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The woes of the high street need no introduction — over 35 well known high street chains have fallen into administration in 2019 so far. Mothercare and Mama and Papas appear to be the November additions to this list.
This national picture, however, is an incomplete representation of what is going on up and down the country. Not all high streets are struggling, some are in fact thriving. In places like Brighton and Exeter, vacancy rates are as low as 7 per cent and 8 per cent respectively. On the other hand, in Hull and Wigan, Vacancy rates are around 20 percent. In Newport in Wales, nearly a quarter of shops sit empty.
All our research into this points to one key observation – the city centres that thrive do so because they function well as places of work. The city centres with the low vacancy rates tend be what we have previously characterised as ‘strong city centres’ – a high proportion of their jobs are in exporting business and the exporting jobs themselves tend to be higher skilled than the average. They bring in people to the city centre on a daily basis for work giving the retailers and the restauranteurs a ready-made market to sell to. They also house well-paying jobs meaning that the people that are around have the disposable cash in their pockets to spend on the high street.
Any policies that seek to address the decline of the high street have to address the underlying economic causes if they are going to be successful and sustainable. While supply-side interventions that tackle the quality of shops (think retail-led regeneration) or of activities (think culture-led regeneration) can provide temporary comfort, they fail to address the causes of the problem.
To bring the spending power back into city centres, we need to focus on policies that will bring jobs to the city centre and ones that improve the quality of these jobs. This means attracting and supporting the kind of businesses that will provide these kinds of jobs.
Much of this has to happen in the cities themselves, like improving the quality of the workforce and upping both the quantity and the quality of the office space available. But there are things that national government can do to help:
1. Prioritise commercial space in city centre planning
There is a need to exercise caution around Permitted Development Rights (PDR). The ability to covert commercial space into residential use more easily has had the intended impact of increasing the supply of housing in some unaffordable cities. In a sub-set of these however, the same process is creating a potentially unsustainable loss of central office space.
Offices in our densest city centres also contribute disproportionately to national productivity. Office space, and the footfall this brings, also plays a strong role in maintaining the vitality of city centres. Exempting city centres from commercial to residential PDR would help local city planners in preserving and prioritising this role.
2. Reform business rates to incentivise city centre growth
Business rate reforms are often cited as an antidote to the decline of the high street and they can be, but not in way people usually talk about it. Cutting business rates for retailers might provide some relief in the immediate term but is likely to be matched by increases to rent over the medium to long term. It also fails to address the underlying reasons why these shops struggle – low footfall and low spending power.
There are several ways in which the current system can be reformed to align the fiscal incentives for local authorities to appropriately meet the demand for office space in them. These include, allowing local authorities to capture some of the commercial property uplift they contribute to and having more frequent revaluations so that the system is more responsive to changes in the market. Encouraging cities to drive economic development in their city centres in such a way is a much more sustainable route to healthy high streets.
3. Use funding pots to drive productivity growth in city centres
The £1 billion Future High Streets Fund allocated to 50 places across the country to make their high streets and town centres fit for the future is a step in the right direction. The new government must allow, and encourage, this money to be spent on more than amenity improvements, supporting the remodelling of high streets away from retail and towards more office space and a higher quality public realm.
In addition, we would call for the creation of a £5 billion City Centre productivity fund for councils to bid into, with the explicit aim of making their city centres more attractive places to do business. While this may seem like a large sum on its own, it is a fraction of the £37 billion that is currently allocated to the National Productivity Infrastructure Fund.
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