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Lloyds seeks rent discounts after 99 branch closures in 12 months

Lloyds: There have been "multiple failed attempts to engage in rent negotiations with NHSPS”
Lloyds: There have been "multiple failed attempts to engage in rent negotiations with NHSPS”

Lloydspharmacy has announced that it has closed 99 community pharmacies in the past 12 months and has warned of more closures unless it gets greater support from landlords.

The multiple said the closures, which are in addition to the 190 branch closures it announced in 2017, were “a result of mounting cost pressures and declining footfall”.

Lloydpharmacy is now asking for a 25% rent reduction for nearly a quarter of its English sites, for which NHS Property Services (NHSPS) is the landlord. McKesson UK chief financial officer Chris Keen yesterday (November 19) described the sites as being "loss-making after incurring significant COVID-19 related costs”.  

The multiple, which currently has around 1,100 pharmacies in England, said the request for a 25% discount on rent comes after “multiple failed attempts to engage in rent negotiations with NHSPS”.

“As we deal with the second wave of COVID-19, some of our landlords continue to refuse to engage in discussions about unsustainable rents. Many health centre landlords base their rents on the number of patients on the register, but these patients are currently being encouraged not to visit sites because GPs provide video and telephone consultations,” Mr Keen said in a statement yesterday.

“Some institutional landlords have engaged to discuss alternative solutions but the majority, including NHSPS, are refusing to recognise the impact of reduced footfall. This is clearly unsustainable and puts at risk our ability to continue providing vital healthcare services to the communities we serve,” he added.  

99 closures “on top of” previous 190

Closures have long been on the table for Lloydspharmacy. Earlier this year, the multiple said it was proposing to close a “small number” of community pharmacies after “increasing financial pressures” from factors including COVID-19.

At the time, Lloydspharmacy said it would aim to “retrain and redeploy” as many staff as possible. Commenting on the 99 branches that have closed in the past 12 months, a spokesperson for McKesson UK told C+D yesterday that: “Where possible, we have redeployed colleagues to other locations or roles within the business where there have been suitable vacancies.”

In 2017, Lloydspharmacy’s parent company McKesson, then known as Celesio UK, said it would be closing or selling 190 branches across England after they had become “commercially unviable” due to “changes to government policy on reimbursement and retrospective clawbacks”.

The 99 closures in the past year are “on top of” the 190 announced in 2017, which have all already closed or been divested, the McKesson UK spokesperson told C+D.

Yesterday’s announcement comes after the McKesson group announced in August that revenue for its European business dropped 4% to £4.7bn ($6.2bn) –  once currency rates were taken into account – during the first quarter of the 2021 financial year.

In June, Well Pharmacy also asked landlords for rent reductions following a 25% income dip as a result of the COVID-19 pandemic. The multiple wrote to approximately 580 landlords asking for help with rent payments.

“Months of trying to seek an audience with NHSPS”

A spokesperson for NHSPS told C+D today (November 20) that it “recognises the challenging trading environment which small businesses and larger organisations, such as McKesson, operate in”.

“As such, in early November we wrote back to the CEO of McKesson UK to offer a variety of practical and tangible solutions, including a bespoke site-by-site approach to ensure that communities retain these vital services. We have not received a response to our proposals,” they added.

The McKesson UK spokesperson told C+D today that “after months of trying to seek an audience with them”, the company would “very much welcome a discussion with NHSPS.” This has, however, proven difficult so far, they added.

“We started writing and attempting to engage with NHSPS back in June, with follow up letters in July, September and two letters in October. The latest one we sent requested a 25% rent reduction – we still haven’t received a reply to this. In their only response to us so far, which we received this month, they offered a site by site negotiation but without any overall reduction in rent,” spokesperson said.

“What we are calling for is a central discussion to overhaul the archaic methodology of calculating rents. The model of basing rents on the patient list numbers at a GP practice has been outdated for some time and COVID-19 has brought into sharp relief this broken process. We need an urgent and meaningful reduction in rent where footfall has dropped dramatically,” they added.

Lloydspharmacy needs all its larger landlords to “provide more tangible support during these turbulent times”, Mr Keen said.

20 Comments
Question: 
Have you been speaking to your pharmacy's landlord about a rent reduction?

Freelance Chemist, Pre-reg Pharmacist

If any GP partners are listening my advice is as follows;

1- refuse rent reduction

2- get rid of the the multiples 

3- employee your own pharmacist/superintendent pay them well and treat them better, they will grow the business for you and run it at a very good profit

4- if you pay peanuts you will get a monkey that will drive your business into the ground as has already happened to most big business, that were short sighted 

Axed Locum, Locum pharmacist

With a glut of pharmacists, and contract limitation, they will pay the least they can get away with, and extract the most!! They further claim there is a shortage of pharmacists to drive the rates down further.But they will not declare that they can't recruit paharmacists at the minimum wage  rate, otherwise, the DOH will reduce the global sum again!!

 

Chris Locum, Locum pharmacist

Multiples used to whine about front-loading of the old renumeration towards the little guy, lobby government and get contracts through expensive legal representation. The consequences are squeezing the human capital of ever disappearing staff into exhaustion and ill-health.

Soon-To-Be Ex-Pharmacist, Superintendent Pharmacist

Don't suppose Lloyds ever thought of increasing their rents paid to the NHS while times were good? What goes around comes around Lloydys

Paul Dishman, Pharmaceutical Adviser

Nobody in their right mind would volunteer a rent increase

Soon-To-Be Ex-Pharmacist, Superintendent Pharmacist

Obviously, but when the boot is on the other foot, why should a landlord, especially the NHS, agree to a rent decrease?

Paul Dishman, Pharmaceutical Adviser

That depends on whether they want to retain their tenants, better a reduced rent than no rent at all. Of course it could be a bluff....

Angela Channing, Community pharmacist

Looks like Sainsbury's got out at just the right time by selling the whole portfolio to Lloyds in one swoop.

Benie I, Locum pharmacist

Rents are not set by tenants as far as I know. It's not a sysytem that would get very far otherwise everybody could just move into Knightsbridge and tell the landlord to take a flying...

Benie I, Locum pharmacist

I'm gutted for them but somwhow I'll make it through the weekend.

Chris Pharmacist, Community pharmacist

I've been a pharmacist for over 20 years and I still don't know a pharmacist that has worked more than one day for Lloyds...

The company baffles me, its an enigma...even in the current climate with companies making significant cuts and regularly increasing staff expectations  none match Lloyds' mismanagement and shocking reputation. Who on earth works for them and why?

rafal Burdon, Community pharmacist

Still better thn Boots. 

Soon-To-Be Ex-Pharmacist, Superintendent Pharmacist

I did nine years for Lloyds and until they went public, they were a good company to work for. Once shareholders had to be pleased, it became diabolical for the staff.

Chris Pharmacist, Community pharmacist

*staff demands

Tohidul Islam, Locum pharmacist

So the company that treats its pharmacists with complete disdain DEMANDS landlords have pity on a multibillion dollar company becuase they hired bottom of the barrel decision makers who's solution to bad decision was to make more bad decisions then demand pharmacists work for peanuts with skeleton staff to save the company. Ya I can completely see the rationale! Might have better luck asking AAH to give up some of the the whoelsale profit.

C A, Community pharmacist

They are obviously planning on returning their share of the £350 million advance payment...

Chemical Mistry, Information Technology

Ask sainsburys for their pharmacies in their stores and i can guess what the answer will be hahaha

Dodo pharmacist, Community pharmacist

If only they hadn't outbid all other pharmacies by agreeing to pay way over market rent for their health centre pharmacies......

TC PA, Community pharmacist

Exactly, it's been tough for everyone but Lloyds have made some poor decisons in the last 5-6 years that have come back to haunt them. Couple that with an awful PMR system and staff at their wits end leading to poor service, and you've got problems.

Leon The Apothecary, Student

I could rant for days about Compass.

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