is set and whilst the closing of premises has been a mere leak in the dyke so far, the tsunami is coming and which means that many of you reading this today may not remain employed in a few short weeks’ time. Merry Christmas indeed.
Before you resort to calling out my apparent insensitivities in the comments below though, remember that I am merely the Ghost of Christmas Future in this scenario – the messenger, not the one executing, as such.
But there is ‘good’ news
The flip side of this soon to be forced change in business model, some 15 years on from the dawn of innovative estate agency models like House Network and Emoov launching without the inconvenience of pesky branches, is the realisation that estate agency firms can indeed operate successfully in areas without having a physical office presence. Even the laggards and the luddites should accept, out of necessity if nothing else, that less can be more and so now watch as they shed offices and people as a strategic volte-face in a more public manner.
Some less enlightened management team members will fight the inevitable and will see this reality as a stigma, as defeat, as failure. As I’ve set out above this will be a sad, tragic consolidation for the industry’s people. The human cost will be significant.
But what it is… what it actually is, is progress – if you can get your head around the fact that sometimes, in order to survive, going faster and outrunning the threat means losing some weight rather than staying fat and slow.
The physical footprint of our sector is now shrinking. The key is maintaining a decent market share in each town (yes, it can be done) without the millstone of premises costs – or at least as many premises. As the corporate giants morph into fewer locations from which to operate, as overheads plummet and balance sheets sigh a collective relief, the ‘people’ will then become more obvious as the drivers of success – not shop-signs.
Empathy and relationship building, prospecting and nurture will take precedence over silent offices full of Candy Crush experts sitting waiting for a Rightmove lead to ping them into action. And above all, whilst the resulting financial transformation will bolster the companies themselves, this levelling-up – to coin a modern phrase – will provide greater reward for the individuals themselves in the form of a higher share of fees as it becomes glaringly obvious to the industry’s gentry that it is the people themselves that make the income – not an office. As they earn more, customer experience will also improve because agents will have sufficient incentive to look after their clients much better.
There will be blood. But I’d argue that in the fight for sector survival and indeed prosperity – it’ll be worthwhile for those that do decide to act strategically and not out of necessity later.
One final thing. Which if any of the current crop of UK estate agency bosses are fit to lead the change necessary – and I do mean lead rather than just manage (they are different things)? Because I suspect that in addition to the short-term blood on the floor that we’re about to witness, there will also be some rather higher profile heads chopped too.