High streets are under threat, but that doesn’t mean they’re doomed, says Tom Ironside, Director of Business and Regulation at the British Retail Consortium
It is something very few of us can escape, whether we want to or not, and it’s probably the closest many of us ever get to influencing a major sector of the UK economy. It is shopping.
Whether it’s the weekly trip to the supermarket, a stroll around your nearest town centre, a visit to a retail park or an internet search, our shopping habits add up to some pretty staggering statistics.
In 2011, retailing generated an enormous £303 billion towards the nation’s wealth, equivalent to one fifth of the UK’s gross domestic product.
And it provides jobs for nearly three million people, more than 10 per cent of total employment.
Representing 80 large retailers or retail groups and 16 trade associations, which in turn represent between 30,000 and 35,000 small and medium-sized enterprises, is the British Retail Consortium.
Based on company turnover, the BRC is the voice of between 70 and 80 per cent of retail outlets – 11 out of 12 of the major supermarkets, the big DIY stores, household names like Argos, Boots, WH Smith, John Lewis and Marks & Spencer.
Director of Business and Regulation Tom Ironside left no doubt about what he believes is the BRC’s primary role: batting unashamedly for the interests of retailers, from giants such as B&Q and Tesco to the small independent shop in your local high street.
“We are explicitly a campaigning and lobbying organisation focused on ensuring that the business environment in the UK is as conducive as possible to maintaining and growing what the retail sector does,” he told me at the BRC headquarters in the heart of Westminster.
“We spend an awful lot of time with Whitehall and with parliamentarians just around the corner,” he added.
That applies not only to parliamentarians in London, but also in Edinburgh, and to assembly members in Cardiff and Belfast. In addition, there are BRC representatives lobbying on key European Union issues in Brussels.
On the subject with which the BRC believes the EU should be principally concerned – the single market – Mr Ironside said: “For our members there is a lot interest in making sure we have as level a playing field as we can.
“That means having good market access right across the EU, and making sure that the development and interpretation of regulation at UK level is consistent and fair and does not impose undue burdens on British businesses.”
The BRC is careful not to get too involved in the political ‘Britain in or out’ argument over Europe and whether David Cameron is right to promise a referendum.
It stresses the importance of developing and refining the single market and supports Mr Cameron’s demand for change and reform.
However, with all the ifs and buts attached to the still-some-years-away referendum, its leaders emphasise how vital it is to minimise uncertainties “to ensure retailers continue to be able to make important decisions on investment and job creation – either here, elsewhere in Europe or indeed globally – that continue to benefit the UK economy”.
That’s a pretty clear warning to the Prime Minister that the uncertainty surrounding the future of Britain’s place in Europe is potentially a concern to business interests.
Retailing can offer up some more impressive stats: the sector paid £17.5 billion in tax in 2010 – VAT, business rates, National Insurance and income tax. The Exchequer also benefited from around £5 billion in corporation tax from wholesalers and retailers.
The bête noir among those taxes, says the BRC, is the business rate because retailing remains a property intensive business, so shops and stores are disproportionately affected by movements in the rate.
Mr Ironside set out the three principal costs facing retailers: buying goods for resale; their employees (wages, NI, etc); and property (rates, rents, service charges, etc).
He pointed out that average rents have been going down since the economic downturn of 2008/09 because many landlords had been responsive to the difficult times facing their tenants.
“At the same time, business rates have been rising very rapidly because they are pegged to a single-month snapshot of the Retail Prices Index,” said Mr Ironside.
This means that the April increase in business rates is determined by the previous September’s RPI figure.
“We have not called for this before, but we think there should be a freeze in business rates and that the current planned increase of 2.6 per cent should be cancelled,” said Mr Ironside.
“At present it’s effectively a casino – using a one-month snapshot does not give large or small businesses very much time to plan for what is a substantial part of their cost base.”
The BRC wants Chancellor George Osborne to move from the Retail Prices Index to the Consumer Prices Index, which is usually lower, and to base the business rate on a period of price fluctuation longer than one month.
A phenomenon that has inevitably affected traditional shopping in recent years, and will continue to do so, is the internet.
Online shopping is now worth approaching £20 billion a year in turnover – about 10 per cent of the total – and it is increasing year on year.
“Some analysts are predicting that, by 2020, a quarter or even a third of retail turnover will be appearing online,” said Mr Ironside.
Some of this rise is put down to people’s increasingly busy lives, but the reasons are complex and, said the BRC spokesman, there are plenty of things that traditional traders can do to increase their footfall.
One development which the BRC is particularly keen on is the creation of business improvement districts – partnerships which are intent on raising the standard of the shopping experience whether it be in London’s Oxford and Regent Streets or in local market towns.
It involves thinking hard and collectively about what the consumer needs, good marketing and branding, staging events to bring people into an area, making sure that it is safe for shoppers, and trying to prevent an area from becoming a ghost town after the shops have shut, so entertainment and leisure should be in the mix.
Affordable and easy access for shoppers is also important, so bus and train companies need to become involved, and car users should not be put off either by a lack of parking or exorbitant charges.
“It’s a complicated mix of different issues, but almost everything comes down to having an effective vision for a local area, a clear programme of activity and an effective partnership to make it work,” said Mr Ironside.
The proliferation of ‘pound shops’ and charity shops in some towns is a sign of the economic times, but the BRC has no qualms about this trend.
“My understanding from dealing with a whole range of different people is that many towns and cities welcome the presence of value-led retailing on their high streets, particularly at a time when there are significant numbers of vacant premises. Customer behaviour shows that there is a strong market in that area,” he said.
There is no doubt that the face of the high street is changing, but that should not mean that town centres should be killed off by the internet, retail parks or huge shopping centres.
“For some towns, the future won’t just be about retailing. It also needs to be about culture, entertainment, leisure and maybe the reintroduction of houses and flats in certain areas,” said Mr Ironside.
There is an inevitability about change, he said, and it has been happening over a long period.
But one more statistic tells another important story. Town- and city-centre shopping still accounts for more than 43 per cent of all retail spending, so there is plenty or life there yet.
“Some regional centres have borne up pretty well but there is a lot of variability even within a region. You will find good performance alongside less good performance right across the country. It’s not a north-south issue.
“Our high streets can never be preserved in aspic, but what has to happen in all successful locations is for retailers to meet the changes in consumer needs. That’s the real challenge,” said Mr Ironside.