Suppliers not prepared for congestion charge

24 March 2003 by
Suppliers not prepared for congestion charge

London's food and drink suppliers are this week waiting in trepidation for the impact of Mayor Ken Livingston's congestion charging, which comes in next week. Most expect to shoulder the cost themselves, despite earlier predictions that operators would carry the cost, pushing up customer prices.

"The charge will have a devastating effect on suppliers, because our customers aren't prepared to pay the bill," said Vijay Solanki, financial controller of MG & Sons, a fruit and vegetable distributor to restaurants such as Harvey Nichols Fourth Floor and Yo! Sushi.

Because competition is so fierce, suppliers will foot the bill, he said. If anyone raised their prices they would be undercut by others.

Roberto Oddi, managing director of bread supplier Maison du Pain, agreed. "At the moment, we won't pass the cost on," he said.

From 17 February all commercial and private vehicles entering the designated zone from 7am to 6.30pm on weekdays will have to pay £5, in some cases £5.50. Some suppliers expect the charge to plunge them into administrative and financial chaos, but others seem unaware of the potential impact.

"Not one of my suppliers, from Courage and Interbrew to the smaller food producers, has spoken about it," commented Paul Billington, manager of bar and restaurant Jerusalem in W1.

But there's clearly confusion among suppliers, particularly those with vehicle fleets. Under the scheme, anyone with more than 25 vehicles can apply for incurred costs to be calculated by scheme administrator Transport for London and pay monthly, although this costs an extra 50p per vehicle. Firms with small fleets must register each vehicle every day and ensure all bills are settled before 10pm.

Smaller businesses condemned the system, pointing out the complications involved if they used hired vehicles or had new drivers, or if the drivers didn't know they'd travelled into the zone.

Although charges can be paid in advance, Transport for London admitted there would be no refunds for unused days, only for prolonged periods or vehicles taken out of use.

In defence of congestion charging, the director of independent business group London First, Julia Lalla-Maharaj, said: "Congestion is crippling London. If we see travel speeds improve we will see London benefit."

But suppliers scoffed at this. Oddi said: "The same number of drops will still need to be made, so we won't be easing congestion. The last thing late-night restaurants want is to take deliveries before 7am."

\* Peter Gladwin, managing director and executive chef of the Just Restaurant group, has come up with a way of persuading his customers not to avoid central London after the charge comes into effect. He's offering diners £5 off the cost of a three-course lunch or dinner. The offer runs from 17 to 23 February at his four Just restaurants inside the congestion zone.

No escape for hotel employees

While suppliers are preparing to bear the brunt of the costs, only 11% of key four- and five-star hotels in London are planning to pay the £5-a-day congestion charge for employees who drive to work, according to a survey by recruitment specialist Indago.

Nearly half of the 100 top-end branded and independent hotels in the capital said they intended to make employees pay the charge, while 43% had yet to decide their policy. Indago said there was a strong suggestion that they would choose to reimburse the charge through expenses.

One company said it would absorb the charges to help retain staff who already face salary and bonus freezes this year.

What you need to know about the charge
\* Fleets of more than 25 vehicles (although you can't include cars along with lorries and vans unless it's an all-car fleet) can be pre-registered and then clocked when they cross the zone. Companies will then be billed monthly, but in advance, based on an estimated bill. Cost is £5.50 a day per vehicle (plus 50p administration) There's also a £10 standing charge per vehicle per year.

\* Smaller fleets can pay on an ad hoc basis, but can pre-register and set up an account. Drivers telephone or text the charging hotline with details or pay the £5 at selected petrol stations, shops and car parks. Alternatively, companies can ring the hotline before 10pm with details of vehicles entering the zone that day. Payments received from 10pm to midnight go up to £10; pay even later and it costs £80.

\* Once paid, vehicles can leave and re-enter the zone during that day.

For more information, visit www.cclondon.co.uk or call the congestion charging hotline on 0845 900 1234.

Over to you…
Michael Gottlieb believes the congestion charge spells doom and gloom.

Central London restaurateurs have long been concerned about the impact of the congestion charge on sales, although it will take a while to know how founded their fears have been. It could mean people will eat out locally, so redistributing the overall business. But where does this leave central London restaurateurs? Will they get a cut in rent? In rates? Of course not. Most probably there will be an increase in food costs as suppliers pass on the £1,500 or so per annum they have to pay. And this will have to be passed on just when higher prices will do the most damage.

People refusing to pay the £5 tax to go into London for a meal and a show may find they enjoy staying in eating take-aways (at least someone in our business benefits) and not worrying about being mugged. Problem is that staying home can become a habit, especially when there's a recession on. So the anticipated local restaurant boom may not be as big as predicted. And if the congestion charging is a success, other London boroughs will consider introducing it, too.

What Ken Livingston refuses to acknowledge is that for a large metropolis to thrive it has to endure some degree of traffic and congestion. As a restaurateur, I have an innate desire to go to the latest restaurants and see new shows in central London. Going out locally doesn't have the same buzz. One could ask what difference another £5 will make to the current £150 bill for two I now spend on a meal, a show and parking. Not much, but final straws never are.

When someone like me, with a vested interest in the industry, is deterred, what will others, with less interest and more finite resources, do? Restaurateurs the world over should be afraid. Very, very afraid.

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