The State of Scotland's High Streets

Charity Retail Association’s Scottish seminar 2015

The State of Scotland’s High Streets

David Lonsdale, Director, SRC Scottish Retail Consortium: . Established in April 1999 . 255 brands in membership include well-known high street and online retailers, plus grocers and trade associations . Policy & market intelligence; representation; networking . Champions the retail industry and campaigns for a competitive policy landscape. Positions are determined by 16-strong SRC Board after consultation with wider membership . 4 C’s: competitiveness, careers, communities, constitution . Topical issues: devolved budget, NDR, carrier bags, high streets, regulation, building standards, devolution

Represent 255 brands including: Sector size and importance

• 257,000 employees • Largest private sector employer • 23,000 shops • 9% of businesses are retailers • Retailers invest £1,400 p.a. in training each employee • Retail pays quarter of all NDR • In independent research the public rated high street retailers & supermarkets as top sectors for community engagement

SRC-KPMG Scottish Retail Sales Monitor

8.0 6.0

4.0

- o - 2.0 Food 0.0 -2.0

% change y change % All Sales -4.0 -6.0 Non-food

-8.0

13 13 14 14

13 13 14 14 15

- - - -

- - - - -

Jul Jul

Jan Jan Jan

Oct Oct

Apr Apr

Source: SRC/KPMG SRC- Springboard Footfall and Vacancies Monitor

Source: SRC/Springboard SRC- Springboard Footfall and Vacancies Monitor

13.0% Vacancy Rate 12.0% 11.0% 10.0% 9.0%

8.0%

12 12 13 13 14 14

12 12 13 13 14 14 15

------

Jul

Jul Jul Jul

Oct

Apr Apr Apr

Oct Oct Oct

Jan Jan Jan Jan UK Scotland

Source: SRC/Springboard

Town centres - main drivers of change (“shift in power from retailer to consumer”): • Structural e.g. profound shift in use of online/mobile technology, re- emergence of convenience shopping, demographics, rise of car ownership & ‘anti-car’ approaches in town centres

• Economic e.g. recessionary impact on disposable incomes, deleveraging, addiction to bargains and deals

• Regulatory e.g. cost & ease of doing business, future for upcoming leases? Internet spend per capita Impact of structural change:

• Share of total retail sales in town centres down from 47% to 39% in decade, mostly at expense of online & mail order • Too much retail space yet greater use of warehouses • Fifth of non-food items purchased online, 50%+ via tablets/phones • Transparency over pricing, quality & service • Simultaneous growth of premium and value retailing

… this ‘disruption’ is forcing retailers to evaluate their business models

21st century town centres:

Our town centres have a great deal To thrive town centres need to: to offer: . Encourage collaboration . Craving for social and between private and public community interaction sector . Destination retailing but also to . Attractive public realm do banking and access public . Understand customer’s evolving services needs, use technology . Beyond retail e.g. night-time . Make it easier and less costly economy, leisure, cultural for retailers to invest . Provide good reasons to visit and spend time and money Greater public policy focus of late:

• Fraser Review of Town Centres • Scottish Government’s town centre action plan • Cross Party Group on Town Centres

… plenty of focus on housing, location of services, digital … but missed mark as far as retail is concerned

Cost of doing business has risen:

• Non-domestic rates • Pensions auto-enrolment • NMW increases • Training staff in new alcohol licensing • Training staff & providing new kit for tobacco legislation • Water/sewerage charges for empty shops • Planning fees up 25% in 2 years • Scotland v rUK– building standards: sprinklers and fire precautions, toilet provision, seats, signage, height of counters

… making commercial investment decisions more marginal … at a time when there is little ability to pass on to constrained consumers

Further potential policy challenges:

• Further devolution e.g. income tax, LBTT, VAT assignment • Council tax replacement • Tax powers for local authorities? • Living wage • Carrier bags, recycling/waste disposal • Crime e.g. shoplifting • UK General Election outcome (VAT rises?)

SRC’s agenda for town centres:

Spur extra private sector investment:

. Policy coherence . Non-domestic rates . BIDs/BRIS . LBTT . Access/parking . Building standards/planning regime . Tight lid on government costs . Budget “consequentials” Business rates:

. Current system not fit for purpose: quarter of all rates paid by retail, bills are too high, reliefs account for over quarter of total income . NDR revenues from retail up 30% over 5 years to 2014, but 1,800 fewer shops during that period . Reform: system flexes with economy, rewards rather than penalises investment, reduces tax burden, reduces admin cost . Change happening elsewhere in UK . First Minister’s request for ‘new thinking’

Can we secure more favourable policy regime?

• Most MSPs familiar with retail industry • Majority of MSPs have favourable view of the sector • However a significant proportion of MSPs are indifferent towards the sector

… we have a good story to tell but too often the retail industry is still taken for granted. Need to do better at telling story, and that requires all of us to participate … encourage politicians to think twice before rushing to legislate or introduce extra costs

Based on findings of SRC commissioned survey of MSPs (Oct/Nov 2014)

Conclusion - possible questions for discussion:

• How can we collectively better position the retail industry over the next few years? • How can we ‘wake up’ government and policy makers and secure a more favourable and competitive business environment on our high streets? • How do we motivate members and shops to get better involved in our Trade Association and industry campaigns?