On the ropes: What is the future for the UK's high street retailers?

  • 15 Jan 2020

The UK’s high streets are struggling to adapt to a new age of online shopping, changing work patterns and out-of-town retail parks. But there are efforts underway to ensure they still have a future, Penelope Rance discovers.

The Death of the High Street’ might sound like a trashy thriller but, for many UK towns, it’s a far-from-fictitious scenario, with the loss of retailers, banks, post offices and community hubs changing the face of town centres and leaving bricks-and-mortar businesses struggling to survive. 

Emerging technology and shifts in working patterns, retail behaviour and leisure activities have all contributed to the dismantling of the high street. The rise of the car, out-of-town retail parks and online shopping are leading to fading footfall, empty premises and economic decline.

 

In the first half of 2019, there were 1,234 more store closures than openings in outlets with multiple sites in Britain, according to PricewaterhouseCoopers and high street analysts the Local Data Company – a net loss of seven stores a day. 

Should the high street be consigned to the past? Or does it retain a vital role? “Town centres are still important as places where communities come together,” says Michael Weedon, FSB High Streets Chair. “You find culture, libraries and theatres, local government. It creates cohesion for society.”

Following store closures by household names in 2018, including Maplin, Mothercare and House of Fraser, the UK Government commissioned an expert panel to determine how to bolster the high street, resulting in the Future High Streets Fund, as well as a High Streets Task Force to support local leadership.

A 2019 Housing, Communities and Local Government Select Committee inquiry subsequently offered recommendations, including business rate reductions for high street retailers in England (Scotland, Wales and Northern Ireland have their own business rates systems). 

However, it will take more than money: the picture is complex, layered with regional, political and economic strata. “High streets across the UK are struggling with rents, business rates and parking, but in individual areas one of those issues might be particularly bad,” says Daniel Bellis, FSB High Streets Policy Advisor. “They’re broken, but they’re broken in different ways. It’s about finding the appropriate fix.” 

Business rates


In England, a ‘fix’ for business rates would be welcomed. “In a climate where the high street is trying to reinvent itself in a bid for survival, the system is creating uncertainty for new businesses,” says Martin Davenport, a business rates expert at commercial property consultancy Hartnell Taylor Cook. 

Rates equating to almost 50p in every pound of rateable value are having a devastating effect, along with an inefficient appeals process. “The new system of ‘check, challenge and appeal’ is tricky to navigate: it operates incredibly slowly and the process of submitting checks is confusing and unpredictable,” says Mr Davenport. 

Change of use – such as a yoga studio in a former office – can also cause issues when buildings are valued on a former tenant’s business. And the lack of rates relief on additional sites is deterring expansion. “If a small business opens a second branch, even if their combined rateable value is below the £12,000 mark, they’ll lose any relief,” says Mr Bellis.

Mr Davenport sees little chance of system change, and recommends businesses work within it. “There are some positives,” he says. “There are opportunities for rates reductions when they are merited. Should a business think its rates are too high, there are avenues to reduce rates liability.”

Work is also being done to check whether the level of rateable value in some UK towns is correct. Any changes in rates could mean reductions being backdated to April 2017.

Ownership issues

High rents, as well as rates, are crippling high street prosperity, as is a lack of regulation to control them. “With commercial tenancies, a lot of the power is in the hands of the landlord,” says Mr Bellis.

“There are also contracts being written outside of the 1954 Act, which guarantees protections and provisions to small businesses.” He cites upwards-only rent reviews, dilapidation clauses and sales of leases as making town centre properties untenable for small business.

Power to Change’s Take Back the High Street report reveals that one in four empty shops are owned by real estate companies; overseas investors own one in five. By contrast, the public sector and social sector own around one in 10 each.

 

“Investors are investing for the long-term rather than for the benefit of the place,” says CEO Vidhya Alakeson. “They don’t have a strong incentive to make sure the shops are full. They just own those properties as part of a vast portfolio.”

The type of occupancy can also reflect a decline, and broader social problems. FSB Wales reports a growth in the number of fast food shops in Welsh towns by 4,000 between 2014 and 2017, with the most deprived areas now having five times more fast food shops than the most affluent ones. 

Local government must take responsibility for the situation, says Bill Grimsey, author of Sold Out and the Grimsey Reviews on the future of the high street.

“Very few local authorities have produced an objective vision for their town and started to build towards it.” He is in favour of compulsory purchase of properties vacant for more than a year, so they can be used to benefit the community. 

Power to Change believes community ownership of commercial properties offers a sustainable alternative to the high street model. “Community organisations and businesses have proved themselves to be good animators of space,” says Ms Alakeson.

“They put them back into use, bringing things to life that people in the community want.”
Co-working hubs bring people and cash into town centres, as does the conversion of commercial premises to residential. Stockton Council bought the Fountain Arcade and created an incubator for start-ups; Glasgow Council offers empty publicly-owned premises free to local businesses in need of space as part of its High Street Area Strategy; while the Made in Stirling creative spaces contain shops, galleries, workshops and venues. 

Reversing the decline

Local authorities cannot improve town centres without funding. Austerity has taken its toll, but now central government is recognising that strong high streets boost local economies, and has committed funding to regeneration.

A £675 million Future High Streets Fund was announced in the 2018 UK Budget and, recently, the Government launched a £1.6 billion Stronger Towns Fund. FSB Scotland also successfully lobbied the Scottish Government to launch a £50 million Town Centre Fund.  

Loss of financial services outlets is as problematic as lack of funding. In 2013, there were 1,123 bank branches in Scotland, a figure that is set to drop to under 800, according to FSB research. This has a knock-on effect for business: SME lending growth reduces by 104 per cent in areas that lose their last bank. 

By contrast, putting services back on the high street can spark a new lease of life. Everything from local government offices to gyms and barbers boost footfall. “The majority of businesses on the high street are service-based,” says Mr Bellis. “It’s no longer just a place to sell things. If local authorities move their council office from an industrial park to the high street, they bring people in, who go out to buy lunch, who want to shop. Conwy Council has made a good start on this, but still requires onward engagement in order to bed in with local businesses.” 

These days, people drive to the high street, and if there’s nowhere to leave their car, they won’t come. “Parking’s expensive, and you only get one or two hours. People run into a few shops, they don’t browse,” says Mr Bellis.

But cash-strapped councils see town centre car parks as a revenue stream, and charge so much that they are underused. “In Northampton, the council in the second quarter of 2019 increased charges and got rid of free parking in its multi-storeys during the week,” reports Mr Weedon. “In that quarter, the town lost 729,000 visitors, a sixth of all the visits in that period.”

Online impact

Consumers are staying away for other reasons, too. A recent House of Commons report revealed that online shopping accounts for 18 per cent of all UK retail sales. This is affecting small high street retailers, with 77 per cent of respondents to the FSB Future of

Our Welsh Towns report saying that online retailing is detracting from town centres.
If people are moving online, extending the high street onto the internet could be the solution. FSB Wales has recommended the appointment of Digital Town Centre Managers to collate the online efforts of independent businesses, the voluntary sector and public services into one regularly updated town offer.

 


Mr Weedon believes there is an untapped opportunity on social media, too. “Some 78 per cent of small businesses on the high street don’t have an active social media presence. The size of that problem is the same size as the opportunity. Small businesses can also operate through big platforms – Just Eat helps 27,000 independent businesses to sell online locally. If you combine social media and online systems with local action to engage the population, then the high street will draw people back.”

If the high street has a future, what does it look like? Mr Weedon believes that a more varied, service-based ecosystem will develop, along with independent shops filling the holes left by big retailers. “Our high streets need flexibility, innovation and reinvention,” adds Mr Davenport. “Pop-up stores, multi-use sites and changing uses could be avenues to regeneration and long-term successes.”

It needs to be a mixed model, agrees Ms Alakeson – “a combination of housing, workspace, some retail, and traders who have always been part of the high street. Small, locally rooted businesses are part of this picture.”

Mr Grimsey’s vision is more radical: “I envisage 1,500 Disney Worlds up and down the UK by the end of this century,” he says. “I think that towns can become experiences of history, events and local heritage. They can come alive in a different way, be branded in a different way, and attract people to come live, work, play, visit in a different way.”  

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