Ignoring successful high streets stops us helping the weaker ones
Another high street report prescribes business rates reform and again fails to recognise the real blame lies in the weak economies of many UK cities
Another high street report prescribes business rates reform and again fails to recognise the real blame lies in the weak economies of many UK cities
Another set of solutions for how to save the high street was added to the mix last Thursday, with the publication of the Housing, Communities and Local Government Committee’s report. Having consulted with the retail and property industries and local government, the committee suggests a wide range of ideas, among which tax reform is given most attention.
But there is little acknowledgement in the report that the performance of high streets varies significantly across the UK. This means that the committee’s diagnosis of the “four systemic issues” causing high street decline is missing some crucial underlying factors. The fact that some high streets thrive, despite the rise in online shopping and the business rates system, reveals that something else is to blame.
Centre for Cities’ work shows that it’s the weak economic situation in many city centres that leads to low footfall and spending power, and ultimately empty shops. By omitting this, the report fails to provide adequate recommendations to revive high streets.
What we agree on: Cities have a role to play in the development of less retail-focused high streets
The report is right to identify oversupply of retail as one of their “systemic issues”. Many city centres across the UK have too many shops and need a rebalance away from this reliance on retail towards a more balanced mix of offices, homes, food, drink and leisure.
High streets with lower vacancy rates have already made this shift, with shops being replaced by restaurants, offices and gyms. Take Leeds and Doncaster as contrasting examples. In Leeds city centre only 21 per cent of commercial floor space is retail, compared with 43 per cent in Doncaster. But despite being dominated by shops, nearly one in five are empty.
In city centres with strong customer demand, this shift is taking place organically, led by the private sector, but elsewhere it needs help to get going. As the committee suggests, the public sector has a role to play in this. Local authorities will need to step in to redevelop vacant and poor quality space where private sector interest is low or act as a coordinator between partners to ensure the redesign suits local needs and shifting customer preferences.
Another area covered by the report is planning. On the one hand, they propose creating a more flexible system, for example by updating use classes to better help the high street adapt. But they also recommend an end to permitted development rights (PDR) and return of power to local planners. While we agree for city centres, and suggest all are offered PDR exemptions to protect their commercial space, the policy can helpfully prompt change in other parts of the country. So we recommend PDR remains in place outside city centres where competition for space is less intense.
Read our recommendations on how to revive city centre high streets in our report City Centres: Past, Present and Future.
Read the report hereWhat we disagree on: Reducing the burden of business rates on high street retailers will help the high street
The committee cites the strain placed on retailers by business rates as one of the core problems facing high streets and recommends several ways the tax could be improved. To reduce costs for retailers, the report suggests “a reduction in business rates for retailers in high streets and town centres”. The rationale is that the combination of high rents and rates makes them uncompetitive with online retailers, but this misses three important points:
Another recommendation is that new taxes are levied to “level the playing field between online and high street retailers”. But business rates are a tax on property, not on retail, and they should be treated as such. We need to be wary of penalising companies who choose a different business model and succeed without the need for expensive city centre property. There are plenty of reasons to criticise Amazon’s approach to tax, but its ability to sell without using physical retail space is not one of them.
What should happen instead: Business rates should be reformed, but for reasons other than high street retail
Instead of offering more piecemeal edits to the business rates system, a more systematic reform is needed. Infrequent revaluations cause uncertainty for businesses and the incentives created by the current design of the tax are unhelpful for cities trying to improve the quality of their commercial space. We set our proposed reform of business rates in this briefing.
Business rates reform is not the saviour of the high street. While there are many good reasons for reform, fixation on this tax risks blinding policymakers to the factors contributing most to the decline of the high street. Instead, much more attention needs to be given to the weak economic performance of many UK cities. It’s only by attracting in more high-skilled, well-paid jobs and refocusing city centres towards business rather than shopping, that enough footfall and spending power will be raised to sustain thriving high streets.
You can read our recommendations on how to revive city centre high streets in our report City Centres: Past, Present and Future.
Leave a comment
Kiat Huang
What do you think about the importance of businesses owning their premises, rather than renting? Aldershot, where I used to live, used to be a thriving market town up to the 50s, but since then the retail offering on town has declined inexorably, with only one shop lasting the decades, Jeromes, family run for over 90 years and they own their own premises. Like householders that can weather bad financial times when they own their property outright, shops surely are able to do the same when they own their premises outright and can’t be directed or by higher rents that a multiple can afford?