The strength of the convenience offer in the majority of service stations means the forecourt sector should have a good chance of surviving the present pandemic crisis more or less in one piece, according to PRA chairman Brian Madderson. He says everyone is pulling together and has praised the government for its financial measures which have been a lifeline for many; with some of the bigger groups saving millions of pounds because of the business rates holiday. He has also welcomed oil company support for the dealer community.
"The sector has changed so much in the past 10 years so many sites now have good quality symbol convenience stores, they’ve really been able to make their mark on the local community," says Madderson.
"There is hope that some of the footfall that has been attracted to them during the lockdown will continue. Customers will hopefully have got used to the shop and the people, and the convenience of the location, and they will return to do their shopping.
"Quite a few retailers have diversified into home deliveries, which may in some cases continue, although it’s cumbersome and expensive. It may just be a kindness in a difficult moment, generating goodwill for the business. Some of the retailers that will have suffered will be those that moved heavily into food to go, who will have been harder hit than others with purely convenience stores. I would say at least 70% of all the dealers have good quality convenience stores. Most now have alcohol, which has seen the biggest increase in any of the shop categories, with increases between 25% and 200% being seen."
Those hit hardest will be those who have seen both shop and fuel volumes fall to unviable levels, coupled with staffing issues, caused by people being unwell or self-isolating. From the information Madderson has been privy to he believes around 100 forecourt sites have closed temporarily across the UK including Northern Ireland and Scotland - due to the significant fall in fuel volumes over the past few weeks, with some dealers up to 85%, even touching 90% of normal volume.
"I don’t think there will be many permanent closures, because the number of temporary closures is lower than I would have expected," he says. "We would hope that those that have closed temporarily would come back once fuel volumes start to return."
Despite the continued lockdown, fuel volumes are already starting to climb and are up 10-15% compared to the lowest point, which for the big groups was about 70% below normal demand, whereas it’s now at around 55%, according to Madderson’s figures.
"Road creep is starting to happen," he confirms. "But I wouldn’t have thought the sites that have closed will re-open yet. Maybe 70% of normal volume might be a trigger for them. Plus I don’t think there will be any further closures if there is now road creep."
Madderson has high praise for the government’s financial measures: "The government was very quick off the mark," he says. "First of all it offered the cash grant of £25k per site, with a rateable value up to £51k and generally speaking most local authorities in England and Wales have paid quickly, without always the need for retailers to apply.
"In addition the business rates holiday for all petrol filling stations for 12 months from April 6 has made a massive difference some of the bigger groups could be making millions.
"We’ve looked to see if there are any other levers we can pull to get more money out of the government, but I suspect probably not. Our retail sector is unique because of the tax they give us £25k with one hand and the next time a tanker rolls in they take it away again because we pay the duty and the VAT. The VAT we might be able to defer for a couple of months, but we’re certainly paying the duty. Maybe forecourts should get £50k to help the cashflow...!"
It’s certainly been a hectic and challenging time for the forecourt sector, but not just for the retailers. Right from the start Madderson and his team six in all at the PRA have been working around the clock keeping the membership informed of developments with daily emails and stepping in with support where necessary. Madderson has also made his presence felt across the media.
"As we saw the coronavirus starting to impact, I wrote to the heads of all of the oil companies on March 19 asking that they look at all their financial levers available as to how they can help the dealers particularly the small and medium sized ones survive what could be a very difficult and hostile climate for fuel demand; and asking they apply the utmost flexibility and extend credit where possible on a short-term basis," he says. "They all acknowledged my letter in one form or another and I’m pleased to say that messages have come back from our dealers saying two things: firstly they have been able to negotiate extended credit terms, some quite generous, some a little less so, but certainly the oil companies have played their part. Where asked for and where possible they have been flexible with their credit.
"They’ve also done things like temporarily suspend premia for part loads; and have also been engaging with members who have the vendor-managed inventory systems particularly Shell and BP, which is all really positive. I think from that perspective I give the oil companies pretty much full marks for trying to help the dealer community."
The PRA has also been having daily exchanges with the Downstream Energy Resilience Team at BEIS, which has enabled it to keep its membership up-to-date with national and regional fuel-volume trends. The only caveat, says Madderson, is that the information is coming from three major wet-stock suppliers, who have systems installed with the supermarkets, major oil companies, and major dealer groups, excluding data from smaller sites without such systems.
"We’ve been exceptionally busy all round including holding teleconference calls with members, discussing what problems they’re having and how can we help them further," says Madderson. "Certainly our members’ website has had much more use than ever before. We’ve put up things like a legal pro forma letter for furloughed employees, so members can use it for their own use knowing it has a legal basis to it. Retailers have been appreciative of the help we’ve had some very nice comments from them."
Kay Group welcomes PRA assistance
The PRA has been praised by the Blackburn-based Top 50 independent, the Kay Group Ltd, following the enforced closure of one of its car wash operations in the current pandemic by the local Environmental Health Officer.
Paul Blackmore, The Kay Group’s non-executive chairman, said the company greatly appreciated PRA chairman Brian Madderson’s intervention when it had been served a Prohibition Notice against the use of its jet wash facilities.
"I contacted Brian to advise him of the situation with a copy of the order and our site communication and after a few exchanges of emails and surveys of competitors washing activities. Brian quickly offered up his services to deal direct with the EHO on our behalf after taking QC’s advice, and in virtually 24hrs the order was lifted - much to our surprise but great appreciation of Brian’s intervention. We all expected more of a tussle with the EHO."
Madderson said a draft letter to assist forecourt retailers argue against closure of their car wash facilities by local authorities or police has been made available on the PRA website.