Since the beginning of this year, 21,000 retail jobs have been lost as businesses as diverse as Toys R Us, Maplin, House of Fraser and Poundworld have entered administration or pursued CVAs.
The high street is used to upheaval – it has only been a decade since the last recession and the collapse of Woolworths, MFI and a host of others.
As those businesses closed, they were replaced by bookies, coffee shops and value chains, and many high streets recovered, albeit with varying degrees of success – according to the BRC, there are now almost 2,500 fewer shops in the UK than there were three years ago and, since 2014, 3,200 retailers have entered insolvency.
“Clone towns were depressing but everyone was fighting for space. But that’s done – we are seeing the end of the chain store, they are over”
And much more has changed in the intervening years including the meteoric rise of online retailing, increasing business rates and a worsening housing problem.
Consequently, the solutions to the current crisis hitting high streets and town centres should look very different from last time. So, what needs to change? Retail Week spoke to landlords, retailers and industry experts – and tried to speak to politicians – about what has gone wrong and what needs to happen now.
To solve the high street crisis, its evolution over the past few decades has to be contextualised.
During the 1980s and 1990s, town centres transformed from mixed-use spaces populated by independent businesses and civic offices to frequently homogeneous chain-filled streets: it didn’t matter whether you were in Maidstone or Maidenhead – M&S, WHSmith and Boots might sit side by side in almost every town in the UK.
While that created rather boring city centres, it did not much matter to retailers, landlords or government because footfall was high and businesses were making money.
But the rise of the internet and a shift to experiential offerings mean that many national chains no longer dominate consumer spend, as they once did, leaving high streets increasingly vacant.
“[The present upheaval is] the most dramatic change wreaked on the high street since the Luftwaffe”
Mark Robinson, Ellandi
“Clone towns were depressing but everyone was fighting for space,” says retail consultant and founder of agency Portas, Mary Portas, who published a high-profile review of the high street in 2011. “But that’s done – we are seeing the end of the chain store, they are over.”
Expert consensus is that the retail industry cannot be relied upon to keep high streets alive – last year, retail vacancies rose for the first time since 2012, according to the Local Data Company (LDC).
“The long and short of it is that 49% of shopping locations in the UK have too many shops,” maintains community shopping centre investor Ellandi’s director, Mark Robinson, who describes the present upheaval as “the most dramatic change wreaked on the high street since the Luftwaffe”.
“What do we do about town centres and high streets as places for communities? The answer is not retail – it is wider”
“Certain towns are going to have to shrink their retail offer dramatically, and trying to fight that is futile,” he observes. “You cannot fight these massive structural changes. You’ve got to understand what the purpose of your town centre is and what people need from it.”
“You can’t rely on shops for town centres and high streets in the 21st century – full stop,” agrees retail veteran and author of 2013’s Grimsey Review, Bill Grimsey. “So what do we do about town centres and high streets as places for communities? The answer is not retail – it is wider.
“We – and I include myself in this – cloned towns throughout the UK and they now have to differentiate and go back to their heritage, find their reason and mission and build their town centre from that.”
Finding reason and mission is easier said than done, however, as many executives grappling with transformation plans will know. And if retail is not the answer to the high street’s woes, what is?
Smaller spaces may well be filled by barbers, beauty salons, vape shops, nail salons and cafés – the top five fastest-growing store categories in 2017, according to LDC – but what will fill the cavernous spaces about to be created on many high streets up and down the country?
“When you look at the extent of the change going on and think about what could take that space, it’s quite difficult to envisage”
“When you look at the extent of the change going on and think about what could take that space, it’s quite difficult to envisage,” concedes Richard Pennycook, chairman of the BRC, the new Retail Sector Council, Fenwick and The Hut Group.
“In the early 1990s, it was pubs, restaurants, mobile phone shops, then more recently we’ve had coffee shops and betting shops.
“This time around, it’s not obvious who is coming in, and when you look at House of Fraser stores, these are big, complex units that will be coming onto the market. We saw that with BHS, and a number of those still haven’t been re-let.”
While some of those units are in secondary or tertiary locations – Darlington has lost its BHS and is set to lose House of Fraser and M&S, for instance – some are in relatively prosperous towns that should be economically viable locations, such as St Albans, where the old BHS still stands vacant.
“We have to start talking about this imbalance – the UK has far too much retail space and far too few residential places to live”
If large units left empty by retailers two years ago have yet to be filled then retail units flagged for closure over the next year are unlikely to be occupied by other retailers.
Instead, Pennycook says, they need to be “regenerated through mixed-use developments to bring them back to life. One way or another, a big proportion of the old retail space needs to be converted to other uses.”
“What you don’t want is an old high street with one shop in three being vacant and one shop in five being a charity shop, because that isn’t an attractive place for people to come – it will just be a lingering death. That’s why we have to start talking about this imbalance – the UK has far too much retail space and far too few residential places to live.”
“If you put a shit block of flats above a shit shopping centre, you’ve still got a shit town centre. It takes a bit more than that – you need a proper vision”
Mark Robinson, Ellandi
Robinson urges caution about seeing housing as the answer, however. “I worry that everyone thinks housing is the panacea that’s going to fill the space,” he says.
“If you put a shit block of flats above a shit shopping centre, you’ve still got a shit town centre. It takes a bit more than that – you need a proper vision. Housing plays a massive part, but so do civic uses, so do health uses.”
While beauty salons, vape shops and cafés may contribute to any regeneration, Portas believes that tax cuts should be given to other business and occupancy types.
“You end with chicken shops or charity shops if you don’t tackle issues up front,” she says. “So why doesn’t the Government give tax cuts to crèches or hair salons or libraries or yoga studios?
“They need to look at what is right for that market and what will deliver a new footfall. And that footfall will result in better sales at the nearby retailers – it is not rocket science.”
Technology has been the main driver of falling footfall on many high streets but can be a boon as well as burden.
Businesses behind apps such as Near St and ShopAppy are attempting to package the convenience of online shopping and click-and-collect with the desire to shop locally and from independent stores.
Near St is a location-based online marketplace that works on the belief that if shoppers knew a local store had the exact item they were looking for in stock, they’d opt to collect it rather than order it online and wait for delivery, while ShopAppy allows customers to shop across local stores and collect a single package.
Apps like these are currently under most shoppers’ radars but have the potential to push a millennial customer back to the local high street.
While a single industry was relied on to sustain town centres, decision-making was relatively straightforward but fractured: space was sold to the highest bidder and not much thought was given to any mission statement or purpose other than to make money.
Now that is no longer viable, the decision-making around what goes where on a high street needs to change.
Grimsey believes town centre planning is much too bureaucratic and that a single body needs to be created to make major planning decisions.
“At the moment you have Local Enterprise Partnerships, Business Improvement Districts, parish councils, town councils… you have the BRC and the Association of Convenience Stores and the landlord bodies, and none of them are waking up to what is happening.
“The starting point needs to be to embrace stakeholders in a unitary approach and needs to be led by local government. You need a town centre commission, led by a local authority and consisting of all the stakeholders.
“You have to forget all other initiatives, clear the decks of institutions and parties, bring it down to common denominator and build objectives into a 20-year business plan built around different axes, not just retail.”
Robinson believes that some local authorities are already grasping the nettle and are ready to transform their town centres, but maintains that they need the support of central government, especially when dozens of different landlords all have a stake in a single high street.
“There are some local authorities that are intervening and looking to do some really dramatic things, but others are not,” he says. “Some people get it and some people don’t.
“The Government at the moment is utterly paralysed. They cannot deal with Brexit and do their day jobs. They don’t understand the challenges”
“But there is a growing realisation that local authorities and the main stakeholders in a town need to formulate a vision and a plan that delivers what their town is supposed to fulfil. People always think that ‘vision’ means ‘bigger and better’, but actually it might mean dramatically reducing the retail footprint if there is an oversupply of shops.
“The Government has got to support local authorities to make positive investment decisions in their towns. But they have also got to educate local councils and give them the toolkit to really understand what’s going on and give them the policies to help encourage investment.”
Regenerating the high street is often low on local authorities’ lists of priorities, however.
“Local government are up against it,” says Portas. “Their coffers are so limited. If you are a local council and you have to choose between investing in the high street or social services, there’s an obvious choice.”
Pennycook agrees that the Government and retail sector need to “educate local authorities on what they can do to be more supportive and creative”.
“With our Future High Streets Forum, we are working closely with retail leaders and industry experts so we can develop new solutions to the current challenges we are facing”
Ministry of Housing, Communities and Local Government
He is encouraged, however, by the creation of a retail industry council on which he sits, alongside high street retailers such as John Lewis Partnership chairman Sir Charlie Mayfield and Boots chairman Elizabeth Fagan.
“It won’t just happen,” he adds. “We’ve all got a big challenge to communicate that story, but it’s very encouraging that the Government have set up the Retail Sector Council in the first place – they wanted to do it.
“There was an opposition debate in the Commons about the transformation of retail. It’s very much on the agenda for politicians, partly because local MPs are seeing a direct impact on jobs in their communities and asking questions.
“We are at the point where this could start to be taken really seriously nationally – and that’s how you start to make a difference.”
Pennycook, however, is in the minority with his positive view of politicians’ stance on retail and the high street.
“There is a lack of engagement with retail from government,” counters Robinson. “The retail industry has been taken for granted for decades by governments of every colour and they have done absolutely nothing of note to help sustain an industry that has been seen as a piggy bank for far too long.”
“The Government at the moment is utterly paralysed,” adds Ryman, Robert Dyas and Boux Avenue tycoon Theo Paphitis. “They cannot deal with Brexit and do their day jobs. They don’t understand the challenges.”
“I don’t think that politicians don’t care,” Portas says. “They just don’t understand. They had yesterday’s retailers scrabbling about looking at tomorrow’s retail.”
Neither the Department for Business, Energy and Industrial Strategy – under which retail sits – nor the Ministry of Housing, Communities and Local Government (MHCLG) – under which high streets sit – was available for interview.
The office of Rebecca Long-Bailey, Shadow Secretary of State for Business, Energy and Industrial Strategy, did not respond to a request for comment.
The MHCLG said in a statement: “This Government is determined to see our Great British high streets thriving now, and in the future. With our Future High Streets Forum, we are working closely with retail leaders and industry experts so we can develop new solutions to the current challenges we are facing.”
According to The Sun, MHCLG ministers are trying to rush through a review of Britain’s high streets following the biggest loss of jobs since the recession. Communities minister Jake Berry is understood to be at the helm of plans, but the MHCLG declined to comment on these.
Rates and rents
When national chains can no longer afford a presence on the local high street, a recalibration – or total redesign – is clearly in order for any type of business other than those with major tax advantages, such as charity shops, to be able to operate a physical high street presence.
“The rates review with Sajid Javid was a shambles, an absolute shambles”
The MHCLG points to the £9bn business rate support for small businesses it introduced in 2016, which it raised by taxing big business, and its recent switch of business rate calculation from the retail price index to the consumer price index, but retailers are unanimously scathing of the Government’s stance on rates.
“The rates review with Sajid Javid was a shambles, an absolute shambles,” thunders Paphitis. “We knew this was coming but he stuck the knife in and was too bone idle to do the job properly.
“If the Government had done their job properly, retail would have evolved in a sensible way. But central London rates have doubled. I can negotiate with landlords on my rent but I can’t negotiate with local authorities on rates.
“Business rates are a cancer. They’ve morphed from a tax for services that businesses need, like bin collecting, into a monster”
“No-one can afford to pay the ridiculous rates – leisure operators can’t, they’re barely better off than we are. We need income for our public services, they are what makes this country so great, but the Government has lazily raised income from a decreasing cake.
“Rates have to be abolished – the system is archaic.”
“Business rates are a cancer,” agrees Grimsey. “They’ve morphed from a tax for services that businesses need, like bin collecting, into a monster.
“One third of all business rates come from retailing, with online businesses exempt from paying them. There needs to be a sales tax to replace business rates.”
Retail is evolving quicker than ever before so it’s only logical that our high streets change too - industry and government need to work together to create a new model for the digital age.
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