Corporation's submission to Select Committee

OPENING REMARKS 'Grateful to the Committee for giving us the opportunity to give evidence – and to make a short opening statement.

Will cover two areas: (a) The Corporation's reaction to the Saphir Report and (b) our reaction to the recent Government Statement.

SAPHIR REPORT Glad to have been able to jointly sponsor with DEFRA but made clear ab initio that, as it was an independent study, we would not be bound by the Recommendations.

By and large a very useful report, with much helpful background information on the state of wholesale markets to-day, but we noticed something of a disconnect between the Recommendations in Chapter 5 and the proposals for Implementation in Chapter 6 which don't seem to have the same focus.

We accept the first recommendation, encouraging greater co-operation between farmers and wholesalers.

The second recommendation, that the legislation currently restraining trade in the various markets should be removed, is more difficult and controversial. The Corporation accepts that some of it does restrict markets ability to diversify BUT, as modern hygiene and health regulations become more and more rigorous, so Regulation, Inspection, and the maintenance of Trading Standards are increasingly important. We do not believe that it would be in the public interest for there to be a potential explosion of small wholesale markets, which might not be able to afford the necessary level of investment to build and maintain sites to the proper standards. We have, for example, recently invested some £80 million in upgrading Smithfield market and are facing substantial investment to bring Billingsgate up to the standards required by new Hygiene regulations coming into force in 2005. We need to protect that investment and our tenants from unfair competition.

On the third recommendation, that markets should operate from three composite sites, at Nine Elms, Spitalfields, and Western International, we believe that in the longer term there will only be sufficient business for markets on a reduced number of sites and we can see the benefit of composite sites.

There is, however, an illogicality in this third Recommendation – between pages 57 and 58 – which at one stage says: 'London's requirements for meat, fish, fruit and vegetables could be accommodated efficiently and economically on two composite sites, east and west of the capital. S. A central London site, largely focussed on the London hospitality trade, would reduce the pressure on the expansion needed at the two outer markets.' But the final recommendation on the next page states: 'London should be serviced by three composite markets S based at the sites of Nine Elms, Spitalfields, and Western International.' Western International is sufficiently far to the west, not to have a very significant effect on the other four markets, so, in the context of potential developments at the other four, the possibility of it expanding into the sale of meat and fish does not create a problem.

We do not believe that the creation of full scale composite sites at both Spitalfields and Covent Garden is financially viable. We have estimated that the cost of doing so at Spitalfields – and meeting all the current and expected health and hygiene Regulations - is around £80 million for the construction, with a substantial annual maintenance bill. We might be able to fund one such market but certainly not a second, and it would be interesting to see how any private sector investor would be able to generate sufficient Return on Investment just by running a wholesale market.

As we stated in our proposal to the Secretary of State: 'A better long term approach would be to expand Spitalfields as a composite wholesale market and develop New Covent Garden as a complementary facility providing specialist 'value-added' services for the catering and restaurant trade of central London.' In making this statement, we implicitly accepted that the current Covent Garden wholesale activities should continue but, noting the reaction from the Covent Garden tenants, we might have been better to express that explicitly. We have made the point to DEFRA, at both Ministerial and official level, to the Covent Garden Market Authority, and to the Covent Garden tenants themselves that we would support their current wholesale business activities and we can see the potential for these to expand if our proposals to do more for the hotel, restaurant, and public sector catering businesses are accepted.

We were surprised by an assumption that appeared in Chapter 5, among the Recommendations, that 65% of Billingsgate and Smithfield tenants would wish to move to Covent Garden. This is not borne out by our own evidence or the reactions of our tenants – none of whom appear to wish to move there. Our Billingsgate tenants have made it clear that, if they cannot stay on their current site, they would wish to move en bloc to Spitalfields rather than into Central London.

Smithfield tenants do not want to move from their present site, where, as I have mentioned, the Corporation has invested some £80M recently to bring it up to modern hygiene standards, and many of the tenants themselves have invested up to a quarter of a million pounds in their stalls.

We are content with the fourth recommendation that there need not be a central strategic body for planning, management or liaison between the Markets.

GOVERNMENT STATEMENT Turning now to the recent Government statement, we have to admit to being somewhat disappointed that they have poured cold water over our proposal and the phraseology of the statement implies a degree of misunderstanding of our position. Nevertheless, our offer remains on the table and we would welcome further discussions with the Government or indeed Covent Garden.

We note the Government's appeal for private investment and look forward to seeing what transpires. As I mentioned earlier, creating and maintaining markets handling animal and fish products is a significantly more expensive business than doing the same for fruit, vegetables, and flowers and we do not see the level of demand in the wholesale food market to justify such an investment twice over.

There are three other particular points of note from our point of view: a. If the Minister grants consent for the sale of meat and fish at Covent Garden, we have a responsibility to our tenants and their workforces to protect their investments and we will challenge the infringement of our Market Rights, which are enshrined in Legislation. Any such legal challenge would, of course, make any negotiations over ownership of Covent Garden more difficult.

b. We look forward to some clarification of how the Government sees its role as a 'Consultee' in the process of rationalisation of the markets.

c. We do not see how the government can avoid some form of legislative change if transfer of the ownership of Covent Garden is to be achieved.

CONCLUSION On balance, we believe that there is still much that can be achieved in developing the London Wholesale Markets to meet the challenges of the future and we stand by the proposal we made to the Secretary of State. We are willing to take on ownership of Covent Garden but if the government finds a better alternative, or there is concerted opposition from within Covent Garden itself, we would be content not to pursue the offer any further.