House of Commons Business, Innovation and Skills Committee
The Retail Sector
Eighth Report of Session 2013–14
Volume II Volume II: Oral and written evidence
Additional written evidence is contained in Volume III, available on the Committee website at www.parliament.uk/bis
Ordered by the House of Commons to be printed 25 February 2014
HC 168-II Published on 4 March 2014 by authority of the House of Commons London: The Stationery Office Limited £22.00
Business, Innovation and Skills Committee
The Business, Innovation and Skills Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Business, Innovation and Skills.
Current membership Mr Adrian Bailey MP (Labour, West Bromwich West) (Chair) Mr William Bain MP (Labour, Glasgow North East) Mr Brian Binley MP (Conservative, Northampton South) Paul Blomfield MP (Labour, Sheffield Central) Katy Clark MP (Labour, North Ayrshire and Arran) Mike Crockart MP (Liberal Democrat, Edinburgh West) Caroline Dinenage MP (Conservative, Gosport) Rebecca Harris MP (Conservative, Castle Point) Ann McKechin MP (Labour, Glasgow North) Mr Robin Walker MP (Conservative, Worcester) Nadhim Zahawi MP (Conservative, Stratford-upon-Avon)
The following members were also members of the Committee during the parliament. Luciana Berger MP (Labour, Liverpool, Wavertree) Jack Dromey MP (Labour, Birmingham, Erdington) Julie Elliott MP (Labour, Sunderland Central) Margot James MP (Conservative, Stourbridge) Dan Jarvis MP (Labour, Barnsley Central) Simon Kirby MP (Conservative, Brighton Kemptown) Gregg McClymont MP (Labour, Cumbernauld, Kilsyth and Kirkintilloch East) Ian Murray MP (Labour, Edinburgh South) Nicky Morgan MP (Conservative, Loughborough) Chi Onwurah MP (Labour, Newcastle upon Tyne Central) Rachel Reeves MP (Labour, Leeds West) Mr David Ward MP (Liberal Democrat, Bradford East)
Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.
Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/bis. A list of Reports of the Committee in the present Parliament is at the back of this volume.
The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only.
Committee staff The current staff of the Committee are James Davies (Clerk), Amelia Aspden (Second Clerk), Peter Stam (Committee Specialist), Josephine Willows (Committee Specialist), Ian Hook (Senior Committee Assistant), Pam Morris (Committee Assistant).
Contacts All correspondence should be addressed to the Clerk of the Business, Innovation and Skills Committee, House of Commons, 7th Floor, 14 Tothill Street, London SW1H 9NB. The telephone number for general enquiries is 020 7219 5777; the Committee’s email address is [email protected]
The Retail Sector 1
Witnesses
Tuesday 21 May 2013 Page
Helen Dickinson, Director General, British Retail Consortium Ev 1
Jonathan James, Chairman, and Shane Brennan, Public Affairs Director, Association of Convenience Stores Ev 8
Edward Cooke, Director of Policy and Public Affairs, British Council of Shopping Centres, and Mark Williams, Chairman, Distressed Town Centre Taskforce Ev 15
Tuesday 25 June 2013
Fiona Wilson, Head of Research and Economics, and Stephen Rydzkowski, Research Assistant, USDAW (Union of Shop, Distributive and Allied Workers) Ev 22
Martin Blackwell, Chief Executive, Association of Town and City Management, and Sara Scott, Chair, Market Rasen Town Team Ev 32
Tuesday 2 July 2013
Alex Gourlay, Chief Executive, Health and Beauty Division, Alliance Boots, Tony Wheeler, Head of Branch, Peter Jones, John Lewis, Mark Lewis, Online Director, John Lewis, and Tony Ginty, Head of Public Affairs, Marks & Spencer Ev 40
Martyn Hulme, Managing Director, Co-operative Estates, Tim Fallowfield, Director of Corporate Services and Company Secretary, Sainsbury’s, and David Hobbs, Director of UK Operational Strategy and Business Planning, Tesco Ev 50
David Owen, Chief Executive, GFirst Local Enterprise Partnership, Professor Joshua Bamfield, Director, Centre for Retail Research, Alexandra Birtles, Head of External Communications, TalkTalk, and Liz Peace, Chief Executive, British Property Federation Ev 57
Thursday 12 September 2013
Mary Monfries, Partner, and Matthew Tod, Partner, PricewaterhouseCoopers Ev 66
Mark Walmsley, Chief Executive, ActSmart, Ken Parsons, Chief Executive, Rural Shops Alliance, and Meryl Halls, Head of Membership Services, Booksellers Association Ev 71
Jane Rexworthy, Director of Skills Solutions and Head of National Skills Academy for Retail, National Skills Academy, and Martin-Christian Kent, Research and Policy Director, People 1st, National Skills Academy Ev 76
2 The Retail Sector
Mike Davidson, Head of Retail Operations, Land Securities, and Peter White, Executive Director, Marketing and Customer Services, Gloucestershire College Ev 83
Tuesday 29 October 2013
Bill Grimsey, businessman and author of Sold Out: Who Killed the High Street? and The Grimsey Review: an alternative future for the high street Ev 90
Rt Hon Michael Fallon MP, Minister of State, Department for Business, Innovation and Skills, and Brandon Lewis MP, Parliamentary Under- Secretary of State, Department for Communities and Local Government Ev 98
The Retail Sector 3
List of printed written evidence
(Oral and Written evidence is published in Volume II)
1 Department for Business, Innovation and Skills Ev 114; Ev 147 2 Association of Convenience Stores Ev 148 3 Association of Town and City Management Ev 153 4 Boots UK Ev 160 5 British Council of Shopping Centres Ev 165 6 British Property Federation Ev 169 7 British Retail Consortium Ev 172; Ev 177 8 Co-operative Group Ev 178 9 National Skills Academy for Retail Ev 183 10 Rural Shops Alliance Ev 186 11 TalkTalk Group Ev 191 12 USDAW Ev 193 13 Department for Communities and Local Government Ev 195
4 The Retail Sector
List of additional written evidence
(published in Volume III on the Committee’s website www.parliament.uk/bis)
1 Accessible Retail Ev w1 2 Alliance for Intellectual Property Ev w5 3 Association of Licensed Multiple Retailers Ev w12 4 Rodney Atkinson Ev w16 5 Bank Machine Ev w19 6 Boxpark Ev w21 7 British BIDs (Business Improvement Districts Ev w22 8 British Independent Retailers Association Ev w23 9 Emma Brooksbank Ev w27 10 CACI Limited Ev w28 11 Charity Retail Association Ev w36 12 Economic and Social Research Council Ev w38 13 F Hinds Ev w45 14 Hippodrome Casinos Ev w46 15 Intu Properties plc Ev w50 16 Local Government Association Ev w60 17 Morrisons Ev w62 18 National Federation of Retail Newsagents Ev w64 19 National Federation of SubPostmasters Ev w67 20 National Franchised Dealers Association Ev w72 21 New West End Company Ev w74 22 Petrol Retailers Association Ev w76 23 Paul Turner-Mitchell Ev w79; Ev w82; Ev w84
Business, Innovation and Skills Committee: Evidence Ev 1
Oral evidence
Taken before the Business, Innovation and Skills Select Committee on Tuesday 21 May 2013
Members present: Mr Adrian Bailey (Chair)
Paul Blomfield Rebecca Harris Katy Clark Ann McKechin Mike Crockart Mr Robin Walker Julie Elliott Nadhim Zahawi ______
Examination of Witness
Witness: Helen Dickinson, Director General, British Retail Consortium, gave evidence.
Q1 Chair: Good morning and welcome. Thank you Helen Dickinson: From an industry point of view, it for agreeing to address the Committee today and help is really important that we do not see it as large versus us with our inquiry. Could I ask if you could move small, food versus non-food or online versus high slightly to the centre? street. From a consumer point of view, they will shop Helen Dickinson: I was a bit worried about the in the place where they feel that their needs are being microphone, but I will move this way. met. That gives opportunities for all types of retailers, Chair: I think we can hear you. I will ask you to from the large multiples to independents, to pure introduce yourself for voice transcription purposes plays, and to community stores right across the before we start with the questions. industry. Helen Dickinson: My name is Helen Dickinson. I am the Director General of the British Retail Consortium. Q4 Ann McKechin: Good morning. Perhaps I can press you a little bit further about this issue of online Q2 Chair: Thanks very much. I will just start with a shopping. A number of the submissions to the very general question. The retail sector and, indeed, Committee’s Inquiry argued that online sales from your organisation cover a wide variety of businesses, traditional retail should be seen as complementary. I from small shops to multiples. Major shopping centres think that is your argument too. How do you think are often in competition with each other. What do you high street retail can benefit from e-commerce and see as the major challenges facing the different sorts m-commerce? Do you think that sufficient numbers of of businesses and how do you think your organisation companies are actually making the best use of the provides support for them? benefits? Helen Dickinson: The major challenge facing the Helen Dickinson: This is a very fast-moving area, and whole industry is one of a changing consumer. This is what we are seeing is a huge structural change within all about the way that people interact with shopping all parts of the industry, whether that is from some of as an activity. Over the last five to 10 years or so the biggest players or many of the smaller ones. we have seen a real acceleration of the impact that Perhaps before coming back to your question, it is technology has had on the way that people shop. This important to look how big online and m-commerce has put the consumer firmly in control. It has given are in the context of the industry. Online sales are much more visibility over the prices of what they buy about 10% of retail sales currently; sales through and the different options available to them in terms of mobile are less than 1% of retail sales. Both of those how they buy it. channels, though, have an influence on the way that From a BRC point of view, we look to advance people shop. More and more people are crossing vibrant and responsible retailing, and we look at that different channels in making their customer journey across three aspects. Firstly, that is from the point of to an ultimate purchasing decision. view of people and careers in the industry. There are From an independent point of view on a high street, just under 3 million people who work in retail, and there is an opportunity for them to look in a different those are jobs where there is great opportunity for way at what it is that they are offering their customers. career progression and development. Secondly, we That may well be a convenient shop, and in that look at it from the point of view of community and instance consumers are still looking for convenience. the role that retail plays in society. Then thirdly we On things like e-commerce and m-commerce, there look at it from a competitive point of view, so making are new business models emerging that will support sure that the opportunities for innovation and growth many smaller businesses. Those are things like My are there. High Street, for example, which is a new marketplace. It is an online market place that looks at individual Q3 Chair: How do you reconcile maybe conflicting town centres and then gives people in those local town interests between the larger stores and the small, centres—so individual traders—the opportunity to independent ones? showcase what it is that they are offering through a Ev 2 Business, Innovation and Skills Committee: Evidence
21 May 2013 Helen Dickinson different channel as well as providing something not something that the public commonly perceives as locally that is convenient and in the physical space. a potential export and source of earnings for the country. In very broad terms, where do you think the Q5 Ann McKechin: What specific actions do you opportunities arise and in what particular countries do think BIS as a Department can introduce to ensure you think there is the most potential? the high street can benefit from electronic forms of Helen Dickinson: We have to look differently from a shopping? Obviously, very large companies are European point of view and outside Europe. Within already adapting quickly, but I think many of the the EU, making sure or continuing to push for a true, shops in our high street are smaller retailers, and the single European market, both from a physical concern is whether they are going to be able to benefit presence and digital point of view, really does give or whether they are just going to be left out. opportunity for UK retailers. There are many UK Helen Dickinson: From a Government point of view retailers that are operating in Eastern Europe, but also over the last few years, it has been interesting that we in Germany, France and all European countries. That have seen an increasing focus on the sector. We have looks on the face of it an easier opportunity for retail the BIS retail strategy, which came out at the end of businesses because the perception is that the last year; we have the UKTI Retail Industry requirements of consumers in those countries are International Action Plan. These really highlight the similar to the UK. Not necessarily understanding how interest in the opportunity that is there. Certainly from consumer preferences differ across different markets an international point of view, what e-commerce does is something that many retailers over the years have is put everybody on a level playing field because it is fallen foul of. They may well be closer to home, and available and open to everybody. The UK is a leading that provides logistics/supply chain advantages, but it light if you look across the globe in terms of how e- still leads to the need to understand local preferences. commerce has developed in this country versus others. There is both a European opportunity and, further We have a higher spend per head through e-commerce afield, if we look at the developing nations—countries channels here than any other country. like India and China—there is a huge amount of investment that is already going into those countries Q6 Ann McKechin: Can I just press you on that from particularly a brand point of view, but also more point? Do you think the Government has actually broadly across retail. The differences in terms of local given sufficient support in spreading the benefits that regulatory requirements are huge. From talking to a we have in being further ahead on online shopping number of retail businesses, what they say when they than many other Western nations in terms of are thinking about going into those overseas markets international trade? is they do not know what they do not know. It is Helen Dickinson: International is a real opportunity almost like you are starting with a blank piece of to push further, because of that expertise that actually paper. That sort of support that UKTI is suggesting sits here. There are a number of things that are already through the Action Plan, about trade missions and in progress. For example, there are trade agreements giving guidance on what those local requirements are, outside the EU because there are lots of duty costs is really important. that are pretty complex, particularly for a smaller business, to understand. More support could be offered to help smaller businesses understand what Q9 Chair: We went to Brazil last year, and Burberry those different regulations are across borders and was opening in Sao Paulo. They outlined some of the actually understand the local requirements if they did difficulties. Do you as an organisation work closely want to set up and invest directly in those markets. with UKTI to try to identify potential markets and obstacles that need to be removed in order for those Q7 Ann McKechin: Obviously businesses are still markets to be exploited? going to be primarily based here in the UK but Helen Dickinson: I am sure there is more that we operating online. Do you think UKTI has actually could do. We certainly worked closely with UKTI in changed the way it provides the service to make sure the thinking that was behind the International Action that these people can get to that advice? Plan. Helen Dickinson: That has shifted over the last Chair: Thank you. We may explore this further with couple of years. There is definitely now much more the companies themselves. recognition that UK retail as an export is an opportunity. That is both from the point of view of Q10 Mike Crockart: I have a very quick exporting physical goods through e-commerce supplementary on this precise subject. You do talk channels and UK retail businesses investing directly about there being a blank piece of paper, but of course overseas. The UKTI Action Plan identifies lots of there are many larger companies, with the dominant areas where more focus is needed in order to leverage position we already have in economies, that have that opportunity. To answer your question, we are not already filled in the bit of paper. The experience that quite there yet, but the opportunities are all on the I have found in talking to small companies in my table and the awareness is there. constituency is when they manage to get on a trade mission, whether by accident or design, they actually Q8 Chair: Just before we go on, picking up this find out more from the other large companies that are export potential issue and the UKTI strategy, there is on that trade mission than they ever found out from no doubt that the British retail brand is recognised UKTI. Is there some way of formalising that by internationally as being a world leader. However, it is putting in some sort of mentoring scheme that we Business, Innovation and Skills Committee: Evidence Ev 3
21 May 2013 Helen Dickinson could actually get up and running and would help any way some of the innovation that is coming smaller companies far more? through. Helen Dickinson: That is definitely something that could be explored further. At the BRC, through our Q13 Nadhim Zahawi: Where do you fall on that? member groups, we put people from different Helen Dickinson: I am agreeing with you in that it businesses together. One of the things that I have absolutely needs to be considered further. I do not heard back from talking to the chief execs about what know what the answer is though. it is they get from the BRC, having the opportunity for people in their business to share experience, share Q14 Nadhim Zahawi: What is the role of the BIS best practice and just talk to others who have faced Retail Policy Forum? The Department says that it similar issues or done something before them is really meets three times a year. Is this in your view sufficient very helpful. to develop a coherent strategy between interested parties? Q11 Nadhim Zahawi: I am just following on from Helen Dickinson: It is an opportunity to really some of the questions you had earlier. Obviously highlight what is on the top of the agenda at any retailing is in a state of flux because you have m- particular time, as well as think about some of the tailing and e-tailing. We will get to questions about long-term issues. There is plenty of other day-to-day business rates later on in the session, but I have a contact that is going on on a more regular basis, so more general point on taxation. Is your view that the we are not reliant on that forum just for exchanging Government is doing good enough, is not doing views. enough or could do more on a more level playing field? Obviously some e-tailers and bricks-and-mortar Q15 Nadhim Zahawi: Do you think interaction is retailers have different corporation tax rates that allow sufficient with the BIS Department? them to scale, get to a certain size where they use loss Helen Dickinson: I think the interaction is sufficient. leaders, to crowd out some of the smaller retailers We have a good relationship. Going back to one of who are under a different regime. I just want to get the earlier questions, the retail strategy, along with the your take. There is obviously so much in the news UKTI Action Plan, has put a lot of focus on a number on different corporations. Without attacking anyone of areas where there is an opportunity to make some specifically, because I think that is unwise for Select changes, for example lessening some of the burden of Committees to do if we are trying to encourage regulation. Having identified those issues, now we corporations to invest in the UK, where are we on that need to focus on making faster progress on taking scale? Do we need to do more to level the playing them forward. field? Do we need to get better and modernise some of the rules around taxation? Q16 Nadhim Zahawi: The Department has Helen Dickinson: From a medium term basis, that is acknowledged that it does not provide e-tail specific absolutely something that does need to be looked at. business support schemes. Should it? If yes, what I am sure the reduction in headline corporation tax is form should those schemes take? very welcome to every business, and that has Helen Dickinson: I am afraid I do not know the obviously been beneficial across the piece. Over the answer to that question. There is always an last few years or so we have seen a real shift to lower opportunity to do more. I could sit here and say I corporation tax, but that has put more burden on other would love to have the whole of BIS just focussed on taxes—people taxes and property taxes, which comes the industry, which I am sure would be completely back to business rates—and if you think of retail as inappropriate. an industry in its entirety, it is generally a property- intensive, people-intensive industry. That has shifted Q17 Nadhim Zahawi: The thrust of my questioning some of the burden to retail. If you put that in the is if you look at the automotive sector, we really context of an industry whose structure is changing and focussed on it; we created forums and platforms to get dealing with the move to a much more digital the industry engaged with Government—and look at economy, it absolutely raises the question of whether, where we have ended up. It is a big export success in the round, the tax system is— story and a great repatriation of supply-chain Nadhim Zahawi: Catching up. manufacturing to the UK. There is a really positive Helen Dickinson: Catching up for a 21st century outlook for the industry. Retail is in that state of flux digital economy. That is where you get to what a level that I think needs that level of interaction. Just playing field actually looks like in a different world thinking back to some of those three meetings a year from the one that was in place when those systems that you have, can you think of any significant and processes were put in place. material outcomes from those meetings about which you would say, “Right, that’s what we achieved in that Q12 Nadhim Zahawi: Presumably because of our meeting”? Can you name one thing that came out? success in embracing the digital economy or e-tailing, Helen Dickinson: I would have to come back to you we are a valuable market to anyone who may be in on that because I am afraid I have only been in-role that global space. Can we use that to help with some for four months, so I cannot comment on the history of our indigenous businesses? Are there any thoughts of the outcomes. I think, though, it is an interesting from your organisation on that? point in the context of looking at the BIS industrial Helen Dickinson: That is one that requires further strategy. Retail was not recognised as a priority sector thought. We need to ensure that we are not stifling in within the context of that. What we do have through Ev 4 Business, Innovation and Skills Committee: Evidence
21 May 2013 Helen Dickinson the Retail Action Plan is a level of priority being put Q20 Mike Crockart: It is quite a variety of different on it. I do agree that there is plenty out there. There schemes. Is that just a reflection of the fact that, as is no silver bullet, but there are a lot of individual you have said already, retail is so wide and so different things that if taken together would make a big it therefore needs different intervention in different difference. areas? Is it all just a bit too confusing and leaving people not knowing what they are best trying to Q18 Nadhim Zahawi: So it is lots of tactical stuff follow? rather than a strategic view. Helen Dickinson: The answer to that is probably Helen Dickinson: That comes back to the fact that both. It does require intervention at many different this is a very fragmented industry. It is quite different levels. The BIDs and the change of use classes is a from automotive in the sense that there are around national level intervention. At local level things like 200,000 retail businesses in this country. It is different car parking and accessibility to local areas is a key from the pharma sector or the automotive sector in thing that gets mentioned to me time and time again. that sense. The sorts of things that will help the How can local councils be encouraged not to see industry as a whole are less big or groundbreaking charges for car parking as revenue generators but see things like that. parking as an opportunity to generate footfall into a local area? Then when you get further into the local Q19 Mike Crockart: One of my colleagues is going level, because there are so many differences about to go into Portas in a bit more detail in a moment. On what is needed between one high street and another, the much higher, strategic level, though, we obviously you then have to put a diverse bunch of stakeholders have a large number of initiatives out there now to try together to create a vision, plan and a viewpoint on to help retail on the high street. There are 27 Portas what it is that that particular local community will Pilots and 330 Town Teams, BIDs, the Future High need. There is not a one-size-fits-all answer to that Streets Forum and a High Street Renewal Award question. scheme; there is a plethora of help available. I would just be interested in your take on which of those is Q21 Mr Walker: You have already touched on actually most successful. Have you done any work business rates as one of the big issues affecting the looking at those? sector. You have highlighted business rate multiplier Helen Dickinson: The first thing I would say, reform as one of the areas in which you would like to perhaps, before coming back to the question, is that see the Government act. Apart from shifting from RPI for the future of high streets and town centres in this to CPI, what other reforms would you like to see country we need to recognise that they need some help introduced to help the sector? in entering a new phase. What we had before has gone Helen Dickinson: If you delve into and look at the forever and the whole thrust absolutely has to be on cost base of UK retail plc and how that has changed reinventing town centres and high streets that are fit over the last five years or so, what you see is that for purpose in the future. That, for example, will market-related costs such as rent have fallen over that include other sectors beyond retail, whether that is period, whereas centrally driven costs have continued leisure, care and support in the community as well as to rise. Now we are looking at a situation where shops. That is not to say that retail does not have a business rates are becoming much more of a driver to fundamental part to play. the economic decision of opening a store as opposed Coming back to your question in terms of the things to a tax that is expected on the back of performing that are working well, certainly from the experience well at that individual store level. that we have seen on the ground, BIDs are a great To explain that a bit more clearly, when a retailer is concept. Having that local input to what needs to be looking at whether they should or should not open in done on a local basis is absolutely key. One of the a particular place, they are effectively running a profit recommendations that was in the Portas Review was and loss account for that store and looking at the around extending the scope of BIDs to give them individual costs and the expected revenue in order to greater powers and also to include landlords not just make that decision as to whether it is economically on a voluntary basis as it is at the moment. The viable to open it. Business rates have become a bigger creation of super-BIDs to give that local focus and and bigger part of that decision-making process, to the support is one thing. point where it is actually tipping people to take a Another area is around the use classes of property. “don’t open” decision as opposed to an “open” That is having the flexibility to change use classes decision. That therefore leads to a conclusion that, on more easily. Again, certainly for the chief execs that I business rates as a whole, something bigger am talking to, one of the frustrations is about not just potentially needs to be done to help address the how difficult it is but the length of time that is taken vacancy rate across the country, where about one in to get property decisions taken on a local basis. It eight stores in town centres is vacant. hinders them in terms of giving that support where they want to invest. There has been a consultation on Q22 Mr Walker: It is a pretty crucial point if you temporary change of use for property. Within the think business rates are providing a real disincentive budget there was a plan to do a consultation on for people starting up in the retail business. Do you making change of use more straightforward between think the sector as a whole is bearing an unfair burden commercial, retail and residential. Both those two of business rates? I know that the proportion the sector things—firstly the BIDs and secondly the planning— represents of the economy is much smaller than the would make a big difference. proportion of business rates that it pays. Is there an Business, Innovation and Skills Committee: Evidence Ev 5
21 May 2013 Helen Dickinson extent to which we ought to be looking at the whole undue burden on business and stopping them from system of business rates in order to see if we can getting on doing what they want to do. relieve pressure on the sector? Helen Dickinson: Yes is the answer to that. We need Q26 Mr Walker: You mentioned the issue of to take into account the Treasury’s need to balance its accessibility earlier, and parking is clearly a massive books in the current economic climate. What we issue for some of our city centre high streets perhaps need to bring more effectively into the particularly, and areas such as that. How do you think equation is looking at a closer link to how well a parking league tables would help to improve the particular store is trading. At the moment there is no accessibility of town centres? link between business rates and that. We also need to Helen Dickinson: It would just give more visibility perhaps look at it in a different way. If there are about to everybody and show those that are at the bottom of 300,000 stores across the whole of the country and the the table that there is a better place for them to be. vacancy rate is 12%, if that was moved by 1% then that is about 3,000 stores. If between five and 10 Q27 Mr Walker: Do you think there are other people are employed in each store, that is 15,000 to measures on the parking and accessibility front that 30,000 jobs. Then you have a knock-on effect from a the Government ought to be looking at? Treasury point of view of corporation tax and national Helen Dickinson: The proposal around league tables insurance from that particular store. That is before you is probably top of the list. get into the beneficial impact on the local economy. My point there is that perhaps we need to look at it in a different way. I agree with you though. Q28 Chair: Just picking up that parking issue, do you think that by having league tables and so on it Q23 Mr Walker: You have picked on performance might be a mechanism by which local authorities as being one of the things potentially to look at in that actually try to integrate their thinking with local retail respect. One of the things the Government has already development? My experience is that often local been doing is shifting the burden of business rates authorities just take decisions like this unilaterally from the smallest businesses to the larger ones. without really any long-term consideration or Obviously you represent both ends of the spectrum. Is consultation with bodies that might be affected. that something that you see as helpful from the Helen Dickinson: I agree with that. Part of the perspective of the retail sector as a whole? decision-making process should include a look at what Helen Dickinson: It comes back to what a level it is that will drive footfall and people into a particular playing field actually looks like. We welcome the centre. As you say, if you just look at parking in reliefs that were given, particularly for small isolation as what can be charged and how much businesses, because I think that really helps in the revenue that will generate, that is a very narrow early start-up phases. We need to be careful, though, economic assessment that is being made as opposed of thinking small versus big, and think of it from the to a broader one that takes in the broader economic point of view of what it is we can do to incentivise benefit of encouraging more people in way beyond the industry as a whole, irrespective of the size of the revenue generated from parking. There was one business, to continue to invest at local level. example I heard about where the parking charges were halved and the number coming in more than doubled, Q24 Mr Walker: What do you think the impact is so in fact the amount that was raised actually went up going to be of the delay in introducing rates as opposed to down and they got the benefit of revaluation from 2015 to 2017 and rates reform over increasing numbers of people actually shopping in that period? that area. Helen Dickinson: Again, if you look at it across the industry, there are winners and losers in the fact that Q29 Chair: The British Council of Shopping Centres it was delayed. From a town centre point of view, it argues that town centres should have a single owner/ has meant that that is where market rates have fallen manager. Would you support this approach? more significantly, so the delay is putting more burden Helen Dickinson: It is important that there is in that space. expertise at a local level in helping the various stakeholders work out what is best for that particular Q25 Mr Walker: Finally on business rates, one of town centre. What Portas and the other related activity the issues that I often get from local businesses is has done has really highlighted the problem. There is concerns about the valuation system and the length of a huge amount of goodwill out there in lots of time that it takes to appeal in that system. Have you different communities, and it is really giving them the been making representations to the Government in tools and the expertise to actually help them to think that area? about what is best for that particular centre in the Helen Dickinson: I would have to check and come future. That may well benefit from having the support back to you as to whether we have or not. From my of an expert in town-centre management. experience, I would completely agree that it is tied up into this “anything to do with property”, whether it is Q30 Chair: I was going to say, going back to the planning applications, change of use, or business rate previous question about integrating parking with the revaluations—that is just an area where there is a huge broader strategy, it would presumably help that. amount of complexity and time taken that is putting Helen Dickinson: Yes. Ev 6 Business, Innovation and Skills Committee: Evidence
21 May 2013 Helen Dickinson
Q31 Rebecca Harris: Can I ask you about People are the biggest asset of many retail businesses, regulation? You appear to argue that the Red Tape so the success of schemes like the apprenticeship Challenge has been a bit of a disappointment for your scheme is absolutely key. Many retailers have put in sector. What deregulatory measures do you think place apprenticeship schemes and are very keen to would have the biggest impact for your sector? make sure that they work as well as they can. Helen Dickinson: There are two areas. If we look at The challenge or the feedback that we get is that often things like “one-in, two-out”, we would recommend they are quite complex in terms of implementation that is looked at on a sector-by-sector basis. Certainly and they change quite regularly. If you are a business at the moment there seems to be a bit of delay that employs a significant number of people, then any between identifying a piece of legislation that could particular change to those requirements can be quite be removed and actually removing it. Therefore, one difficult in terms of the implementation and systems thing is about speed. The other is making sure from that are required to put those changes in place. It is an industry point of view that we are getting the really important that employers, as suggested in the benefit of “one-in, two-out”. If you think about it from Richard Review, are included in determining what the a retailer’s perspective, part of the challenge comes best way to implement any particular changes might from the fact that we have 200,000 businesses and be. they are processing millions and millions of transactions every day. Any piece of regulation Q34 Paul Blomfield: That is interesting because I potentially does have a big impact on the way that the would have thought that there was an engagement sector actually works and requires quite a lot of with employers in the relevant Sector Skills Council, change in systems and processes in putting it in place. but your view is that the voice is not heard. Therefore, the first thing is recognising some of the Helen Dickinson: The feedback I have is that they complexities where changes are made, but looking at would like to be more involved. those changes on a sector-by-sector basis. The other recommendation that we would have is if you look at Q35 Paul Blomfield: Can I ask about the ambition things like Primary Authorities, the feedback we have in relation to the levels of skills that we are giving had is that Primary Authorities work really well and people working in retail? I remember when we were have done a great job in helping those larger retailers doing our Inquiry on apprenticeships there was quite that work across many different local authorities to a striking difference between the UK retail sector, have consistency in implementation. However, there where level two is the norm, and the German retail are some areas like age-related sales, and that moves sector, where level three was the norm. I wondered if from things like alcohol and cigarettes to things like you thought we were sufficiently ambitious. One of knives and all sorts of other areas; apparently there the areas of difference was actually in product are about 20 pieces of legislation around that. These knowledge. It seemed that a lot of UK apprenticeship could also be included within the Primary Authority training in retail was focussed on general customer scheme, so that is about using a mechanism that relations and customer service. That is all very already exists and extending it to other areas like age- important, but actually it was weak on product related sales. knowledge and the areas where that extra support might be provided. Q32 Rebecca Harris: You have also answered the Helen Dickinson: Certainly if we go back to some of second question I was going to ask you. It was about the structural changes that are happening in the how you would like to see the Primary Authority industry, there is a real strong aspiration to actually scheme expanded. Is there anything you want to add broaden that beyond perhaps where it looked like it on that? was when you had your other Inquiry. The sorts of Helen Dickinson: No. skills that will be required in future within the industry are shifting from where they are at the moment. The Q33 Paul Blomfield: I would like to explore what need to make sure that we are offering the breadth of the skills needs are and where the responsibility for what is available is really key to the future of the fulfilling them lies, what the expectations of the sector industry. are and what the role of the sector is. In your evidence to us, you talk about the commitment of the sector to Q36 Paul Blomfield: Could you flesh that out a little apprenticeships. I think you would probably recognise bit in terms of the way you think the skills needs are that not all but some retail apprenticeships have changing? actually tarnished the entire apprenticeship brand and Helen Dickinson: Just again going back to feedback have led the Government to take action on the re- I have had in terms of people coming in to work, branding of short-term in-house training in customer whether it is basic employability, STEM skills or IT service. Could you flesh out a bit more what you think skills, the entry-level-type job base is much broader the good practice in the sector is and the commitment than stacking shelves and working in shops. There are of the sector to apprenticeships? opportunities within retail that sit right across from Helen Dickinson: If we think about it from a general supply chain to e-commerce, to finance, to analysing point of view to start with, the retail industry employs data. It is a very broad base of different types of about 2.9 million people. Many of those are entry- career opportunity. level jobs, so the need for training, whatever sort of training it is, is absolutely key for the industry. We Q37 Paul Blomfield: Just specifically on IT, it is an invest more than manufacturers in training our people. interesting area because I remember having Business, Innovation and Skills Committee: Evidence Ev 7
21 May 2013 Helen Dickinson conversations with some people in the sector recently think to myself, “If you went into your local Tesco or talking about how you keep up with the pace of whatever, would you get a comparable experience if change. In a sense, it is very difficult for pre-entry you were a tourist in this country?” Obviously the training to deal with that in that you could develop a nature of our tourist market is rather different from curriculum at school, college or even at university the tourist markets of some of the Mediterranean level that is right at the point of starting the course countries particularly. However, I do think there is an and out of date by the point of completion. Where issue in terms of skills in our retail sector appropriate does the responsibility lie for actually training people to encouraging tourism in this country. to keep up with that change? How is the sector coping Tangential to that, I understand that the Government with that? is at this moment trying to negotiate a change in the Helen Dickinson: Particularly as retailers continue to visa regime for high-value Chinese tourists. At the work out and develop their business model as the moment, the European market by virtue of its environment in which they are operating changes, Schengen Agreement is cleaning up on their they absolutely recognise the need for them to purchasing power. Whilst it may be a niche market, it undertake training in-house to keep those skills up to is potentially a financially significant market for date. In fact, many of those skills that are specific to individual retail businesses are sources of potential retailers in this country. Do you look at reinforcing competitive advantage between one business and the skills base that might attract some tourists? another if they get that training done well. Helen Dickinson: I am not sure I understand the question. Are we talking about the extent to which Q38 Mr Walker: I just want to pick up on Paul’s retailers are thinking about the sorts of skills that they point about the skills base and employment in the have to deal with not just UK consumers but industry. There is a narrative about retail that says the overseas consumers? high street is struggling—we have seen some big Chair: Yes. chains go under; we have seen shops moving towards Helen Dickinson: I would say that they definitely do. a higher technology basis; we have seen the move It depends on the extent to which their business is online—which suggests that over time there are going dependent on that tourist trade. From a Chinese point to be fewer people employed by the sector than there of view, particularly some of the more branded and have been in the past. I was quite surprised to get a expensive end of the market is very key to that written answer to a parliamentary question recently segment. I remember talking to the chief executive of that showed that, over the last two and a half to three a big, branded watch retail business, and the years, the actual numbers employed both in the retail interesting thing he said is that they invest very and the wholesale sector have been increasing. Do you specifically in training their staff around how to deal think that is a trend that is sustainable? With all these with Chinese visitors, particularly because the way changes we are talking about in the skills base and in they interact is slightly different from what the staff technology, in 10 years’ time will we be able to look had been used to. So, yes, they do invest in that if at a retail sector that is still the biggest employer as a overseas consumers are a big part of their business. sector in the UK? From a visa point of view, the other interesting thing Helen Dickinson: That is a very interesting question. that he said—because I think there is a perception that I am not sure I know the answer to that, but I would Chinese visitors will just come to London—is that definitely say it comes back to the point about what they have stalls around the country and they are the greatest asset of any retail business is. The reason investing in this training for all their customer-facing why retailers have continued to invest in people even staff right across the UK because it is not just a during the downturn is because they absolutely London-centric issue. The slightly more complicated recognise the importance of that—it sounds awful process to get a visa to come to the UK versus the calling people an asset, but they are an asset to their rest of Europe is, from an opportunity point of view business. There are two schools of thought in the for his business and many others like it, a very big answer to your question. One is that a more digital issue. It is not just one that relates to London and the retail economy will involve fewer people, but the South East. other argument is one that says, actually, in a more digital retail economy, the need to differentiate on customer service, for example, and those IT skills we Q41 Chair: Moving on from that, I have a final were talking about earlier are absolutely key. That will question unless any of my colleagues have a burning require the continued need for very significant question they want to ask. Are you signalling “yes”, numbers of individual jobs. Robin, or just waving your pen? BIS has a retail strategy, but DCLG has responsibility for planning Q39 Mr Walker: So you think there is potential that along with local authorities. Do you find this a it could employ more people in the future. problem? Helen Dickinson: Yes, there is potential. Absolutely, Helen Dickinson: If I look across the whole of retail I would agree Robin. and the interaction that we have, we have interaction with many different Government Departments, Q40 Chair: I have a couple of tangential questions certainly from a food-sector point of view with on skills. It always impresses me when I go abroad DEFRA and the Department of Health, for example. and I go to a foreign supermarket and the checkout The need to think across and to work across different assistant is able to speak to me in fluent English. I Government Departments is part of the day job. Ev 8 Business, Innovation and Skills Committee: Evidence
21 May 2013 Helen Dickinson
Q42 Katy Clark: I want to ask a supplementary national business. He is saying he does training on about your organisation. Obviously, the big challenge looking after Chinese countries and that he does that is the internet, and you already mentioned the change right across his store portfolio. to a more digital economy. To what extent have you developed views as to how you think that needs to be Q44 Julie Elliott: Is that mainly the likes of regulated or looked at? It must be a massive challenge Edinburgh and the big capital places? for your members. Helen Dickinson: No, this is somebody who has over Helen Dickinson: It is and this is one that we will 200 stores. It is not just in the cities. continue to look at. It is emerging in our thinking as to what those things need to be. I cannot answer your Q45 Chair: Do you know if these issues are being question now, but I absolutely agree that we will need considered by the UKTI in its strategy? to continue to look at it and it will become more of a Helen Dickinson: I would have to check and come focus as we go forward. That is things like having back to you, but I do not think so because I think consistency of regulation from a consumer-rights UKTI is looking outwards as opposed to inwards. point of view, because from a consumer perspective it Chair: There is an argument that it should be looking does not matter which channel they are actually using. inwards as well. I think perhaps we might explore that further with other bodies, but if you could give us Q43 Julie Elliott: I wanted to expand a bit on the your perspective in a written form, we would be very Schengen stuff. You have said that you do not think happy to have it. retailers think this is just a London problem. How I think that concludes our questions. It may well be wide is this? Do you think it is capital cities around that in retrospect we think of questions that we should the UK or are you saying that this is going to be an have asked but did not. We will submit those in a issue for people trying to purchase things in all of our written form. Equally, you might feel that there was town centres? You were saying it was not just a more information that you would have liked to give problem for retailers in London, which I found very us on something or indeed to answer a question that surprising. we were neglectful enough not to ask you. Please feel Helen Dickinson: I was not trying to say it is not a free to submit any supplementary written evidence to London problem. I was saying it is an opportunity for that you have given today. other parts of the UK as well as for London. If it were Helen Dickenson: That is very kind, thank you. easier for Chinese visitors to get a visa such that we Chair: That is very helpful indeed. I realise you have had more Chinese visitors in this country, then they only been in post four months and you have had a would not just be coming to London. They would be pretty widespread range of questions to answer. We going to other parts of the UK as well. That was really very much appreciate the contribution you have made. brought home to me by the chief executive who has a Thanks very much.
Examination of Witnesses
Witnesses: Jonathan James, Chairman, Association of Convenience Stores, and Shane Brennan, Public Affairs Director, Association of Convenience Stores, gave evidence.
Q46 Chair: Can I welcome you? I assume you have an independent retailer running two stores, one in been sitting there listening to the previous contributor. Cambridgeshire and one in Norfolk. I am also the Before I invite questions I had better just make a Chairman of the Association of Convenience Stores. declaration of interest myself. I am a Labour and Co- ACS is the trade association representing local operative Member of Parliament with a long previous grocery stores in the UK. All together, we represent employment history with the Co-operative movement. over 33,500 shops across the United Kingdom. Our Can I just invite you to introduce yourselves for voice membership includes some of the big chains such as transcription purposes? Then I understand that you the Co-operative Group. However, the majority of our have asked to make an opening statement. I am quite members are small businesses either trading happy to allow you to make an opening statement, but independently or under a common national brand like please keep it brief. SPAR, Londis, Costcutter, Booker Premier or in my Jonathan James: Good morning, Chairman. My case Budgens. I am accompanied today by my name is Jonathan James. I am the Chairman of the colleague Shane Brennan, the ACS Public Affairs Association of Convenience Stores. Director. Shane manages our representation across a Shane Brennan: I am Shane Brennan. I am Public wide range of political and policy issues. Affairs Director of the Association of Convenience Firstly, unlike many parts of the retail sector, the Stores. convenience sector is in growth. In 2012 the sector grew by 4.6% to £33.9 billion. It also provides jobs Q47 Chair: Who wishes to make the opening for over 370,000 people. We are currently benefiting statement? It is you, Jonathan. from a long-term trend that sees people moving away Jonathan James: Good morning. I would like to from complete reliance on the weekly shop and thank the Committee for the opportunity to give preferring to shop more often. There are demographic evidence today as part of this important Inquiry. As I factors behind this. There is the rise in single-person have just said, my name is Jonathan James and I am households, with increasing numbers of old and young Business, Innovation and Skills Committee: Evidence Ev 9
21 May 2013 Jonathan James and Shane Brennan people living alone. Also, consumer attitudes are relation to retail, whether it is business rates or issues changing. On the one hand, growing numbers of more to do with town centre regeneration, are devolved. I affluent people are cash rich and time poor and, on just wondered whether you had noticed a difference the other, less affluent people are choosing to live day in policy in relation to what is happening in Scotland by day and managing their budget by buying only and elsewhere. Is there anything that has worked in what they need when they need it. I therefore Scotland that you think might work down here? How represent a sector where there are opportunities. would you compare and contrast the differences, given My concern is that the growth and opportunity that you will have members in both areas? available to our industry is not evenly distributed. The Shane Brennan: I will take that one. Most of the significant majority of growth we have seen has been issues are actually devolved, so you are absolutely taken up by the major multiple chains. Unfortunately, right. There are different ministerial priorities in the number of independent stores in the market has different areas. They are covering the same space: we experienced ongoing long-term decline. This means have a Portas Review; the Scottish Government has a that there is growing disparity of opportunity, which High Street Review. There is a small business rate has been made worse by the economic downturn. This relief scheme in England and Wales; there is a small needs to be addressed through effective policy business rate relief scheme in Scotland. There is a intervention. range of other policy interventions. That is where BIS is so important. We have Certainly in terms of something like planning policy, collaborated with the Department on its retail strategy the emerging Scottish Planning Policy Framework is and we very much support it. Its focus on reducing potentially more robust than the one that we had in the burden of regulation, sharing knowledge and NPPF in terms of how it deals with high street issues. harnessing localism to deliver business-friendly policy However, they have a legacy in Scotland of being less are good, important intentions. However, we are robust on high-street issues in terms of planning concerned that it is limited in scope and intent. It sits development than in England and Wales. There is a only within the remit of BIS and yet many of the big slight element of catch-up there, but catch-up in the issues facing the retail sector are the responsibility of right way. The rate reliefs in Scotland are potentially other Government Departments. We believe that slightly better and more generous than they are in strategy that makes a real difference has to cover England and Wales, but there is a fundamental issue controversial issues such as business rates, town- around small business rate relief and how well it centre versus out-of-town planning and resisting targets the retail sector, because it of course applies temptation to impose further regulatory burden in across a broad base of businesses. In terms of retail, politically sensitive areas such as alcohol licensing. business rate relief is quite broad and thin rather than Finally, I am sure you will want to talk about the point targeted at specific potential needs. and value of the Mary Portas Review. We are I do not think there is a particular winner or loser delighted by the energy and the enthusiasm that was between England and Scotland in terms of how they created by the Town Teams initiative. There were over tackle this issue, but certainly in both areas it is 300 applications and thousands of people engaged in definitely a priority that we acknowledge. trying to find solutions to local problems, myself Jonathan James: It is important to say that ACS has included. The frustration we have is that the Town an excellent working relationship with the SGF, our Team initiative was one of 28 policy colleagues up there, and we very regularly are in recommendations. These other recommendations were contact. We liaise very closely with them. targeted at issues such as business rates, car parking charges and planning policy. If they have not been Q49 Chair: We will be going to Scotland shortly and taken forward that is not a failure of the Portas report we may examine that issue further. Just picking up the but of the work that has been done since by point that you made about regulation, the retail sector Government and others to take on her was one of the first to go through the Red Tape recommendations. Challenge. What impact did you see on your sector? One of the reasons for this is that the issues she Shane Brennan: I will take that one. The Red Tape highlighted are not simple to solve, but they must be Challenge was an interesting exercise because the taken on. The Local Growth Minister, Mark Prisk MP, intention was absolutely the right one. In doing it in who is responsible for taking on the policy the format that it was done, which was essentially recommendations made in the Portas Review, has set putting every piece of legislation that was relevant to up the new Future High Streets Forum. We are retail on a website and asking people to comment on optimistic that this forum is an opportunity for which ones should be removed and which should not, delivering on these bigger policy challenges. Thank they essentially showed a specific problem. It is not you again for the opportunity to give evidence to you. often the regulation intent that is the problem; it is the Shane and I both look forward to your questions. effective way in which it is enforced. We have seen Chair: Thank you. I am just going to invite Katy 250-odd regulations being removed from the statutory Clark to open the session with a question that perhaps book, but the vast majority of those were completely is not covered by some of the issues that you raised irrelevant—things like regulation on trading with there. We will go on to those immediately afterwards. Czechoslovakia, which obviously was not having any impact as it stood. Q48 Katy Clark: Along with a number of other Some of the other areas were relatively members of the Committee, I represent a Scottish uncontroversial things like changing the age constituency. Obviously a lot of the responsibilities in restriction on Christmas crackers. These things are Ev 10 Business, Innovation and Skills Committee: Evidence
21 May 2013 Jonathan James and Shane Brennan
fine and good, but they are not transformational in Jonathan James: No. terms of the impact or burden of regulation on the sector. We learnt that the problem of regulation is Q52 Julie Elliott: You have already mentioned more of an institutional problem than it is a specific Primary Authority and I understand you are in favour regulation problem. It is about how those regulations of an expansion of that to deal with some of the are enforced. We were very clear, and the business problems and inconsistency around enforcement of retail strategy is absolutely well targeted, in saying it regulations. In which areas should the Primary should look at the way regulations are enforced. It Authority be expanded? should look at issues like Primary Authority and Shane Brennan: From the point of view of the understanding how we can get the enforcement convenience store sector, it has to cover alcohol entities, whether those are national regulatory bodies policy. If you look at the compliance manuals that or local authorities, thinking in a more business- retailers will have in their business in the convenience friendly way about how they approach regulatory sector, the biggest regulatory challenge they face is challenges to reduce that burden through how they are how to comply with alcohol regulations, whether that interpreted rather than necessarily specific regulations. is licensing compliance or underage-sales prevention. The Red Tape Challenge showed that it is hard to find If you are going to have a compliance mechanism in specific regulations that should be removed, because place that is valuable to the independent retailer, if it they are there for very important reasons. does not cover alcohol it is covering all these smaller issues rather than the main one. For us, Primary Q50 Chair: That is interesting because you have Authority is absolutely the right idea; it potentially reflected one or two comments I have had in other has a huge benefit for independent retailers, of which sectors of industry as well. You argue for an “ongoing there are many thousands in the market. However, review of retail regulations”. Which areas do you unless it is a top-to-bottom compliance manual you think should be reviewed? are going to have to have more than one and it Shane Brennan: We represent convenience stores. becomes a very difficult thing to see the value in The regulations that bear most heavily on our sector retailers taking it up. We know there are ongoing are product regulations—alcohol issues, tobacco discussions about bringing alcohol into it, but it has issues and other issues—and those are the areas where to happen for it to become a relevant thing for our there is an active, ongoing process of new regulations association. being considered all the time. That is the area where the hardest questions have to be asked about what an Q53 Julie Elliott: Who do you think should take lead appropriate balance of regulatory burden is. I am sure responsibility for all this? Should it be BIS or the Jonathan might have something to say about this, but Department of Communities and Local Government? these are the areas that retailers spend most of their Shane Brennan: In terms of alcohol, the tension is time trying to find ways of complying with. It is a between the Home Office and BIS, because alcohol case in point: those are examples of areas that do need policy and licensing is under the remit of the Home to be regulated. How do we challenge ourselves to be Office. This brings into focus one of the issues we thinking that we are doing these things in the most have in retail, which is we have a lot of different business-friendly way possible? It is that ongoing Government Departments that have some degree of conversation both at the national and local level about interest or stake in our business. There is tension there how those regulations are brought in in the most around whether it should be BIS or the Home Office. business-friendly way. I think it should be BIS because this is about better Jonathan James: It is important to say as an regulation; it is about a way of working and BIS is independent retailer I do not have a compliance best placed to champion that way of working across a manager. I do not have somebody constantly range of different regulations across different monitoring the regulation. Often it is not until you fall Government Departments rather than one specific foul of a regulation, be it a new one or an old one, Department. that you realise the regulation actually existed in the first place. Unlike our larger grocery colleagues, who Q54 Ann McKechin: Mr James, you mentioned that have people constantly monitoring and keeping up your association is working with Government and with it, we do not have that advantage. Through the with BIS. Can I ask if you are a member of their ASC and other bodies we can hopefully monitor it, Retail Policy Forum? but as a retailer your job is there to run your shop and Jonathan James: Yes, we are. it is not that easy to keep up with regulation. We have a good working relationship with the various Q55 Ann McKechin: The Department says that that authorities, particularly in our area, so it is more of a meets three times a year. Do you believe that is partnership rather than somebody coming into your sufficient to develop the coherent strategy you referred shop trying to trip you up on falling foul of another to in your opening presentation? regulation you did not know existed. Shane Brennan: I would just like to jump in because Jonathan does not sit on the Retail Policy Forum; I Q51 Chair: When we interviewed the Minister on do. The Retail Policy Forum does not have the the last annual report, we highlighted the abolition of intention of delivering the business strategy in its the regulation concerning the disposal of German entirety. As Helen said in your previous evidence, enemy property. Presumably it was not a regulation there is a range of different meetings and contact you had too much problem with yourselves. points between us and BIS to deliver on strategy. We Business, Innovation and Skills Committee: Evidence Ev 11
21 May 2013 Jonathan James and Shane Brennan are meeting on a regular basis on a range of different for the Executive signing off on significant amounts specific areas. The Retail Policy Forum is a useful of investment in rate relief when they are trying to staging post in the year to go over a helicopter view fund central care services, etc. of the broad things Government is trying to deliver, We think the Government should be focussed on how what is happening in the retail sector, how they come we can find ways to help local authorities to make that together and in setting off another train of work. It is first step towards granting greater amounts of useful to that degree, but it does not have the discretionary rate relief. How might we look at the ambition, and I do not think it should have the first couple of years, particularly at the moment, when ambition, of trying to be the sole ownership point for the economy is down? How can we potentially the entirety of business activity around retail. underwrite discretionary rate relief investments in the first couple of years, with a view to that being paid Q56 Ann McKechin: The Department has back over time? From 2014, we have the retention of acknowledged to us that it does not provide retail- local business rates, which is a potential game changer specific business support schemes. Should it, or in terms of the relationship between local authorities should this be more a function of LEPs in terms of and their business rate base, but I do not think it is actually making sure that there is some form of advice going to happen immediately unless there are some system? Both of you have mentioned this issue about ways of trying to kick start that. Some form of the burden of regulation and how as small businesses underwriting discretionary rate relief in the first you are actually going to cope with it. I just wondered couple of years because there is that potential to retain whether you think more needs to be done at either a rate relief in years four, five and six to me sounds like local or national level providing advice. an area where we should really be thinking very hard Jonathan James: I suppose it is how it filters down about whether we can do something to really get some to our membership. Many of our members are proper relief targeted for the businesses that need it shopkeepers and it is getting that buy-in from them. most on the ground. That is where somebody like the Association can obviously work in conjunction with the Department. Q58 Mr Walker: If you were underwriting We are probably uniquely placed from that point of discretionary rate relief, particularly if you were doing view in that the BRC have much easier it for the first couple of years for new businesses—we communication channels to the shop floor. ACS have the New Homes Bonus; we could have a New getting involved is obviously very key to anything Shops Bonus or something along those lines— such as this. wouldn’t that actually potentially penalise a lot of Shane Brennan: Helen was answering this question your members and help out new people starting up to earlier as well. Specific initiatives are not necessarily compete with them? the answer here. There are 50,000 convenience stores, Shane Brennan: I do not think it should be just for and of them there are tens of thousands of individual new businesses. It might be in some cases that it is to owners out there. It is a very broadly based thing. fill in empty spaces. That might be what is needed in Specific initiatives to try to intervene in the way they some areas. In other areas it is about helping do business to try to help them are not necessarily businesses make investments. One of the issues is that going to work. It has not worked historically and I do we have an opportunity sector, as Jonathan outlined; not think it should now. If there are initiatives we need we have growth, but the investment is coming from they are about taking away some of the burdens and the major chains, which are potentially able to make looking at costs. We talked about business rates and some long-term investments at this point in the things—those are sorts of initiatives that we should economic cycle. Independent retailers are trying to see Government trying to take some leadership on keep their head above water, but if they do not make rather than necessarily tinkering and trying to get the investments this year or next year they are going involved because I do not think that translates to be at a disadvantage in three or four years’ time. If particularly for the independent retailers. It just does we want to make the investments and create the jobs not get to them. now, that is where we should be targeting. We should be targeting new businesses but also existing Q57 Mr Walker: Like everybody else who has businesses, to help them to grow, invest and provide submitted evidence, you have highlighted business a better service. rates as a particular concern. You have also set out Jonathan James: Through the Association I am that you want to recommend “new innovative ways to reading various reports that would say business rates encourage or incentivise local authorities to provide have gone up 2.6% or whatever. Actually, when we rate relief to a wider group of retail businesses”. Can take it down to grassroots level, it is very easy for you give examples of how you think that could work those figures to get lost in reality. If you take one of in practice? my stores, two years ago I was actually physically Shane Brennan: Absolutely. Obviously the Localism paying £56,000 a year rates. This year it is £63,000 a Act came into force and gave very wide-ranging year rates on one shop. That is a staggering figure that powers to local authorities to grant discretionary rate every week has to be found, but if we look at the relief to any business they chose. That could be a big, significance, in the largest recession we have had in small or any business that they felt was necessary in living memory suddenly I have to find another £7,000 the area. The problem with that is there is no money for absolutely no better service and nothing different. for local authorities, and at a time when their budgets That £7,000 has to come from somewhere. The are massively squeezed, it is very hard to see a case concern is that very much figures and words get lost Ev 12 Business, Innovation and Skills Committee: Evidence
21 May 2013 Jonathan James and Shane Brennan in the reality of a business trying to keep its head depends on effective planning policy. I am interested above water and actually being hit at that sort of level. to know what you think constitutes effective planning To find £1,200 or £1,300 a week every week to pay a policy. In particular, thinking about the success of the cost like that is a staggering sum of money. high street, are we looking at greater freedoms within town centres or restrictions on out-of-town Q59 Mr Walker: Absolutely. That is something that developments? all of us will recognise from our constituencies with Shane Brennan: The answer to that is you need both. businesses that will have come to see us. Do you think You need to make it incredibly attractive to make the in that respect the valuation system and process that investments that are going to regenerate retail spaces is currently used is fundamentally flawed? Are there that are out of date. That is to potentially make them any suggestions that you would have for changes to smaller, make them more focussed and make them that? more fit for purpose; that is a clunky phrase, but it is Jonathan James: There certainly needs to be a fairer true. The problem we have had for 15 or 20 years, way of looking at the entire thing. I used to be a petrol though, is that every time we want to do that kind of station operator, and you would sell X amount of fuel work to drive that investment into the town centres but you have different ways that fuel is sold. Some where it is most economically and socially beneficial, will be sold on bunkered and some will be sold on it has been undermined by the agenda to drive cards, etc, so you are getting different margins for development out of town by the development industry. types of fuel. That needs to be reflected in rates. It is Still today we have a growing pipeline, where over exactly the same with the shop to find that sort of 70% of that pipeline is located out of town. Much as money. Is there a fairer way rather than looking at the the national policy tells us we want a town-centre-first property and valuing it often as a postcode property? approach, the reality on the ground has always been What I am paying in certain areas is not what my that it is more out of town that it is in town. Unless colleagues would be paying in another area. There you have developers, councils and communities all certainly needs to be a fairer way to be looking at it. with the same objective, which is how we find the Shane Brennan: However, we do not have the right location to regenerate our town centres, we are obvious answer here today of what that should be. The not going to achieve the change on the high street we worry we have is that because it is so difficult and want to achieve. That is a stated political priority of potentially so complicated we are not even looking at governments at national and local level almost the issue. I think we should be looking at the issue; unanimously. There are very few arguing against that. there is a short tem/long term. In the short term, how do we find help now to get out there to the people that Q62 Paul Blomfield: I am interested in how you can need it most? We have the delay now in the actually move the consensus on that. I represent the revaluation to 2017 and that is four years. If we do city of Sheffield, where over 20 years we have had not use those four years to look at the system, the enormous challenge of sustaining a city centre understand it better and then look at potential new with the Meadowhall development a few miles away. options, then we are really going to fail the retail Every time the Council seeks to constrain or look sector, because that is what needs to happen. critically at developments at Meadowhall, the sector comes down on them like a tonne of bricks. How do Q60 Mr Walker: You said in your evidence that you you actually shift that debate? think the delay in the rate revaluation until 2017 was Shane Brennan: Government has to lead it. It is not inadequate and it is likely to have little impact on the sector. Why would the sector benefit more from a very trendy or of-the-moment statement around having a revaluation? localism and local empowerment, but in reality you Shane Brennan: What was inadequate was that it was do not have local empowerment if the local council is portrayed as this was what was needed to make a overwhelmed by the power of those that are coming difference to the rates of the retail sector. This was against it. You have to have a line in the sand. The the initiative the Government could do to make a real Government and Ministers who oversee policy have difference to the high street. That is inadequate. That to ultimately control that. The fact is we do not see is not the reason. There might be other reasons why call-ins. We have a new National Planning Policy we need to delay the revaluation, but it has been done Framework coming, which has exactly the right words now so we do not need to rehearse the arguments in it, but unless that is backed up by interventions on about it. Now that we have four years we need to the right examples, particularly in the first phase, it is think about how we do valuation in 2017 and whether not going to stick in terms of changing the direction it can be different in a way that is fairer and more on the ground. That is my fear for what is happening equitable, and take our time to study that properly. at the moment in terms of planning. Mr Walker: It would be very useful to have written evidence from the bodies that have been giving Q63 Paul Blomfield: Specifically, to perhaps both of evidence today if there any suggestions as to what you you, do you feel that the Government is giving the think could be useful reforms to the valuation system commitment that you are looking for now? that would make a real difference to the people you Shane Brennan: I think they have a cultural aversion represent. to the idea of getting too involved.
Q61 Paul Blomfield: You have argued in your Q64 Paul Blomfield: Is that another way of saying evidence that the future success of the high street no? Business, Innovation and Skills Committee: Evidence Ev 13
21 May 2013 Jonathan James and Shane Brennan
Shane Brennan: They believe that, if they let the make them fit for the next 20 or 30 years? That is the policy go and let local authorities interpret it for conversation we should be having at a local level, not themselves, there will be right outcomes in the end. fighting off out-of-town. The problem is what happens in the meantime. We also often hear Ministers talking about the ability to Q65 Paul Blomfield: Specifically following up on fail in that. The problem is that, once you have built that, Portas recommended relaxation of the use class a big out-of-town supermarket in a market town, you restriction. I just wondered how you saw both the cannot un-build it. That failure is 20 years and benefits of that but also the risks associated with it. potentially forever. Jonathan has a real life example. Shane Brennan: I think that we should be restricting Jonathan James: On Wednesday in my home town a use classes, but in the context of a plan of action for prospective developer had put in for a 41,000 square the local area. Basically, we fear blanket use-class foot out-of-town supermarket, 1.5 kilometres from the restrictions, particularly if you say things like retail to town centre, completely contravening local and residential, which was something that was mooted in national planning town-centre-first policy. It failed on the budget. Basically you just have a free-for-all on three sequential tests; it failed on impact on the town allowing retailers to convert their shops into houses. centre, and the Council unanimously waved it If you do that on a nationwide basis, it is not going to through. The application took 418 days from start to be the areas that need regeneration that are going to finish. As a retailer in a town centre with 57 other get the new houses. It is going to be the villages and businesses, our lives were basically put on hold for the areas where you are going to get a lot more money that duration until we could find out exactly what was for that bricks and mortar as a house than you would happening. It has now been passed, and obviously as a shop. We need to say, “Looking at this town there is going to be huge reluctance for anybody, for centre, how does it look in the future in terms of our want of a better term, to rearrange the deck chairs on vision for that centre?” Once we have that vision, we the Titanic. Why would you want to invest in a town get rid of all the regulatory burdens to allow those centre when you know in X amount of years a huge businesses to then make those changes they want to out-of-town superstore is going to come and make to be able to fit with that vision. It is in the effectively bypass that town? The Sword of Damocles context of a managed plan for that area, rather than is another term that can be used for exactly the same just a blanket free-for-all, which would potentially just sort of thing. have negative consequences. The National Planning Policy Framework is there and it is very robust in its wording, but it does tend to be Q66 Julie Elliott: You state that the trends in retail without teeth if there are no ministerial call-ins to development continue to move away from investing follow it up. The Government has the benefit of in town centres and that the town-centre-first policy is hindsight and experience; a local council, with what not stopping this. You talked about this a little bit. is probably the biggest development that has happened What more can be done to promote town centre in 20 years in our town, is obviously lured by potential development and which Government Department jobs—although they do not see it as job displacement; should take the lead on this? Should it be DCLG, BIS they see it as job creation. They are lured by or, indeed, local councils? investment, but the investment is out of town, which Shane Brennan: National policy should be led by is going to suck investment from the town centre. It DCLG probably, although we need a leader and it is a very specific problem, and as Shane quite rightly does not really matter who it is from a national policy said, the problem we have as a sector is that because perspective. However, every local area is of course members of planning committees in particular use different. Local authorities are going to have to be shops, they all think they are experts on it. It is very agents for themselves in trying to achieve that change. scientific: where you put a supermarket, for example, There are national policy considerations that have to or an out-of-town planning application for a retail be led from somewhere in Government, probably park, everybody needs to know exactly the DCLG because that is where it currently sits. Then at implications and impact of putting it there. It is a very local-authority level there needs to be some proactive specific thing. economic planning—it sounds very 1970s—not just Shane Brennan: Unfortunately it becomes a very physical town spatial planning. Think about those negative debate about what we want to restrict. town centres: how do we think about the rates? How Restricting, though, is probably the first part of it. do we get local authorities thinking about investing in What matters then is what you do to free up the those areas a bit like a business and saying, “Right, opportunity for investment in locations where it is we need investment here. How do we make the right needed. Ideally we would be talking about that, but amount of investment in this particular location to unfortunately because on the ground there is still so make the town centre more attractive through much of this tidal wave of applications—it is a discounts or incentives in that particular area? How grocery thing; it is very different in non-food—they do we look at car parking charges? Are the car parking are still pushing forward with these applications. charges not actually helping this business to attract Applications might not get built. Jonathan’s store new customers?”—as in the town centre as a business. might not get built because we know that there are Ultimately, in answer to your question, local changes in the financial decisions being made, but not authorities are going to have to do it with locally necessarily the development pipeline. Once we have specific interventions. There are still things to be done set that line, what can we do with these centres? How on the policy framework that underpins that at a can we use planning to completely change them to national level. Ev 14 Business, Innovation and Skills Committee: Evidence
21 May 2013 Jonathan James and Shane Brennan
Q67 Julie Elliott: How can BIS deliver a retail in the right location is very much a generator for a strategy if they do not have any influence or control busy, good footfall. Equally, being brutally honest, the over the planning process? consumer sees it as a stealth tax to use a town centre; Shane Brennan: BIS can do other things. BIS can if you start doing that, obviously that is extremely look at the issues around regulatory burdens and the restrictive in how it goes. There is a mindset that culture of regulatory intervention; they can look at the needs to happen with councils so they see it more as knowledge exchange, something that we as an the asset that it actually is to generate growth and organisation have benefited a lot from, in terms of drive the local economy that comes through from the bringing academic learning into our sector to town centre, rather than just a relatively short-term understand a bit better the way that you can be an view of taking the cash that it generates. effective community retailer. That is something we have done through working with BIS. BIS has a role Q70 Mike Crockart: The other related in making LEPs work, if those are going to be relevant recommendation talked about accessibility and to retail. Certainly, the work BIS is doing alongside making sure that was a key factor for successful town the Gloucestershire LEP is an important way to learn centres. More generally on accessibility, how do you how we might use the LEP framework to try to take think that can be improved and what would the benefit an area-wide view so that local authorities are be for the smaller stores? working within specific interventions for a particular Shane Brennan: It goes back to thinking about your centre but also thinking about how those centres local authority as a business. There was a good interrelate in a particular economic area. That is a question in the last session about whether you bring learning process, but BIS needs to be very involved things under one common ownership as a way of because BIS created the LEP framework. doing it. Certainly, we do need some form of common management to think across the piece of what the Q68 Julie Elliott: Can you expand a bit on that? In different elements are that are going to make this area my area they are not involved in retail, so what are successful, and having a plan for that. Access is they doing in Gloucestershire that is particularly critical, and in lots of parts of the country access is helping? Is there something we can learn? about car-borne access; it is about car parking, where Shane Brennan: They are going through a process there is huge discrimination between the accessibility whereby they are actually gathering evidence in a of out-of-town retail developments and in-town retail much more sophisticated way about the retail developments. You also have to think more long term economy in the Gloucestershire area, and as well about other accessibility points. It is worth understanding how that all works together. They are asking whether you can get buses into the relevant looking at what specific area-wide interventions they centres, particularly the parts of the community who can do. I can follow up in a bit more detail around need that access, and about other ways, like cycle Gloucestershire LEP rather than trying to give you lanes and things. You have to have a co-ordinated plan everything today, because it is not an area that I am a for the area that includes access as part of that, and huge expert in. having restructuring as part of that thinking. Jonathan James: It needs a more joined-up approach. Q69 Mike Crockart: Two of the recommendations If you have the pedestrianisation of a lot of town of the Portas Review deal with parking and access. centres, it becomes no surprise that, if the shops there That is something that you have already mentioned sell white goods and bulky goods, people are going to in your evidence. Are you in favour of the specific struggle to pick them up. On a local basis, we had a recommendation of producing a league table for local electrical store close the minute they put double parking? Do you think that this form of naming and yellow lines outside the store. In terms of accessibility shaming will make local authorities change? and pedestrianisation—or semi-pedestrianisation, as it Shane Brennan: The answer is I am not sure. To be is sometimes, where a town will close on a Saturday top of the league table, you would have to give free to allow people to walk—as Shane says, particularly parking, and there are lots and lots of locations that for market towns in rural areas, the car is not a luxury; provide free parking. There will be a lot of people at it is an absolute necessity. People need accessibility the top. Therefore, if it is going to have any benefit, through that vehicle to gain access to the town centres. it is going to be at the negative end—the naming and shaming. I do not think it is as simple as giving free Q71 Mr Walker: Representing a market city, I parking and, therefore, you have a town-centre- suppose, in Worcester, that has a pedestrianised friendly parking scheme. If you have lots of free centre, I definitely recognise some of the issues you parking in a town centre with lots of office are discussing there. We have had a discussion development, you end up blocking all those car focussed around town centres versus out-of-town and parking spaces and then there is no one to come in the that side of things. There is another element of this, shop. You have to take an area-specific decision and in the Association of Convenience Stores you are around parking. It is about culture and thinking particularly well placed to speak about it. This is the differently about what parking is there for. suburban parades, or what I might call “the secondary Jonathan James: Very refreshingly, I saw a statement high streets” within a city like the one that I represent, by a local council leader who said that, while he was which seem to be suffering from many more empty in charge of that council, car parks would always be shops and much more of the pressures than the high viewed as an asset rather than as a cash cow. I believe street itself in the city centre. I just wonder if you the BRC touched upon it earlier as well. A car park have any views as to the policies that would make a Business, Innovation and Skills Committee: Evidence Ev 15
21 May 2013 Jonathan James and Shane Brennan difference to those areas and the extent to which the all know the economic factors that are making these suburban parades are sustainable, with all the changes things happen, and currently it is happening relatively that are taking place in the retail sector. quickly. Footfall is absolutely key to all of this. Any Shane Brennan: I think you are absolutely right. The high street, any out-of-town centre or any secondary vast majority of them do not trade in town centres, parade needs footfall, and with forward economic and that is important to flag. The first thing to say is planning, we need to be able to ensure there is that they suffer the same sorts of issues that town something—an anchor store within a high street, or an centres do. The problem with them is that they are anchor store in a parade such as that—to ensure that often completely invisible in the planning process. If people have a reason to visit that. It is quite worrying there is coherent economic and spatial planning for when that anchor store is seen to go. town centres, it rarely extends to those smaller Shane Brennan: Or anchor service. Where are our secondary areas, but they are vital to the coherence of doctors’ surgeries? Where are our libraries, where we our neighbourhoods. People having access to places have them? Where are our other services? What are they can walk to has huge social benefits, as well as the reasons that people do not go to places? We are potential economic benefits as well. going to have centres for our communities in the However, the things you need to do to tackle that are future, because that has huge benefits in terms of the very similar. They are about the cost of property, and character of the area and the social benefits to that about being able to invest and making investments in particular location. I think we have lost sight of that, the properties to improve them. A lot of them are very somewhere along the way, and we have to make sure out of date and need significant structural change. that that is part of our thinking going forward. There are also some issues about access. The fact is Chair: That concludes our questioning. I will repeat that a double-yellow line on that suburban parade is what I told the previous speaker. If you feel there is a as fatal as the high car-parking charges in a town question we should have asked you but did not and centre. It is probably quite micro, but if it is not joined you would like to reply to, please feel free to send up and we are not thinking about those sorts of us supplementary evidence. Similarly, of course, if in decisions in a business-friendly way for those sorts retrospect we think there are one or two issues that of locations, then that is going to potentially create a we did not explore fully, we may write to you, and huge barrier. we would be grateful for a reply. I thank you very Jonathan James: Picking up on what the BRC said much for your contribution; that is very helpful. We earlier about high streets and secondary parades, we will welcome our next panel, if they are there. are all undergoing a very significant change, and we
Examination of Witnesses
Witnesses: Edward Cooke, Director of Policy and Public Affairs, British Council of Shopping Centres, and Mark Williams, Chairman, Distressed Town Centre Taskforce, gave evidence.
Q72 Chair: Welcome. I do appreciate you coming that retailers are responding. Our recent research today to assist us with our Inquiry. You may note that concluded that we believe around 25% of all retail members come in and out; please do not take that as sales will be through online channels by 2020, which a reflection of your contribution. It is just that there is is a fairly significant jump from where we are at the business in the House, and the nature of things means moment. This will be driven principally by mobiles, that members cannot always be here all the time. tablets and transactions through those devices, which Could I just ask you to introduce yourselves for voice were in the order of 8.2% in the last quarter of last transcription purposes? year. Clearly the threat that is presented through this Edward Cooke: My name is Edward Cooke and I am structural change is an over-supply of retail space. the Director of Policy at the British Council of Subsequently, what do you do with it? With Shopping Centres. forward-thinking investors, developers and local Mark Williams: I am Mark Williams. I am a partner authorities, we do believe that there are opportunities of Hark Group, an asset management business, but for new entrants to the markets to take up some of more importantly I am Chairman of the Distressed that space. However, quite radical thinking is going to Retail Property Taskforce. be required in order to match supply with demand in lots of towns and cities across the country. Certainly Q73 Chair: Thanks very much. First of all, I will we are seeing that there is a polarised market in retail open with a fairly general question to the BCSC. Your that is reflected in towns and cities. The destination evidence highlights the significant changes that will places and the prime centres continue to perform take place in the demand for retail space. However, relatively well. Those in the secondary and tertiary you suggest that there are opportunities and markets have suffered the most as a result of advantages to be found in this. Can you just outline economic conditions over the last five years and the pros and cons? structural changes in the way that consumers Edward Cooke: Certainly through the research that purchase goods. BCSC has undertaken, we are noting the structural change in the retail market, both in the way that Q74 Chair: Mark, is there anything you wish to add consumers purchase goods and subsequently the way to that? Ev 16 Business, Innovation and Skills Committee: Evidence
21 May 2013 Edward Cooke and Mark Williams
Mark Williams: We are in the middle of our research, Q77 Paul Blomfield: Looking from the outside then, but it would be a bit dull if we did not give you some I wonder if you have a view on whether it can deliver indication of where it was leading. Effectively the real results? view is that the UK, having benefited from 25 years Edward Cooke: I think any engagement with the of boom of retail development, is probably between Government and the private sector on policy that is 20% and 30% over-supplied in terms of retail floor going to affect the performance of those businesses is space. The crucial issue is how to de-commission a positive thing. Whether or not it has a kind of retail floor space in order to create smaller but vibrant advisory capacity, or whether it has ownership of town centres in a lot of the distressed locations that particular initiatives, is something I have never been we are looking at. too clear about. The advisory role seems to work perfectly well. I am unclear on how much the group Q75 Chair: There is something I do not think has actually runs its own initiatives. We do sit on the been raised so far in the questioning but I have come Future High Streets Forum, which is the DCLG group across fairly recently. I believe there are some e- set up in response to the Portas Review. Hopefully retailers now that are actually opening up stores, in that will have some really positive, tangible outputs effect, so that people can view the products that are as it develops. online. Do you think there is much potential here? Mark Williams: Omni-channel is the growth market, Q78 Paul Blomfield: What has your experience been which is the relationship between e-retailing and of that so far? bricks and mortar. The reality is, though, that there Edward Cooke: It has only met once. has been flat-line sales growth over the last five years, Paul Blomfield: Over what period? and there is no forecast of significant upturns in total Edward Cooke: It was announced at the beginning of sales. Therefore, what we are looking at in terms of the year and met a month ago. It has a strategy board, town centres or retail property in general is that there but it has three task and finish groups—working is still a trend towards expenditure going through the groups, if you like—meeting over the next few weeks. internet, which is having an impact in terms of the cost rising, and declining profitability of the town Q79 Paul Blomfield: Looking at BIS’s contribution centre. Yes, a lot of retailers are using “click and from a different perspective, the Department has collect”—I think that is the phrase—and accessibility acknowledged that it does not provide retail-specific comes into that. However, we still cannot get away business support schemes. Do you think they should? from the fact that declining sales are affecting the Edward Cooke: town centres. As a sector, clearly it employs 3 million people, with sales of over £300 billion, and Edward Cooke: Just to add to that, I think there are 10% of GDP, so it should be taken as seriously as two effects. One is a showroom effect, which perhaps you are alluding to. There are brands taking space; for other sectors that might have more specific support. example, PayPal in the States are starting to take space for very little purpose other than to market their Q80 Paul Blomfield: If there were to be more brand. Very little transaction goes through that store, specific support, what form do you think that might which is the point Mark is making. Then there is the usefully take? “click and collect” dynamic, which is driven because Edward Cooke: From our perspective, the biggest of consumer need but also because of logistical issue that members face, both on the retail side and blockages. Increasingly, retailers are offering pick-up the owner-investor side, is around the business rates points within their stores, and sales from online are system. In a changing retail climate, where more and therefore driving in-store sales. Some of our big more sales are online, it does not feel right that members are reporting that 70% of people that property tax at that level is increasing by inflation purchase online who pick up in store go on to buy every year. I think something fundamental has to be something else in the store, so there is a done with the rates system in the first instance. complementarity there that is really important. Then you have the pure play online retailers like Amazon Q81 Paul Blomfield: Every discussion we have and Boden, which are using local stores or lockers in seems to come back to rates, and I understand where shopping centres as pick-up points, for people who do you are coming from. Nevertheless, are there other not want the inconvenience of going home and finding parts of sector-specific support that you think might that the delivery man has appeared and disappeared, be provided? because they came at midday when you were at work. Edward Cooke: There are things like a more flexible planning system, and the delivery of a national Q76 Paul Blomfield: Can I start off by asking about planning policy framework. On use class order, the the Retail Policy Forum that BIS run? Are you a noises the Government has made are broadly positive. member? We are waiting to see what the consultation will look Edward Cooke: BCSC is not on the Retail Policy like later on this year, with regard to the ease with Forum. We have had conversations with BIS about it which you might be able to convert retail to other, in the past, but because our organisation represents more economically productive uses. Again, the property investors, developers and managers of narrative in the NPPF, from our perspective, is spot shopping centres, as well as the retail sector, there was on. It was not, but it has evolved and is much, much a sense that that dynamic would not necessarily have better. However, how that is implemented locally is worked in the form that the group is in at the moment. still open to debate. Business, Innovation and Skills Committee: Evidence Ev 17
21 May 2013 Edward Cooke and Mark Williams
The third thing for the retail sector is accepting that a it. Most of the Portas work is very much focussed on a career in retail is a profession. It is not something that bottom-up approach. My specific taskforce is focussed you do to go somewhere else. 18% of all retail jobs very much on the physical barriers to town-centre are managerial positions. Raising the profile of the regeneration and is very much looking at the strategic value of a career in retail is something that I think aspect of it, so what are the key blockages to allow they should really get behind. rejuvenation to take place? The focus is not so much on the major cities, because they have gone through, Q82 Paul Blomfield: Going back to the NPPF pretty much, a major rejuvenation and, in some narrative being right, you probably heard earlier the respects, are causing an impact on the surrounding observation that it was not matched with ministerial or suburban towns and districts. So, from our Government commitment. Would that be your view? perspective, there possibly are too many initiatives Edward Cooke: There has been a little bit more of going around. We are very much focussed on the that recently. I think there have been a couple of call- strategic review of the remodelling of town centres ins from the Secretary of State over the last six and how that should go about. months, in Margate and Rushden Lakes. It is essentially now down to local implementation. What Q84 Mike Crockart: Would it be your view that pressure could the DCLG put on local authorities to there should be fewer schemes? Is this causing insure that they have planned for retail investment in confusion amongst retailers? town centres and are making decisions in accordance Mark Williams: I do not have a view as to whether with that plan? I think that is the question. From our there should be more or less. Clearly, there are a lot perspective, more pressure could be put on local of applicants for the bottom-up initiatives, but on their authorities to make sure that they are keeping up with own that will not solve the problem. The fundamental national planning policy. issue is we have too much retail floor space, so how Mark Williams: Could I answer a bit more simply? do we make vibrant town centres district centres? A Localism is a great idea, and we certainly support lot of the places that are either in your boroughs or much stronger local authority leadership as to what bordering on your boroughs are distressed. How do they want to do in their town centre. That has to be a we make them more vibrant? There was a discussion good thing, and our report will be very much pushing about long parades of secondary retail. How do we in that direction. Localism making decisions that shrink them and put relevant uses back in? That will impact locally is great. Local decisions that impact require local authorities to decide what they want to other boroughs are not so good. The sad fact is that do for their local area and then, potentially and out-of-town applications do not neatly sit around the probably, the use of compulsory purchase powers in boundaries of one particular local authority. It has order to assemble land to then allow that remodelling been suggested that North Korean democracy is at to take place, which the private sector is very play when one local authority can make a decision supportive of in terms of the whole initiative. that impacts five others. That does not seem to be Edward Cooke: From my perspective, there is a lot right, and I think that is where the natural bias of the of useful activity happening within the Pilots, within current Government for localism, which we support, town and city centre management and the has gone slightly awry, in terms of applications that 330 applicants. The learnings that can be taken from impact a range of local authorities. all that really positive activity will, hopefully, have a Whether the decision should be for or against is not a catalytic effect and a positive effect on town centre matter for what we are looking at. What we are vitality. However, Mark is absolutely right: it is looking at is that there is a proper assessment of the necessary activity, but it is not sufficient if we are impact that such a consent would have on other local going to address the issue of changing structural needs authorities, and that there is a transparent process put in retail. So if the move from Government were to in place as part of that inquiry to explain how that concentrate on the tactical in order that they could impact is going to be dealt with. Again, that will vary forget the strategic, then BCSC’s perspective is very on a case-by-case basis. much—and we will be saying this through the Future High Streets Forum—you cannot forget the issues of Q83 Mike Crockart: I do not know if you were in business rates, how the planning system is or is not the room when the British Retail Consortium was working, and the way that consumers are changing giving their evidence, but I have basically the exact their requirement for retail and other uses in town same question to you that I asked them. There is a centres. huge range of projects, pilots and types of help that is going on for the retail sector: we have talked about Q85 Mike Crockart: It is a struggle, because there 27 Portas Pilots, 330 Town Teams, there are BIDs, the are arguments pushing in opposite directions, in that Future High Street Forum, and High Street Renewal we are arguing localism is going too far, but equally Award scheme. There is a whole plethora of help. Do every individual set of circumstances needs a local you have any views on which are most successful? solution. Looking at my constituency as an example, Mark Williams: As a Chairman of one of these, the I have one of the out-of-town city centres, which has Portas Pilots and the Portas initiative has been a 24-hour Tesco and a massive retail outlet within half fantastic in raising the profile, and enthusiasm not just a mile. Equally, I have a semi-rural village that has amongst the Portas Pilots but around 300 other just put a BID together from which they have quite applicants is fantastic, which suggests that people are deliberately excluded the Tesco on the outskirts both concerned and they want to do something about because it would have had too great an impact on the Ev 18 Business, Innovation and Skills Committee: Evidence
21 May 2013 Edward Cooke and Mark Williams decision-making of the management of that. Surely another fiscal driver of that is the rates retention model each individual set of circumstances does need an that we now have. The easy decision to make is to entirely local solution, and therefore we do need all consent more space in order to try to accrue that 50% these different types of schemes to enable them to do uplift in business rates. The hard decision to make is that. to plan positively for investment in your town centre Mark Williams: First of all, the reference to localism in order to achieve the same outcome, but it will take versus call-in relates to major applications that cut much longer. across different local authority boundaries, so that is the only comment I am making in relation to that. Q87 Ann McKechin: BCSC stated they were in That is, you cannot have one local authority making a favour of a strategy of single ownership for town decision that impacts five or six. centres along similar lines to shopping centres. What If you are then looking at issues that relate to the would you say the benefits of that approach are? specifics of a town centre within the localism debate, Edward Cooke: What we have been saying is that, then absolutely the view as to what that town should certainly in some places worthy of being tested, trying look like—what type of usage should be there, what to apply a model that is similar to the shopping centre kind of future—should come from the local authority. model that has the benefits of single ownership in a It should not come from a property developer or an high street could address the issue of disparate outside influence. However, they may respond as part ownership through a more collaborative approach to of the facilitator to deliver that and deliver against asset managing a town centre. The owners of the what that local authority requires. In that sense, the assets on the high street pool together resources—they decisions will vary. The initiatives are good, because are either encouraged to do so through some kind of clearly local people want to see improvements to their equity share arrangement or are required to do so town centre. That has come out loud and clear through through CPO powers—and then they have a shared the Portas Pilots, through the Portas BIDs, the various interest in creating and achieving that vision because television programmes, etc. Whatever one may think, they would, hopefully, see an uplift in rental income the fact is there is enthusiasm via the public for seeing and capital value from each other. an improvement to their town centres, which is great. Q88 Ann McKechin: And standardise the type of Q86 Mike Crockart: Do you have a view on the lease offers that are made to tenants. optimum size of a local authority making these types Edward Cooke: Those kinds of things would of decisions? There are vastly different sizes of local obviously need to be discussed. Different people will authorities. In Scotland, we have unitary authorities, have different types of freehold ownership and will and I believe that Edinburgh is probably too big to be have different occupiers paying a different level of making these types of decisions, because it is very rent. It is very much at the concept stage, but the much drawn towards the city centre rather than the concept is pooling disparate owners’ assets into a slightly out of town areas. vehicle and sharing the risk and the rewards. Mark Williams: You have to have an informed debate. Historically, we had great impact studies that showed Q89 Ann McKechin: Have you any examples of how we had the capacity to build lots of floor space. anyone trying to facilitate that type of approach? Clearly any impact study that now suggests that we Edward Cooke: There are lots of examples of single should be building more floor space is flawed, because ownership of high streets, especially, I suppose, in the fundamentals are we need less not more. So now London, in the classic example of Regent Street, the debate is about where we want to place it and Carnaby street owned by Shaftesbury— what other uses there are. There is a big debate about Ann McKechin: These are Crown Estate, yes. residential. A lot of the small initiatives are fantastic, Edward Cooke: Yes, Crown Estate on Regent Street, but you are not going to get Barratts or Shaftesbury who own Carnaby Street, east of Taylor Wimpey or whatever to build three flat Regent Street. There are lots of examples of single conversions above a former Woolworths store. ownership of high streets, especially in London, but However, if you look at a size in a distressed area and less of this concept of already having a very disparate assemble the land through CPO and provide three or ownership model and pooling individual owners’ four acres, then you will get residential development assets into one fund. That is normally done through through the private sector or through public support. acquisition rather than through that kind of So I think it is down to the vision and then the scale collaborative approach. of the implementation. Mark Williams: It might be helpful to look at the Edward Cooke: I think other groups that might have problem, which is multiple ownership—and again we broader oversight of economic development in an area are talking about distressed locations—probably by could be brought into that consultation process as people who had no intention to be great big property well, like Local Enterprise Partnerships, and work developers. They might be private investors who with the local planning authority to make those kinds bought a single shop at the time. Sadly, the value of of decisions. A duty to co-operate is supposed to be a that may well have fallen considerably. The issue is duty to co-operate. Whether or not it is working in how you collect together enough land to deliver the practice, maybe it is too early, but some of our vision in terms of rejuvenation. The nature of the members certainly are concerned about decisions that ownership is, ultimately, less important than the are being made on planning applications without due assembly. We have seen in the major cities the use of consideration to neighbouring constituencies, and significant CPO powers to bring about rejuvenation in Business, Innovation and Skills Committee: Evidence Ev 19
21 May 2013 Edward Cooke and Mark Williams
Manchester, Liverpool, Birmingham, etc. We now views and some of the issues about, for example, the have to apply that same philosophy to much smaller financing. The idea is then to come through with clear locations in order to bring about that change. recommendations on what we see as the barriers to rejuvenation, what the general trends are, but I have Q90 Ann McKechin: Obviously the banks are very already indicated that we see the nature of local often the major creditors here. Has there been any authority leadership taking a strong view as to what discussion amongst the major banks about the fact that they want in their town centre; the issues about they are obviously holding a lot of commercial multiple ownership, and therefore that is acting as a property that is unoccupied? barrier to that rejuvenation; and the private sector Mark Williams: When my taskforce was set up, one support—so saying we are not going to scream from of the three Portas recommendations was to focus on the rooftops about local authorities threatening CPO. banks’ indebtedness to real estate, and there is no two We think the private sector cannot do it on its own, ways about it: there has been a lot of indebtedness because the nature of assembling land in lots of quite into property. However, it has not come through in the small locations takes too long, is too expensive and research that the banks’ indebtedness is a blockage we therefore need the intervention of a local authority to seeing rejuvenation. Those values have fallen and, to kick start that and then go through the normal whether people like it or not, they are now less. The tendering processes that you would expect. Also, we issue is about multiple ownership. That is a much look at both public sector finance through prudential bigger problem, and there is certainly a willingness in borrowing as one route, and there are local authorities the private sector to provide ideas and support to that have intervened in their town centre, or by finance these. One of them is the issue about looking at infrastructure funds or going out to the infrastructure funds, because if you are going to private sector in the way you can finance things at the remodel a town centre the infrastructure funds from present time. the Government are not property-related; they are related to all the public-sector works. The reality is if Q93 Mr Walker: On the financing front, you have you rejuvenate these, then you can look at the issue also mentioned in your written evidence tax increment of employment, you can look at the issue of financing. Can you just expand on the role you feel construction, and a payback period of 50 years then that can play? becomes more sensible to see your remodelling. Of Edward Cooke: We have been arguing for some time course, that is how London and many of the cities that tax increment financing funded by the private got developed—through effectively what is now the sector for local infrastructure would get some of the modern day equivalent of an infrastructure. new schemes or at least the redevelopment of town centres across the viability gap that exists at the Q91 Ann McKechin: Has there been any discussion moment. Very often, the viability gap from a scheme that you are aware of from the Government side with, being successful or unsuccessful is equivalent to the for example, the major property companies in the amount of public infrastructure that is required as part retail sector about these types of initiatives and of that development agreement. So creating a new whether they should start looking at it? revenue stream through an uplift in the business rate Mark Williams: My taskforce has, obviously, to pay back either debt or equity, whatever source of Government observers on it, as well as representatives capital is used to fund that public infrastructure, which of the key banks, as well as most of the big is obviously then handed over to the local authority, professional organisations involved in property is a way of getting construction going, and getting investment development and the retailers. There is the rejuvenation and redevelopment of town centres unanimous support coming through in terms of trying going again. to bring about these kinds of initiatives. There is no The barrier to all of this is that if it were private-sector opposition from a very diverse group of people, which led, there would need to be some kind of identification has to be a positive, to trying to see how, through of the level of capital used for public infrastructure on the use of infrastructure funds, we can bring about the Government’s balance sheet. As a result, because this change. of the deficit reduction targets, that is not something that is acceptable to Treasury. We would argue that Q92 Mr Walker: You mentioned your taskforce, and there is no risk to the public sector. The risk of the obviously you are taking part in this industry-led rate not being accrued and the risk of the construction taskforce. You say there is unanimous support for the costs overrunning would fall entirely to the developer, initiatives. Can you just set out what are the key so we do not really understand that logic, apart from priorities that the taskforce is trying to address? definitions of “securitisation” and the Eurostat Mark Williams: The objective is to identify the guidance on classification, of why that should be the property-related barriers to rejuvenating town centres. case. We think that it would show a really positive From that, we have undertaken research across approach from Government if it were to reconsider a England but not Scotland, with apologies, because it private-sector led equivalent to TIF. was not part of the Portas Review. That said, the lessons are just as applicable, so I think that is Q94 Mr Walker: To be clear, what you are saying is irrelevant. We are now in the process of sampling that you can have a higher set of business rates in some 27 towns by interviewing local authorities, order to achieve this. In a situation where you are property owners, occupiers, as well as other saying there is over-capacity in terms of retail space stakeholders such as house-builders etc. to test out the available and in which businesses are more flexible Ev 20 Business, Innovation and Skills Committee: Evidence
21 May 2013 Edward Cooke and Mark Williams and more able to move, perhaps, than they used to be been well publicised by Grosvenor themselves that in the past, is there not a risk in creating a body of Liverpool, for example, lost a lot of money, and that property that is paying a higher tax rate and is is on a major city centre project, so the payback period therefore less attractive over the long term for people for these kinds of projects cannot just be measured on to stay in it? a rent-and-yield equation. It has to be looked at in Edward Cooke: The way the formula is calculated terms of job creation, the additional local authority does assume that there is an increase in the land value income that comes from it through construction and and, subsequently, the rents that are paid and the rates the payback period over a longer period of time rather that are accrued. So it is a more economically than the five-year private-sector model. The model productive property investment that should be more does not work and the private sector acknowledges attractive to retailers and should allow for that uplift that. They will not be able to come up with solutions that can be used for the investment. The displacement that remodel, off their own balance sheet, these town aspect I think you are talking about does need to be centres. taken into account, of course, in any calculation of what could be generated. That formula would be Q98 Katy Clark: A couple of final questions. You worked out, of course, and it is not as simple as you are critical of the Government’s decision to delay the assume that the uplift would be whatever—5%, 6%, revaluation of business rates. In your opinion, what is 7%. You would need to take into account what impact the Government’s motivation for the delay? that has had on another area in proximity. Mark Williams: It is political. I cannot see any other possible answer, because the rating system, for all its Q95 Mr Walker: Have you looked into whether any faults, on a five-year annual revaluation allows for of these types of schemes could be eligible for fairness to come into it. You now have this ridiculous regional growth funding? Have there been any bids to situation where the most distressed towns, like Regional Growth Fund for schemes of this sort in the Bromsgrove, are supporting Bond Street, Walsall retail sector? supporting the West End. We have not yet come Edward Cooke: I will have to go and have a look. across someone who has benefited. I, working in an From the last time that I looked, I am not aware that office in London, am a beneficiary of this. I did not the retail sector has qualified for much regional ask for this delay of the revaluation. We are not aware growth funding, but it is perhaps something that our the City of London asked for the delay in the sector should be more active in pursuing. I will come revaluation. I am not even aware the supermarkets, back to the Committee with some more thoughts on who are beneficiaries, asked for it. It has impacted the that. sector that theoretically it was supposed to help and in quite a catastrophic way. In many cases, you cannot Q96 Mr Walker: In terms of the makeup of your let space for £1 because of the level of rates in many taskforce, you mentioned you had Government of the distressed towns that we are looking at, so it is officials in attendance. Where do they come from— not even a question of the landlord dropping the rent. which Department? They can drop it to nothing and they still cannot let Mark Williams: They come from BIS, from Treasury it, so clearly rates have got to a position where it is and DCLG. unfair. Now, we have to live with that, because arguably the property sector got itself into a mess by Q97 Mr Walker: All three, so it is probably quite pushing rents up to their peak in 2008, so they have to healthy. Just in terms of this funding issue, I guess take some responsibility, but having a five-year annual one of the other areas is we have the Heseltine growth revaluation is supposed to iron it out. The delay by a review setting out more challenge funds—more funds further two years has a very big impact. that local authorities and businesses together can bid for—of which the Regional Growth Fund is just one Q99 Katy Clark: When you say it is political, what model. Do you think there is an opportunity for LEPs do you mean? What are they scared of? and BIDs and retail-led groups to play more of a role Mark Williams: Ultimately, rates do not raise more in going after some of that money as well? revenue, so the revaluation simply rebalances it, but Edward Cooke: Certainly what we have seen over the what it would mean is that the UBR would have to last few years is that the old model of retail property rise, because I think the Government’s own work development, where the private sector bears most of shows that the UBR would go up and that, in the year the burden, most of the risk and is able to generate of an election, I guess is politically sensitive. I say capital from debt markets or other sources, is no that because we cannot fathom any other reason why longer fit for purpose. So joint ventures between the there would be a revaluation, unless someone wants public sector and the private sector that enable this to volunteer an answer now. kind of activity have to be the way forward, probably, in more than the medium term. Q100 Katy Clark: You also question the Mark Williams: I think you also have to realise that, Government’s figures underlying the delay. Can you first of all, we are not talking about just retail; we are give us your assessment of who you think are the talking about town centres, so a multitude of uses go winners and losers? into that, including residential. Property development Edward Cooke: The biggest issue the BCSC had with has not necessarily been the most profitable exercise, this was that the point about redistribution is looking back, in any event, and it is one of the reasons essentially it is those that have done less well the banks are in the mess that they got into. It has subsidising those that do relatively well without any, Business, Innovation and Skills Committee: Evidence Ev 21
21 May 2013 Edward Cooke and Mark Williams as far as we could tell, encouragement from those that Government to do quite the opposite, again, it is not had done relatively well for the change. We are very obvious to anybody where this advice or this lobby or supportive of the Portas Review, but the analysis that this encouragement has come from, and Government we have done shows that 13 of the 15 Portas Pilots has yet to identify the key drivers of this change, so that we were able to get rental information from will it is a bit of a mystery to everyone. I totally agree with be worse off. So it is a question of giving an amount you that the five-year quinquennial review should be of money with one hand and taking away a much shorter and we also think that using September’s RPI greater amount of money with another. I would give as a means of up-rating the next year’s business rate you Stockport as an example: £100,000 Portas Pilot has some perverse consequences, as we have seen BID money; £1.5 million impact, negative impact, of over the last three years, with 4.6%, 5.6%, 2.6% revaluation from 2015, so there is an inherent inflation. We have been calling for a cap at 2% at least contradiction there. Clearly, retail in secondary for the next two years, until the end of the locations will lose; retail in primary locations like the parliamentary term, to give some certainty to business. West End will benefit, as we understand, and so will So the revaluation needs to be looked at, the way that the supermarkets. business rates are uplifted needs to be looked at, the The figures we dispute, because there is insufficient whole system for retail needs to be considered, and I data for the VOA to come up with the assumptions am sure that is something this Committee will hear a that they have. Indeed, in their own piece of work that number of times over the next few weeks. looked a bit cobbled together they make that same Mark Williams: I think you have to realise that, whilst claim. The figures are not sufficiently well tested. The it is important we have that debate on the five years, sample size is not sufficiently robust for it to be since 2008 what is new and will not go away is the credible, but the way the Government has interpreted impact of the internet. Of course, the internet does not those figures suggests that this was absolutely the pay rates, so Amazon, which is the world’s biggest right thing to do and there are, overall, online retailer, pays no rates, whereas a lot of the 800,000 winners. Well, we know that there are retailers you have heard from pay a huge amount in 400,000, roughly, that you cannot possibly make that rates. That is now their biggest tax. Whether it is claim on because there is such limited evidence, employees’ National Insurance, Corporation Tax, rates which the VOA says. I suppose the emphasis that the is now the largest tax that retailers pay. That is a huge DCLG put on the figures for such a huge change, we disincentive to invest in bricks and mortar as opposed felt, was very misleading. to, again, diverting to the internet.
Q101 Mr Walker: You have raised serious concerns Q102 Mr Walker: Is the Amazon point not an about the delay to revaluation, which I completely argument for shifting the balance of rates away from understand. A lot of the businesses that have contacted shops and towards warehousing? me about the revaluation process have complained Mark Williams: Certainly if you did turnover on that the snapshot was obviously taken at the height of warehousing, then Dunfermline, which has 1 million the market in 2008 and that we have moved way square feet of Amazon, would be a huge beneficiary beyond the need to have a revaluation every four or in the uplift in rates, but I suspect that is a much more five years. We should be able to be looking at a much complicated debate. more regular valuation process, but the cycle of Chair: Thank you. That is very helpful. We may write revaluation is broken and therefore the whole system if there are any further issues that we feel need needs to be looked at. Would you accept that basic clarification and, of course, if you feel that there is any comment? additional information or answers to questions that we Edward Cooke: I would accept that entirely. Lots of should have asked but did not, please feel free to write the commentary in the market was about more to us with supplementary evidence. Thank you. That frequent revaluations in order to address that issue of is extremely helpful. significant changes over a five-year period, so for Ev 22 Business, Innovation and Skills Committee: Evidence
Tuesday 25 June 2013
Members present: Mr Adrian Bailey (Chair)
Mr Brian Binley Rebecca Harris Paul Blomfield Ann McKechin Katy Clark Mr Robin Walker Caroline Dinenage Nadhim Zahawi Julie Elliott ______
Examination of Witnesses
Witnesses: Fiona Wilson, Head of Research and Economics, and Stephen Rydzkowski, Research Assistant, USDAW (Union of Shop, Distributive and Allied Workers), gave evidence.
Q103 Chair: Good morning, and thank you for the workforce is the greatest asset, and therefore it is agreeing to answer our questions. I will ask you to very important, from an inquiry point of view, to introduce yourself, just for voice transcription consider the workforce—their terms and conditions, purposes, starting with you, Fiona. their pay and, particularly, the skills that they need to Fiona Wilson: Thank you, Chair. I am Fiona Wilson, keep the sector growing. Head of Research and Economics at USDAW. Stephen Rydzkowski: My name is Stephen Q105 Chair: Do you wish to add anything to that, Rydzkowski. I work in the Research Department at Stephen? USDAW. Stephen Rydzkowski: Only in the sense that, when you look at the nonfood sector, it is true that that is Q104 Chair: Thank you very much. There are only the sector that has suffered the most. You have seen two of you, so we do not have the difficulties that we the high street casualties that make the news, but you sometimes have with multiple panel members, but do also need to bear in mind that even within that sector, not feel the need to answer every question if the lead there are some very successful companies that are answerer has covered every point that you would want growing. They may be at the lower end of the market, to make. Similarly, if you wish to add or subtract, but there are successes in nonfood, as well as please feel free to do so. notsosuccessful companies. I am going to start with a very general question, which is an open one. The retail sector covers a wide variety Q106 Mr Binley: May I declare an interest? I used of businesses, from local independent shops to major to be a member of USDAW, so it is nice to see you. I shopping centres, often in competition with each worked in the Coop bank at Wellingborough, so I other. What do you see as the major challenges facing know of the work you do. That was a long time ago, these businesses, and are those challenges the same and I have no reason to believe that that quality has for both, or are there some that are specific to the lessened, so it is nice to be talking to you. different sectors? You mentioned the word, “holistic”—we see the Fiona Wilson: Thank you very much. We would say holistic nature of the problem. In many respects, for that, across the whole retail industry, it is a mixed the last 40 years, we have driven retail down and, in picture in terms of the challenges that are facing the some cases, out of the high streets. We have driven it industry. We think that there are divisions between down through poor planning. We have driven it down food and nonfood retail, as well as large and small through difficulties with policing and with rateable retailers, and that is a point we would like to make. values. It is a very wide problem. It seems to me that The food sector is doing reasonably well, whereas the local government, especially, did not recognise the nonfood sector does tend to struggle a little. We feel importance early enough and act on that. I think they that, overall, it is a growing sector. In the fourweek are changing their attitudes now. Is that view of this period ending in May this year, £27.1 billion was holistic nature and of the problems being layered on spent in the retail sector, so it is a growing and top of retailers in high streets, in many respects, a fair profitable sector. analysis of the situation? We feel that there are issues challenging the sector, Fiona Wilson: Yes, I think it is. One of the issues we particularly from internet sales. This is felt across the raised in our evidence was about what local sector, but probably more so in the nonfood retail authorities can do in terms of helping the high street sector. We are very pleased that the Committee is specifically. I think that there has been a rush in the taking a joinedup approach, because whilst there are past to see car parking as a bit of a cash cow to bring different issues, it is important not to try to solve more in funding, which is understandable in times of problems in one sector than the other. You cannot austerity. However, that has stopped the footfall going resolve a situation by taking bits out; you need to look into town centres, whereas in outoftown shopping at a totally holistic approach to retail. The final point centres, you can park for free. That is an issue we I would like to make is that, as the union that would agree with. represents retail workers and a union that is growing Secondly—and this is being looked at, but I would in membership, we believe that in the retail industry ask for it to be considered further—we would ask for Business, Innovation and Skills Committee: Evidence Ev 23
25 June 2013 Fiona Wilson and Stephen Rydzkowski traders to be supported, with rate support. There has, meeting current shopper demands. Secondly, to obviously, been some assistance there, but I think that support that, if you look at multichannel retailers— needs looking at, particularly in times of austerity. those retailers who operate high street, internet and Something that is also of concern, and has to be click and collect, where the opportunities are there to considered, is consumer choice. It is a bit King sell more products when the consumer goes to collect Canuteish to say, “We are going to stop this; we are their goods—those retailers are doing very well. going to stop that. We can plan it out. We will plan It is a combination of things. It is the business model not to have outoftown shopping centres, or to save the that has failed for some retailers, but the other points high street.” To a certain extent, whilst those are have already been made in answers about rents, rates models to look at, it is the consumer behaviour that is and car parking charges. Those are an issue as well. changing. If we ignore that change and try to bring it Looking specifically at rentals, a lot of landlords are back by making measures to stop that change, I think charging rents and thinking that they can go up in line that is likely to be unsuccessful. with inflation or more. Those rents were set three, four or five years ago, when the economic situation was Q107 Mr Binley: I have one final point. The fact that much different. We have seen with some closures, we put ring roads around our town has also not such as Blacks, a deal done with the landlords to helped, because they are almost seen as a barrier. The enable the company to continue trading at a lesser lack of transport in town centres is seen as a barrier, rent. I suppose, from a landlord’s point of view, some particularly for the elderly coming into town to do rent is better than no rent and an empty shop. It is a their shopping. It is not easy, and it is that whole combination of poor business models; multitrading in problem—that breadth of problem—that we need to terms of the internet, which I think we would like to be dealing with, is it not? expand a bit more on; and, also, the high costs of Fiona Wilson: That is a very important point, rents and rates that has put the nail in the coffin of particularly if you look at car ownership. If you look struggling retailers. at statistics for the amount of petrol sold at petrol forecourts, it has come down significantly in the last Q109 Mr Walker: Just following up on your point number of quarters. It is possibly a dangerous about rent—which I think is absolutely right; I think generalisation, but I would argue that that is because there is a big gap between the expectations of some people are using their cars less, because they are landlords and the reality of what retail is capable of concerned about getting around and about. Elderly generating—something that has been tried, people, people with disabilities and young families do particularly in America, is to have rents that are not always have access to the transport that can get related to turnover. Do you think that that is them to outoftown shopping centres, and that is an something that UK commercial property ought to be opportunity for the high street. looking at, in order to create a more sustainable environment for retail? Q108 Chair: You touched on my next question, and Fiona Wilson: That would be a very good idea, commented that there are still some very successful because then it is relating back to the actual trading retailers, even in a difficult market and a different of the company itself, rather than a rent that used to be situation. I was going to ask: to what extent can appropriate five or six years ago when the economic closures be explained by changes in a business model, situation was different. It is certainly something we or by high cost and lower demand? Just to reinforce would say is worth looking at. that point, I was very interested to read the Asda Stephen Rydzkowski: I echo that. One of the income tracker that has recently been published, examples that I was thinking of, which would fit in which showed that, in most areas, retail spending is with that, was when Thorntons came to renegotiate its holding up. The area where there does seem to be a rent for shops. I think it went up quite substantially problem is white-goods trading, and that seems to be when its trade was clearly sinking. The outcome was reflected in the performance of some of the that it shut down one in three of its establishments, as companies. What is your perspective on the current a way of coping with the total rent increase. If it was market conditions and the differential impact it is based on turnover, it may well have kept open more having on different retailers? than it did. Fiona Wilson: Current market conditions in retail are generally good. If you look at the last quarter sales Q110 Nadhim Zahawi: Of course, just to follow up figures for the Office for National Statistics, they are on that question, the success of airport retailing was showing improvements in those figures. We tend to attributed to rents being linked to turnover. The start monitor closures all the time. Woolworths was a big of the airports being transformed into retail venues closure, affecting a lot of our members, and it seems was based on attracting retailers on turnover, because to be quite cyclical. For retailers, Christmas is their no one really knew what to base the rent at in the first golden few months to get the funding in, and after place. Do you think there is a problem around pension Christmas the firstquarter rent is often due. That is funds as well? On their books, the asset value is linked often a time when we see business failures. In respect to the yield, and therefore they will hold out for the of those business failures, you can look at a range of higher rent, because otherwise they would have to different things. Some of them did not have a business devalue their asset base. Is there any feedback on that model that was going to help to support them going from your members at all? forward. Consumers decided that they did not want to Fiona Wilson: I do not have anything I can think of. shop there anymore, because the offer there was not I can see why that would be an issue, from an Ev 24 Business, Innovation and Skills Committee: Evidence
25 June 2013 Fiona Wilson and Stephen Rydzkowski understanding of how pension funds work. Clearly, if parking nearer to the town centre cheaper. That has you devalue the assets of the pension fund, you create worked, and if you look at the two initiatives, it is difficulties going forward for the actuarial valuation about looking at what is around you as well. I live in that takes place every three years. I can absolutely see Macclesfield. Manchester is not that far away, and you that as an issue, but I have no evidence to bring to can get into town very quickly, so the Macclesfield you to support whether that is a problem or not. I offer has to be something very different. I know we would expect that it would be. are being very parochial now, and we can talk from our own personal experience in terms of these Q111 Nadhim Zahawi: Thank you for that. There initiatives, but we do not, as a union, get involved in are now several initiatives to help retail on the high those. I hope that helps the Committee street. We have got, obviously, the Portas pilots. We have the Town Team Partners and the BIDs, as well Q112 Nadhim Zahawi: It is very helpful. I think as the High Street Forum. Which of these do you what you are saying is that, by having variety, you believe is the most successful? encourage innovation, and that there is no “one size Fiona Wilson: In terms of the Portas pilots, our fits all”, and those are important messages for this concern about those would be that it is reported that Committee. However, let me play devil’s advocate for the funding is not getting through to the actual areas a second, if I may. Is there a danger that when you themselves, so I would say that my concern about have got so many initiatives, they are really tinkering Portas pilots would be that the money does not seem around the edges and confusing retailers by their very to be getting to where it should be. There were 28 number and, obviously, diluting the level of their recommendations in the Portas report, a number of impact? Of course, it is great to have innovation, but which we have touched on in terms of such issues as are we in danger of just having a long laundry list of rents and rates. We generally say that more needs to stuff that all absorbs a lot of resource, energy and be done to implement the Portas pilots, particularly in time, but none of it is in any way strategic? the actual locales where pilot schemes are taking Stephen Rydzkowski: That is where the role of the place. local council comes into place. I support the In terms of the other two initiatives you mentioned, I Warrington local economy council, and it will be up have no practical experience of those from a union to us to do the hard work with that list that you will point of view. However, from a consumer point of have. The council and the councillors will know their view, those initiatives are being successful around town—Stockport, or wherever—and will know what where I live. I live in Macclesfield, in Cheshire, and is likely to be the most appropriate. we have a very good treacle market once a month on a Sunday. It is very, very popular indeed. Local traders Q113 Nadhim Zahawi: You think people in local and farmers, etc. come in to sell homeproduced stuff. government have the knowhow. Those do seem to be bringing footfall into the town Stephen Rydzkowski: I do. centre. Stephen Rydzkowski: I can add one more to your list: Q114 Nadhim Zahawi: Would it be better using, for the Totally Locally project, which has actually been example, the LEP—the local enterprise partnership? funded by some local government money. Again, I am Stephen Rydzkowski: We have only had three from Leek, which is near Macclesfield. Some 28 meetings, but what surprised me was that I was well market towns signed up to this, which is being added impressed with how tuned in it is to the local economy to as the year unfolds. It is based on getting local and what is most relevant, and the ideas that it actually produce into local shops, and you have the sticker that has about going to get projects financed. One of our says, “We are Totally Locally”, and it is quite projects is revitalising the high street. We are not just successful. The point I would want to make is that talking about a high street with shops; it is a mixed whatever is on your list, and whatever I add to your high street, which is attempting to bring back residents list, there really is not one size that fits all. This and getting people into the high street in the evening. Totally Locally project is great for my hometown and If you are just focusing on retailing in revitalising the for the others that have signed up for it. I now live in high street, you are not going to do it. Warrington. It would not necessarily be as successful Fiona Wilson: Can I just add a further point to that? there, because that is a town of 250,000. It is still a I think that where the Committee’s inquiry could also town, but it is a lot bigger than the other town, which be very useful is to look at options and best practice. has got 14,000. There is a whole range of initiatives, but there is a Fiona Wilson: If I could add to that, if you look at whole range of challenges. I think the attitude you are Manchester and Stockport, there are also initiatives taking of looking at it very much in the round is the going on in terms of getting people to come into the best way forward. town centres. Manchester is not really a place that has difficulty getting footfall; it is always rammed. If you Q115 Nadhim Zahawi: On that point—just to finish know the area, it is always very, very busy, whereas off on this question—in what ways do your members Stockport is just down the road from Manchester, so benefit from these things? Could you, for example, you can see why people would want to go to come back to this Committee and say, “Out of the Manchester. What Stockport has done—supporting plethora of initiatives, we have got some the point Stephen was making about looking concentration around these, and therefore it looks like individually at the issues—is initiatives on car these are the good ones?” Could you provide that sort parking: reducing car parking charges and making car of information, in terms of best practice? Business, Innovation and Skills Committee: Evidence Ev 25
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Fiona Wilson: We would need to source that had to demonstrate that they could use the money information, but there is no reason why we cannot effectively. Is the problem with the delivery do so. mechanism, or is it maybe that the local authorities Nadhim Zahawi: That would be very useful for us. have not been able to deliver on the plans that they Fiona Wilson: We have not got it available now, but submitted in order to win the bids? Have you any I would be happy to go and gather that for you. views on this? Nadhim Zahawi: That would be incredibly useful Fiona Wilson: I do not really think we have any for us. evidence to support or deny the questions you have Fiona Wilson: There would be a time scale on that, asked. It is not something in which we have a massive of course. area of expertise.
Q116 Mr Binley: May I congratulate you, as Q119 Chair: I know that I read somewhere—and I someone who spent 12 years on Northamptonshire would not wish to identify the town—that having won county council? It is a bumpy ride, so I wish you well a bid, the local councillors basically could not agree with it, but I am delighted to see your expertise is able how the money was being spent. to be applied to this issue. You are right: you cannot Fiona Wilson: If I perhaps can try to help a little bit, solve this problem nationally. You have got to give Stockport is one of the Portas pilots, and I mentioned the responsibility to local authorities to pick and mix, earlier that it did something on parking. One possible to use a retail term—that is the truth of the matter. issue may well be that there are 28 different initiatives You also, at local authority level, have to recognise that there is a real opportunity for bringing smaller in the whole of the pilot, so there is a lot of pick and retailers in and giving them a new business mix to choose from. Maybe there are issues where opportunity. The problem is that, in many of our town people have different opinions on what is going to centres, the units we built were very large units. It is work. That is a personal opinion. a problem that local government can deal with that cannot be dealt with by a national initiative. Do you Q120 Ann McKechin: You both touched on the think that ought to be one of the thrusts of the report? problem of empty shops, and one of your I do not wish to guide the Chairman too much, but I recommendations is that there should be an empty wonder if that ought to be one of the thrusts—that we shops initiative, using vacant and boardedup shops for really have got to trust localism in this respect. community and charity interests. I just wondered if Stephen Rydzkowski: I would agree. To come back to you could perhaps flesh that idea out a bit further— Warrington, one of our casualties, unfortunately, was about what you think it would actually mean in TJ Hughes. It had a massive department store in the different places in the country. centre of Warrington, and it has been derelict—empty. Stephen Rydzkowski: One of the market towns that I Do not ask me what it is being converted into, because am in is developing that popup shop idea, which I I do not know, but there is work going on. It is being think is a really good idea that brings life and vitality reclaimed. I think it is going to be residential, but the to the high street, even if it is only for short bursts point is what you are saying. When there is a town of time. That is one of the areas we would like to centre casualty—and they are normally the big see developed. casualties—you have got big, empty buildings. What to do with them is probably best left to local people Q121 Ann McKechin: That may be a temporary to decide. solution when landlords still anticipate that they will be able to rent the property out within a reasonable Q117 Nadhim Zahawi: You mentioned the fact that time to a permanent tenant. You actually mentioned only 7% of the £10 million from the Government fund set up in 2012 to help bring empty shops back into an example of a major department store closing. Many use has been spent. Why do you think that 93% of towns have had a similar experience, where a key that money has not yet been spent, and whose fault store has disappeared and the opportunity to get do you think that is? something of a similar size is just not really feasible. Stephen Rydzkowski: As far as I am aware, it is to do Do you consider, then, that people really need to look with the types of projects. They take such a long time at different solutions, rather than this kind of to plan and to get ready to apply for the money. The temporary let? Portas review is not something that we deal with daily Stephen Rydzkowski: That is right. That was what I in our work; we just know from the papers that the was saying. That big store will not return as a big money is not getting through. As for where the blame retail store. It will either be sublet to a number of lies, I would say it is possibly to do with the lack of smaller stores, or with concessions in an overall projects that have been totally designed yet. I do not framework, it may be converted completely into know whether we are in a state where the other money residential living space, or it may be turned into a will be released, but it has taken 18 months or two community theatre. Certainly with something on that years, and there is nothing to me that suggests there scale, you cannot replace a big retailer with a big is suddenly going to be a release of money. retailer. We tried in Warrington; unfortunately, the bombing took place outside Boots, and the big Boots Q118 Chair: Could I just probe you a little on this? store was left empty for many, many years. We have There was a bidding process, and I would assume that now managed to get it back into some sort of retail those local authorities that submitted bids would have use. Ev 26 Business, Innovation and Skills Committee: Evidence
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Q122 Ann McKechin: Can I just ask, perhaps, one Stephen Rydzkowski: It is a tough one, isn’t it? When supplementary question on this empty shops something like that happens, it fundamentally changes initiative? I think many local authorities have tried to the situation of the original terms and conditions of introduce these types of measures—popup shops or the lease. That is what I would say, and I have seen it charity shops. I have got local traders in some areas argued at local level that, because something like that in my constituency who complain about the sheer has happened, they should be able to renegotiate. That volume of charity shops and their ratio to commercial might be something you may need to consider, premises. Because those shops do not pay the same because it is such a fundamental change when level of business taxes, they believe they are actually something like that drops on your trade. By the same undercut in terms of their ability to market. token, I have seen it happen the other way when a Stephen Rydzkowski: That is a really important area. major unit collapses and all the local businesses that I started looking at this issue of business rates, supported it—which have been on the same leasehold because I thought “Why have so many charity shops and rental agreements—see their trade suddenly opened?” Part of it is on rates. As far as I am aware, disappear, for completely different reasons. It is not they do not pay any, or they are certainly much, much just when a major multiple arrives; it is when reduced. There you have something that the something big happens the other way. If and when Committee possibly needs to look at, because it is you do come to look at it, you need to look at both skewing the mix of the high street. It is almost like it sides of the picture. It is such a fundamental change is not a level playing field. This is not getting at that there are certainly moral grounds for looking at charities, obviously, but I would certainly say that it it. Whether it needs to be any further, I do not know, is an issue. but I would think there is an argument.
Q123 Ann McKechin: One of your other proposals Q126 Paul Blomfield: Fiona, in your opening was for an empty retail property law—an unoccupied comments, you talked about the workforce being the retail properties law—to help the retail sector. How greatest asset to the retail sector, and I am sure that is would this actually work in practice? The problem is, right. You also talked about the importance of skills. then, to try to go through potentially hundreds of I wonder if you could develop that a little bit further, thousands of retail units to try to assess what a in terms of what you see the skills training needs of reasonable rent is. the sector to be, how far we are looking at those being Stephen Rydzkowski: As far as I am aware, you do addressed generically through general education, and not pay rates for three months on empty retail how far there is a sectorspecific approach. I am properties. Actually to pass a new law, it might be that conscious that the British Retail Consortium, in its we need to go the other way around and think about evidence to us, talked about the problems being soft removing some reliefs, as a push. For example, rather skills, interpersonal skills, STEM subjects and IT than three months, make it one month, and then they skills. I wondered what your thoughts were on that. will think, “Oh, crikey, in four weeks’ time we are Fiona Wilson: Retail is an entrylevel occupation for going to be paying rates, so we have got to do significant numbers of workers, but it is also an something”. Again, I am not au fait on taxation, but occupation that people progress through. It is often a there is the question of whether empty retail properties case of starting on the shop floor and working your count against your tax, and stuff like that. There are way up. That is a very common pattern for areas that you might need to consider, which you can employment and skills within retail. We want to talk use as little sticks. about apprentices, which I will hand over to Stephen for, because he has got greater knowledge on that than Q124 Ann McKechin: Would this be primarily at the I have. What we do as a union is important, in that local authority level in terms of business taxes. we develop our lifelong learning work. We have funds Stephen Rydzkowski: Yes, it would be primarily local, from BIS through the Union Learning Fund, and we but there might be scope nationally. I do not know. support our members to pick up some of the skills you You might need to have a look at both areas. It is just have talked about. We support our members: more one range of things. It will not solve anything, but it than 7,000 of our members last year had some skills might help. training, such as Skills for Life courses, IT courses, literacy and numeracy levels 1 and 2, and accessing Q125 Chair: Could I just raise an issue that has been National Vocational Qualifications 2 and 3. We work brought to my attention? The head lessee of a row of jointly with employers. There are lots of situations shops in a particular shopping centre leased one of the where there are Union Learning reps, and those reps shops to a major national multiple retailer, promptly work with the employers there through formal putting the turnover of other shops there in jeopardy, agreements to help to skill workers who are already and basically forcing them out of business. Because there. We find that the Union Learning Fund is they are locked into leasing agreements, they exceptionally valuable from a joint point of view, in obviously sustained a certain level of overheads terms of giving workers who are already in that against a substantial drop in turnover. They are in employment the skills to continue to work and danger of going out, and you could have one develop themselves. successful major multiple, but a whole row of empty Apprenticeships are worth talking about, because shops. Are there any changes to either leasehold obviously that is an entrylevel qualification. There are reform or taxation that you think might discourage some very good examples of apprenticeships in retail, that sort of situation? but I will hand over to Stephen to cover those. Business, Innovation and Skills Committee: Evidence Ev 27
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Stephen Rydzkowski: I will, in one second, but apprentices from all different types of people who because I do think it so important, I just want to echo apply for them. There is the example of a woman who and stress that. I go to courses and speak to people applied to do one in the clothing business, but she was about apprenticeships, and it is like they have become disabled. She had lost her lower arm, and they the new university degree. Everyone says, managed to get her on to a pharmacy apprenticeship. “Apprenticeships, apprenticeships; they’re wonderful, Again, not only are apprenticeships really important, they’re wonderful.” People forget this other work that but if you can take them down areas like that, you can is important in the workplace about upskilling the open up even more doors to not just lowpaid people, workforce that is short of apprenticeship level. That is but disabled people and so on. the sort of thing that the employers are so willing to join in with, because it is a real step forward. Q128 Paul Blomfield: You are right that the situation You are talking about retailing, and the other thing is changing, but I think you would also recognise that that gets to me is that when we talk about some retail apprenticeships—and this is something we apprenticeships, we always seem to be talking about have expressed a concern about as a Committee— the RollsRoyce apprenticeship and the craft have actually given the apprenticeship brand quite a apprenticeship, and saying, “This is what it has got to bad name. Some employers have passed off fairly be about.” They forget that retailing is a lowskilled, limited inhouse training as an apprenticeship. That lowpaying sector of the economy, and getting to what clearly is changing, but I wonder if you think there is Fiona has been talking about is a major, major step enough ambition within the sector for forward for some of our members. They are never apprenticeships? When we looked at the area as a going to be a RollsRoyce engineer, but some of them Committee, we were conscious that, in Germany, level have got IT skills that they did not have when they 3 is the norm in retail. We almost talk down left school; they have NVQs at levels 2 and 3, and I expectations in retail. cannot stress how important the Lifelong Learning Fiona Wilson: There is an issue with apprenticeships reps are and what a good job they do throughout the generally that the Committee might want to look into, union movement. and that is the actual careers advisory service, in terms On apprenticeships in retailing, surprisingly, you of recommending apprenticeships to children who are might find, it is one of the fastest growing sectors in at school. I was having a different conversation on a terms of apprenticeship numbers. People do not seem different issue with somebody at the weekend about to think about this or seem to be aware of this. All the fact that because of the way schools are measured our major companies now operate apprenticeship on their key performance indicators, they are looking schemes. We do not normally mention companies, but at things like going to university. we will talk about the Coop group, for example. That Chair: If I can just intervene, one of our is a really interesting example, because that is an area recommendations in our report on apprenticeships where there is a range of apprenticeships throughout said just that. the sector. You have got retail apprentices; you have Paul Blomfield: It said precisely that. got clerical apprentices; you have got motor mechanic Fiona Wilson: I agree with you, then. I think that is apprentices; and you have even got apprenticeships in an important point. Did you want to add to that? the farming industry. Again, people do not think about Stephen Rydzkowski: No, I am just agreeing with you. this sort of thing, but it is a major, major employer of apprenticeships. One of the ones I would particularly Q129 Paul Blomfield: Let me just pursue the mention is Lincoln Coop. Again, people think these question a little bit, then, and look at how the apprenticeships are short: “Oh, they are not proper changes—you have mentioned the impact of internet apprenticeships. They are six months.” That has gone shopping—affect training needs, in particular. I am now. Statutorily, they have to be 12 months, and most conscious that if more people are buying on the of the Coop’s are upwards of 18 months or two years. internet, the high street shopping experience has got to offer something more. Probably, that is about product Q127 Paul Blomfield: What level are you talking knowledge, and that is a feature of German retail. about for the Coop apprenticeships? Are you talking When I talk about level 3 apprenticeships, it is not about level 2, level 3, or beyond? simply about customer service, although that is clearly Stephen Rydzkowski: I am talking about both 2 and important, but actually being able to help customers 3. That is the other thing: a lot of these are level 2, to navigate choice by offering more than you can get but we push for level 3, and the aim is to push further online. Do you think that is an issue? on. Going back to what I was saying, you have to Fiona Wilson: I think that is a very important issue. think about where these workers are coming from, and If you look at the trading figures to do with internet to get to level 2 is a heck of an achievement, but it is retailing, and you look at the multichannel retailing, only the start of a journey. If we can get them there the businesses that perform really well are the ones and then get them to level 3, it becomes a matter of, that have both a click-and-collect service and a high “If we have got them to level 3, can we get them street presence. When customers then go to collect further—to level 4?” It is about establishing the their goods from the store they have ordered them culture. If you can do that—and this is what the Union from, there is a fantastic opportunity for good Learning reps do—you have started the progress customer service to sell even further products. It is a towards something. way in which you can embrace the internet-retail issue I just want to finish with the Coop, because it does and help that to reflect back in a positive way on to actually—and this is quite good—try to take the high street. Ev 28 Business, Innovation and Skills Committee: Evidence
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If you look at performance with click and collect, Fiona Wilson: It has to be driven by all three people there are areas that have been very successful, and it you are talking about. It is so important to make sure takes me back to the point I made at the beginning that people have the skills they need to do the job. about the value of the retail workforce for retail itself. There really is an approach for everybody here. We A recent report produced by the Retail Trust looks at have talked a bit about the work we are doing from a the multichannel experience. It says that staff have to Union Learning point of view, and that has been very be the customer interface. An engaged workforce is successful for us in supporting our members, vital, and good employers are moving away from a particularly so if there are redundancies when retailers “tell” attitude towards an “involvement” attitude. close and members lose their jobs. Skilled workers Those who feel involved are happier in their roles and find other work far more quickly, so I think that the deliver better customer service. Employers need to union definitely has a role in that, and we very much recognise that better customer service and better enjoy doing it. We find a great deal of support from training is needed. It is not just a “Ring it through the our members who want to be Union Learning reps till; put it in a carrier bag” issue; it is making sure that because they want to help their colleagues at work. people have the product knowledge and skills to I think the employer also has a role to play, because enable them to have a more fulfilling job. It is about they need to be clear in identifying the skills that they making sure that people have a better experience at need, and a workingtogether approach is always very work from the employee’s point of view. That is very beneficial in the workplace. If both employers and well worth looking at, because customer service can employees work together through the Union Learning actually improve the high street sales through the Fund or a Lifelong Learning Centre, the employees multichannel avenue. see that their employer is supporting that. There is Stephen Rydzkowski: As well as all that, there is a also a role for the Government, in terms of making different skill needed, is there not? I am buying things sure that the playing field is level and that the online, and there is the “Ask the Question” feature, so standards are there, and helping to identify and you are asking a question and someone has got to support ways to seek to achieve a higher standard for respond instantly with the product knowledge. It is apprenticeships—that is what we have just been totally different from being in a shop. It is a different talking about—to help people raise the bar a little and type of skill. focus on upskilling people.
Q130 Paul Blomfield: Do you not need that in a Q132 Katy Clark: Are we rising to the challenge at shop, too? Even more so, actually, because you need the moment? Are we getting it right? What needs to to have a reason for going to the high street if you can be done and who needs to be doing that? Is there buy online. anything in particular that the Government need to Stephen Rydzkowski: Everybody’s experience of do? shopping is different. The thing is that the person who Fiona Wilson: The Government need very much to is dealing with you online has to know the product to continue with the Union Learning Fund. That has been a much greater degree. an absolutely major development in terms of Fiona Wilson: If I could make a supplementary supporting trade union learning in the workplace. It is comment on that, one of the issues that retailers are beneficial to both workers and employers going concerned about is that people do what is called forward, so the key point I would make is how “showrooming”—they go to the stores, have a little valuable Union Learning is. I should perhaps state an look around to see what product they want, and then interest: I am on the Union Learning board, as a buy it on the bus on the way home on their mobile member of the TUC General Council, so I do see first phone. Not all internet selling starts with you sitting hand how beneficial that is and how much unions and at your computer and deciding what you want; employers work together, not just within USDAW, but perhaps in the middle of the process, you might go for a range of other unions. That is the first thing that and have a quick look at the product that is there. the Government can do. Good sales support, and good skilling and training of The second thing that the Government can do is to the workers who are there, will hopefully ensure that encourage retailers to focus on multi-skills. I think greater sales can be achieved from that particular sometimes retailers want to focus on how we do it location, rather than people going home on the bus here—“This is the way we do it in this company”— and ordering it on the internet. You have got to be in rather than thinking a bit more outside the box and to have your delivery. It is not the panacea: someone about helping someone to get a transferrable skill. has to collect your delivery for you, and that is not Again, it is about encouraging people to strive to always possible when everyone is working 24/7. improve the standards of entrylevel qualifications. Paul Blomfield: Tell me about it. Stephen Rydzkowski: The standards part is one thing Fiona Wilson: I speak from personal experience. You that I would say is really important. There has been can tell, can’t you? bad press about apprenticeships in retailing, and there Paul Blomfield: Me too. were times when they were being rammed through at six months and so on. The standard has been raised Q131 Katy Clark: Whose role do you think it is to now, because it is legally 12 months. We may need to ensure that these new skills are acquired? Do you keep looking at that and have the Government focus think it is primarily the Government’s job, the on quality. One other thing is that there may even be employer’s job, or the unions’ job? Who do you think some sort of further push towards national recognition are the people who have to be driving this? of apprenticeships, and maybe something like UCAS. Business, Innovation and Skills Committee: Evidence Ev 29
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When you apply to university, there is UCAS; there sixth form, so they are not going to give fair and could be something similar for an apprenticeship. I impartial advice there. They want you to go to know there is NAS, but maybe there is some university from their school, because that looks really possibility of linking the two so that whether you are good for them. Apprenticeships are then pushed back. applying for a degree or an apprenticeship, it is the Chair: I understand the point, because it is one that same sort of organisation, really to give it the status our Committee has deliberated on for some time, and that it might not have at the moment. I bang on about it considerably. However, I do want to slightly refocus, because obviously the skills agenda is Q133 Chair: Just before you ask your next question, part and parcel of this issue, but it is not, perhaps, the Katy, could I just raise the issue of engagement with central part of it. schools? Fiona, you touched on this. I think that it is fair to say, historically, that retailing has been looked Q134 Katy Clark: We have already spoken about at as an opportunity for lessqualified students to be online and mobile shopping. What opportunities do employed. Actually, the nature of retailing is you see in the development of that sector, particularly becoming so sophisticated now that I believe there is in relation to job creation? an unmet demand for students with STEM subjects. Fiona Wilson: It is really going back to the Certainly, when I go into some shops—especially multichannel issue, and about encouraging employers those dealing in more hightech products—you need to and small businesses, and maybe even collectives, to have shop operatives who really know their stuff. think about having a multichannel approach, so that What do you feel needs to be done to recruit the right there are then opportunities to develop the high street sort of people? through that. That is one area that we think is Fiona Wilson: Retail really needs to upsell itself, important, so that the shopper is brought to the high because there are far more opportunities in retail street to purchase their goods, and then they are dealt across the whole of the picture. If you look at the with by a skilled worker, who is familiar with the retail workforce, which is worth doing, it is very products and perhaps can help them choose something diverse. There is a very significant percentage of else that they might find they need when they get women working there—it is about 60% female. It is there. dominated by parttime working. To a certain extent, Stephen Rydzkowski: There is also an added spin-off. the demography of retail workers reflects back on the I know one major high street clothing retailer has just workforce that goes in there. If you want a fulltime built a purposebuilt distribution depot that is going to job, you would not necessarily look at retail. A lot of be purely dealing with the online part of its business, it is parttime work, and you have to get underneath and it has created 400 jobs. That is not on the high the demography of retail workers to see how you can street, but it is a spinoff. actually change that. Fiona Wilson: A number of retailers have what they People will go into retail as young workers, maybe call “dark stores”—they are like stores, but it is where because they are encouraged to do that by the school they do the picking to provide online sales. All the because it does not perceive that there is anything else major supermarkets now have online sales, and that is for them to do. Also, lots of young workers working a growing area. It is more distribution centre work, but in retail are at university, funding themselves to study, it is a growing area, and job creation is taking place. and they often then go on to become managers and work up through the retail structure. A point I would Q135 Katy Clark: How do the skills for those kinds make about this is that upskilling is important because of jobs differ from the more traditional retail sector? of the nature of people coming into retail, but of What do those jobs involve, and how do we ensure course there is a big, significant decline in young that people have the skills to do them? people at the moment. The development of young Fiona Wilson: Those sorts of jobs are more about workers over the next number of years is going to picking work—the product knowledge to know where start to decline. Retailers need to think about how they the things are, the physical ability to shift stuff and are going to respond to that. that sort of thing. It is a question of identifying, We have made a number of points already. There is through the careers advisory service at schools, people the issue about careers advisers seeing retail as being who feel that works for them. a place to work, perhaps linking in with having a Chair: Thank you. Can I bring in Robin Walker? We clearing system for apprentices and things like that, have actually poached some of your issues, but I am but also recognising that the work that is available in sure you can find some new angles. retail often dictates the people who seek to work in Mr Walker: I have plenty of other things to pick up retail. It is all about flexible working; it is often on. Fiona illustrated very well the point about school something where, if you have got a caring leavers being traditionally a feeder of the retail responsibility like a family, it is the ideal work for industry. It has also provided, as Stephen pointed out, you. If you are a student seeing yourself through a lot of opportunities for people with disabilities to university, it is the ideal work for you. It needs to be work. Do you think there is any conflict between the dug underneath a little bit to have a look at the type drive towards quality in customer service and the of workforce and see how that can then be sold going traditional position of the industry as being a very, forward. Does that make sense? very inclusive employer? Do you think, in our skills Stephen Rydzkowski: Also, if you are talking about policy as a Government, we should be deliberately the selling at the school, just sticking to trying to protect that status as a very inclusive apprenticeships, schools want you to stay on to the employer? Ev 30 Business, Innovation and Skills Committee: Evidence
25 June 2013 Fiona Wilson and Stephen Rydzkowski
Fiona Wilson: Again, I think it does go back to the type terms of encouraging stores and bridging the gap in the of work that is available. Retail is predominantly high street, I would have thought that the employers parttime, so it is going to be people who are looking for would need to talk to their employees to see whether parttime work who seek to work in retail, and that is a they are willing to work. Because of the diverse nature very important point that we need to keep sight of. In of the workforce, there are people who would work terms of the skills that are available and the time evenings, because it would fit in with other available to learn those skills, people will be juggling responsibilities that they have. One of the beauties of work with other responsibilities. That has got to be retail is that this can work, as long as you deal with borne in mind. Young workers often work in retail as a making sure that the employee has agreed to it, and you way to pursue going on to management traineeships and do not change people’s hours willynilly. things like that, and have their first experience with We have two big issues about flexible work. The first retail from a training point of view. Those are points we issue is that there is not proper discussion with the have covered already, really, so I do not think I am worker about changing their hours, and therefore they helping by taking that any further on. cannot always do that, but feel that they have to because of the lack of availability of work. If you are going to Q136 Mr Walker: Particularly on the employment of start opening during those hours in town centres, the people with disabilities, where retail has performed buses need to be there to take people home. There has very strongly to date, have you got any figures as to to be a transport system that can help a shop worker to whether that trend is continuing, improving, or go home at nine o’clock at night, bearing in mind that if declining? Do you have any views on that? the pubs are just getting going, that might be an Stephen Rydzkowski: We have not got any actual intimidating environment for some people. That is the figures. first point I would make. Fiona Wilson: Would you like us to get some? The second point I would make, which our members Mr Walker: If there are any available, they would be have big issues with, is over short-hours contracts, very interesting to see. where people get a contract for between eight and 10 Fiona Wilson: Anecdotally, I am aware of a number of hours but then regularly work 20 hours a week. You will schemes that the supermarkets offer, where they do know straightaway that there is a difference in the terms support people with disabilities to work in retail. I and conditions if something happens and that the would be happy to do a quick questionnaire among the holiday pay is less. We have worked very successfully people we deal with who negotiate with those with those retailers whom we organise to manage all companies, gather together some data, and then send that. In the big retailers, you will find policies in place that in for you. to ensure that flexible working is dealt with Mr Walker: I think that would be really interesting to appropriately, that discussions take place, and that those the Committee. changes are negotiated and discussed with the Chair: That would be very helpful, yes. employer, taking into consideration family Stephen Rydzkowski: You do come across these responsibilities, travelling home, etc. examples of people applying for certain jobs and not We believe that there is a place for legislation and getting what they initially wanted, but then the regulation to look at people who have a contract for company explores other avenues. If every company eight hours a week, but who regularly work 20 hours a adopted that approach, that would help to push it week and lose the benefit of those additional hours forward, without any shadow of a doubt. every single day of the week, and we will be Fiona Wilson: We will get some data and come back campaigning on that. We think that should be looked at. to you. Those are the two areas that we will be concerned about with flexibility, linked in with the transport issue. We Q137 Mr Walker: You mentioned the importance of surveyed our members about their journeys home from flexibility in working and the fact that many people work. In fact, I can send that in, if you are interested. work in the industry because of that flexibility it offers. Would that be useful? I had a retail summit in my constituency in Worcester Mr Walker: Yes, it would be useful. last week, and one of the things that independent Fiona Wilson: A number of our members tell us that retailers in particular were pushing was the idea of they have real difficulty with work transport in greater flexibility in opening hours, so that they could outoftown shopping centres, which do stay open until compete. They felt that being able to work different the late hours. The stores close at 10 pm and the last bus hours was very important to being able to compete with is at 9.30. That really has got to be addressed, if you are online. You also mentioned earlier getting people into a going to look at extended hours. high street in the evening. We have got a big problem in Worcester in that we have a high street that closes at Q138 Mr Walker: Especially with the rising cost of 5.30 pm and reopens again at about nine for the night- transport and some of the issues you mentioned around time economy. Trying to bridge that gap was one of the people driving less as well, or wanting to drive less. things that retailers seemed very keen to pursue. How Fiona Wilson: Yes. A lot of our members would not far do you think the industry can change its ways to try typically drive, because they would be relying on public to bridge that gap and to try to create opportunities for transport. I can send in the journey-to-work stuff. people to work flexibly into the evenings? Fiona Wilson: The industry, overall, is 24/7 in lots of Q139 Mr Walker: I think all this additional evidence cases, in terms of the work that is done. The opening would be very useful. Just picking up on the online hours of the food retailers tend to be such as that. In issue, you have made a recommendation in your written Business, Innovation and Skills Committee: Evidence Ev 31
25 June 2013 Fiona Wilson and Stephen Rydzkowski evidence that retailers—especially smaller, Q141 Caroline Dinenage: Fiona, you did briefly independent retailers—should be encouraged to build mention the subject of business rates earlier. It is up an online presence. I think there are similar certainly something that, in my own constituency, recommendations in Portas. It is something that there independent retailers name as one of the biggest seems to be a broad consensus on, but how do you see challenges. I just wondered if you could give us a quick that revitalising the high street? How do you see that précis of your views on business rates, and how they having a positive impact? stand at the moment. Fiona Wilson: It is linked in with our observations Fiona Wilson: We have discussed a number of issues about multichannel retailing: that those retailers who this morning about rates being related to turnover, operate on a “bricks, clicks, and collect in the store” haven’t we? There are concerns that the rates were set model actually do improve their sales, because they some time ago, and so in the current economic situation, have a presence everywhere. Our view is that, with they are on the high side, and that they should be good training and support for workers, the person who reviewed if there is a change in circumstances, like a then goes to collect their goods from the store may large store closing or coming in. We would ask the make some other choice to buy another product while Committee to look at all of those initiatives to assist the they are there. At the end of the day, the internet is a high street. great showroom, but if people are going into the stores to have a look and then want to order it online, and that Q142 Caroline Dinenage: Are there any other store does not have online, they are likely to go to Government policies that you feel are deliberately, or another provider. It is really a question of trying to look even inadvertently, affecting both the shape of the at what is successful in retail at the moment, and seeing industry and the pressures on it? how we could support that for the high street. You are Stephen Rydzkowski: I will come back to that one in not going to change it, so you have got to move with it a second, but on business rates, we see that the small and find a way of helping that model work for smaller business rate relief is currently frozen until April 2014. retailers. We believe there is a place for that, particular We would be asking for that to be either extended or in terms of getting people back to the high street to gradually phased back in. I do not think that, when you collect what they have ordered, because they are not get an announcement that there will be a freeze until a going to be in at home to have it delivered to them. certain time period, it should suddenly reverse back. There needs to be a transition period, if business rates Q140 Mr Walker: At this meeting I mentioned last are to go up. That is the first thing. week, we heard from Land Securities about some of the Fiona Wilson: There are two things I would quickly clever ways in which it is using internet access to then mention, which we have not spoken about already. In gather data about people’s spending habits and direct terms of stronger tax avoidance legislation, a lot of them towards the parts of their shopping centres that small retailers feel they are disadvantaged and there is they might want to go to. Do you think there is an not a level playing field, because larger retailers are opportunity for the high street in that? If high streets are perceived as being able to avoid taxation through coming together, and getting independents together to schemes that allow that to happen. That needs to be establish connectivity and build an online presence, looked at, particularly when you look at internet they might also be able to work together to provide wifi providers. They do not have a presence on the high access and use some of that data and information to street, so therefore they are not having that sort of cost. share among all the members of the high street, rather The second thing, which is not quite a regulation but than having it directed by a controlling landowner in the would really help consumer spending, would be a case of a shopping centre. They could actually use that reduction in VAT from 20% to 17.5%. If consumer for the benefit of a much broader constituency of high spending were to be encouraged, all retailers would street retailers. benefit. People would put their hands in their pockets a Fiona Wilson: Wifi access would bring people in. Free bit more if they had a bit more spare cash. wifi access is something that everyone is always Chair: Can I thank you? That is very helpful. We may looking for, and to have wifi access for a town centre well subsequently feel there are some questions that we would be something that would be very well worth should have asked you but did not, and we will write to considering. I also have seen evidence of where towns you. You have already committed yourself to providing have used a discount card, so that if you take your us with some evidence to supplement what you have discount card in, you can get discounts at the stores in said. We would be very grateful to receive that, and of that town. At the end of the day, what successful course, if there are any further observations you wish retailers do is to monitor what their customers are doing to make, again we would be very grateful. Thank you and do more of it. The technology is available for that very much. to happen, and I can see that being very beneficial. Fiona Wilson: Thank you. We will reflect on the Chair: We are running behind time, and I am conscious questioning, and if there is anything we think we could that Caroline wants to ask a couple of questions on helpfully provide, we will do so. Thank you very much. business rates. If you could make both the questions and the answers brief, I would be grateful. I think we know where you stand on business rates. Ev 32 Business, Innovation and Skills Committee: Evidence
Examination of Witnesses
Witnesses: Martin Blackwell, Chief Executive, Association of Town and City Management, and Sara Scott, Chair, Market Rasen Town Team, gave evidence.
Q143 Chair: Good morning and welcome. Thank did a survey of just over 100 of them, and we asked you for agreeing to address us. I am sorry you have them what was important to them. Sara is one of those been kept waiting a little; however, there were we asked. We were amazed to find that the most obviously issues we needed to tease out. I will just important thing, they felt, was about getting people to invite you to introduce yourselves for voice live in town centres. I was talking to one MP recently transcription purposes, starting with you, Martin. who asked me to estimate how many voters there were Martin Blackwell: My name is Martin Blackwell. I in his town centre, and the answer was four. There am Chief Executive at the Association of Town and may be some issues there around how important town City Management. centres are perceived to be, but from our point of Sara Scott: My name is Sara Scott. I am Chairperson view, there has been a growing number of people of Market Rasen Business Improvement Group, and moving back into town centres. we were one of the first 12 Portas pilot-winning Without giving too longwinded an answer, there are towns. also some dangers around this. Government policy at the moment is to relax the need for planning Q144 Chair: Thank you very much. Some questions permission to turn what was termed “vacant offices” will be personspecific; that does not mean to say that into residential. However, as there is no way of the other is excluded, but there is no need to repeat making sure that this only applies to residential, any what one person has said. Can I just start with a office space can now be turned into residential without question to Martin Blackwell? In your written planning permission. The ATCM offices are by St evidence, you describe the changing nature of town James’s park. We have been in those offices for over centres in terms of changes to footfall and consumer 20 years, and two weeks ago I was given notice to behaviour. How do you think these changes are going quit, as were the entire contents of our building. All to affect the geographical scope of retailing? the offices have been given three months’ notice to Martin Blackwell: It is widely accepted that most quit, and we suspect that it is because it is going to be town centres are shrinking in geographical terms. turned into residential, which would be very valuable Some of the outlying areas—the secondary former in Westminster. shopping areas—may not survive as shops. What has been interesting is that more users are coming back Q147 Chair: That is ironic, yes. You pointed to the into town centres. Over the past 20 years, we have fact that town centres needed to have a far wider offer been entirely focused on shopping as the important than just shops, but they also need to have people thing for high streets and town centres, and perhaps living there, and you can certainly see big advantages, lost sight of the fact that actually, historically, our given the cost of transport, environmental issues and town centres have had much broader uses. The Portas so on. However, do you not think there is a slight review, for example, focused almost entirely on retail contradiction there, in so far as if you have a town and shopping, and ignored, for example, the evening centre that offers a vibrant nighttime economy, it is economy, which is a very important part of business. often incompatible with civilised residential living? So I think that they are not shrinking, but we may Martin Blackwell: There are conflicts there, but if you need more flexibility in the uses that we allow these take the examples of most European countries, the buildings to take part in. densities of town centre living are much higher than here. Your colleague earlier referred to the evening Q145 Chair: That is interesting. How do you think economy in Worcester in joining these things up. the Town Centre First approach aims to change this? There are three economies here—the daytime Martin Blackwell: The Town Centre First policy has economy, the evening economy, and the nighttime been there for many years and has probably been economy—and they are very important. We have done effective in reducing the overall scope of outoftown some work recently that suggests that we have development. We are getting towards an American or underestimated the importance of the evening and a Japanese situation, where they have a doughnut nighttime economy. If I might give you some figures, effect. We are not there, but in some of those large the motor industry in the UK is worth about £10 cities in those countries and others, almost the entire billion, the fashion industry is worth about £20 billion, centre has become almost ghettoised. We are not and the telecoms industry is worth about £30 billion. there, but we do have to be very careful that the Town The evening and nighttime economy is worth all those Centre First principles are strictly adhered to, and they put together and more, and it employs 1.3 million are not at the present time. I think there are large people, but Mary Portas did not mention it. It is a very numbers of retail businesses and others that would important part of our economy, but it has to be invest in their town centres if they felt confident that a managed very carefully. We have an accreditation Town Centre First policy would be strictly adhered to. programme called Purple Flag that enables places to look very carefully at how their place is managed to Q146 Chair: Do you think that parades and nonhigh minimise those opportunities for friction. They do street sub-centres have a future? exist, and you cannot get away from it. Martin Blackwell: Absolutely I do. What is interesting is that we have been doing work with both Q148 Chair: This is to Sara: can you just tell us how the Portas pilots and the 320 other Town Teams. We Market Rasen has changed as a town centre? Business, Innovation and Skills Committee: Evidence Ev 33
25 June 2013 Martin Blackwell and Sara Scott
Sara Scott: Certainly. When I first got involved in the the plans and the spending profile has been worked Town Team, there was not a Town Team in Market out? Rasen, 18 months ago, and it fell out of the beginning Sara Scott: It is probably different for each one of the of a neighbourhood planning group. A group of towns. Our Town Team is completely independent. business people came together and, after having had a We are not joined to our district authority or our local neighbourhood planning meeting, suggested that that town council; we are an independent group of process would take too long to make any changes on volunteers, and very commerciallyminded. Where we the high street within a reasonable time frame, have decided to commit to various areas of spend, we because we felt that our high street was dying. Our have gone on and done that within our constitution. I vacancy rates were up at 20%. Our high street is quite think that, in a lot of towns, there are a lot more small; we are a small rural community, and so out of stakeholders involved and a lot more red tape and 100 shops, one in five was shut. bureaucracy, and for a lot of towns that has slowed We formed a Town Team to try to reverse that trend, people down. The other thing is that it is a movable and we bid for the Portas funds. We did not know feast. What you laid down in a plan 18 months ago much about it, but we took the report at face value might not be directly relevant to the high street today, and made our bid, and we were fortunate enough to because things are changing so fast. We are at the be successful. We have just completed a year. Our back end of a really, really long period of tough Portas anniversary came up some time last month, and trading, and whilst, as ever, we are working really in that time, we have managed to halve our vacancy hard to ramp up and fill vacant premises on our high rates on the high street. We run a very successful street, there are traders dropping away all the time, monthly market with upwards of 60 stores, which because they have just hung on as long as they can, brings massive footfall into the town, and we have and the businesses go broke. opened a couple of community shops. There is a general air of confidence on our high street. For us, Q151 Chair: Martin, you looked as if you wanted to certainly, the Portas principles that we selected have supplement that. had a big impact on our high street and a positive Martin Blackwell: If I could add something to that, impact on the trading businesses, which are we have got some experience across the piece. From predominantly independent, up and down that high April this year, we have been asked by the Department street. for Communities and Local Government to support the Portas pilots and the other Town Teams. One of Q149 Chair: There have been some dissenting the things that is apparent is that there has been terrific voices, I believe. What is the nature of those progress in some areas, but very little progress in dissenting voices, and how would you counter the others, across the piece. Perhaps the reason for that is points they make? that these were groups of committed and likeminded Sara Scott: We have faced dissent on two levels. We people coming together, but nobody was there to say, have had a fair bashing from the national media. The “Actually, these are some of the steps you need to take national press seems to have complained heavily in forming a partnership,” and explain some of the about the speed at which the funds have been spent, logistics of how partnerships work and their legal how they have been spent, and the results that have status. We have just produced a guide called A Firm been delivered. All I can say on that level is that we Foundation, which is useful for these entities, to say, did not have a constitution at the point at which we “Would you like to become a community interest won the funds. It was five months after the date of our company,” which I think Sara is, “or a trust, or a win before we had a bank account in place and funds company limited by guarantee?” Once you get these in that bank account, so in terms of spending, we did foundations in place, you are then able to handle it as quickly as we were able, and we certainly are on money, to put plans in place and to develop a business plan to spend the cash and fulfil the promises that we plan. That support was not there last year; it will be made in our bid. That would be my answer to the this year, and I think that that will speed things up. national media. We also get dissent on a local level. Our high street, Q152 Katy Clark: What do you think can be done as I said, is mainly independent, and our challenge is to incentivise and support the use of mixed-use to try and get those independent retailers to do some developments, for both retail and residential? joinedup thinking. They do not like it, and in a lot of Martin Blackwell: Retailing, as a term, is actually instances it is very uncomfortable. Really, for us, it is pretty broad. We need to think of retailing in a wider all about staying true to some very simple principles: sense, and I hope the Committee will do so. For me, understanding what our customers want at a very local if you are selling a drink or you are a restaurant as level, and trying to work together to deliver that. It is part of the evening or nighttime economy, that is a a bit like banging your head against a brick wall some form of retailing to me. As I said in my opening days, at a local level, but nothing happens overnight. remarks, we have been very focused on a narrow definition of retailing, and have actually been Q150 Chair: I think we have all experienced those dominated by a relatively small number of large sorts of tensions. Could I just pick up on something? chains. Some of those have disappeared, have gone Would you say, based on your experience, that one of altogether and have created voids, as we know. the reasons for the relatively low takeup of the actual However, as some of those have gone, it has created moneys that have been awarded has been the speed at opportunities for new and different types of businesses which the decisions were made, before the detail of to come in. Ev 34 Business, Innovation and Skills Committee: Evidence
25 June 2013 Martin Blackwell and Sara Scott
I can give you an example that was put to me recently, up this space, and it suits them to keep it in where a chain that runs fitness studios wanted to put administration, which means that it cannot even be in a series of personal trainer studios. These would go used for community uses, popups, meanwhiles, and into smaller units, and they would be onetoone fitness all the other bits and pieces. It is a problem. training. They wanted to roll out a chain of these Sara Scott: I can elaborate on that. We have got about around the UK, because they thought there was a three anchor properties within our town that are in that market for it. It was an ideal thing for high streets, but exact situation. They are eyesores, apart from every local authority said, “That is not retailing. You anything else. In a small high street, properties that cannot have planning permission.” There are quite a are effectively locked out of use are a longterm issue lot of people who would invest in our town centres if that does not seem to be going away. We have tackled there were some freeing up, and I think these the owners in question, but you just get absolutely decisions are best made locally. stonewalled. My perspective on mixed use is a little In terms of incentivising—coming back to that bit narrow, to be honest, because our town is so small element of it—local authorities do have the ability to and a lot of our buildings are listed. A high street is a give business rate relief and business rate holidays. high street when it is just a parade of shops. We are The Scottish Government have a programme called taking a really openminded view: anybody who wants “Fresh Start”, which I understand has been relatively to come and have a go at a business, and thinks that effective, and also operates in Northern Ireland. it is viable—whether it is a retail business, a service However, very few local authorities in England have business, or something more health and used that power, because they have to pay for it lifestylebased—and who is prepared and has a strong themselves. We have yet to see whether things like business rate retention will help, but finding the business plan can of course have a go. However, wherewithal and the money to give business rate again, it is about matching what they are offering to holidays and incentives is difficult. I am sure we will what the customers in our area want. come on to business rates, because that is one of the Martin Blackwell: One of the things that could make impediments to new startups and new businesses a significant difference is if there was an open national coming in. land registry. Very often, people cannot find out who owns these buildings. That was a Portas Q153 Katy Clark: If I think of my own constituency, recommendation, and would make a big difference. we have all these schemes from the Scottish Government, but we also have lots of towns where Q154 Mr Walker: I recognise the point you are there are lots of empty shops. Do you not think that, making about businesses in administration. There is a given the rise of outoftown developments and so on, prime unit on Worcester high street at the moment there will be places where we just have to accept that that is a closeddown Jessops. We could really do with maybe there is not going to be retail? Whatever getting that back into use, and I am sure people would definition you give of retail, maybe that is no longer rent it if it was available, but there is that issue, and the way a particular town centre is going to be. How there is certainly a perverse incentive there. I spent do we quicken up that process so that we do not my Saturday morning delivering leaflets to flats above have voids? shops, and there are, in our city centres, a certain Martin Blackwell: That is really interesting, and I proportion of flats above shops, but when looking agree with you. Again, I do think there will be some around and walking around the high street and raising contraction. The general consensus is that there is too your eyes, you see an awful lot of empty space as much retail space, but you cannot just undo space, so well. Do you think there is anything the Government you have to use it for something else. If too much should be looking at to reduce the administrative prime space went to retail, that would damage the burdens on landlords to bring properties into business offer, so I would like to see in core areas residential use? I accept your point about there the space being used for business. There is almost an perhaps being some perverse outcomes when you element of “back to the future” here. If we go back to change the planning system, but one of the things, the 1970s, our town centres were much more diverse anecdotally, I hear back from businesses locally is, in terms of the offer they had for businesses, so we “Yes, we do have space above it, but we cannot be do need to think about that. bothered to go through the process of separating that If I could just touch on the issue of voids and empty space between residential and commercial.” Do you space: there are different figures out there, but think there is anything that we should be looking at probably the national average is around 12%. If we on that front? actually looked in detail at that, I would suspect that Martin Blackwell: quite a lot of that space is actually not available for I hear that, too, all the time. I do somebody to rent. They could not go in if they wanted not profess to be a property expert. I think it is to. A lot of premises are in administration at the acknowledged that there is a problem, but I do not moment, and I think there is almost a silent conspiracy think I can suggest to you what the solutions might to keep them in administration. When a business is in be. I am not qualified. administration, nobody is responsible for the business rates. The landlord does not want it back, because they Q155 Mr Walker: In Market Rasen, I do not know would be responsible for empty business rates if they how you break down, in terms of the commercial- have not got somebody to take it on. There is a residential split. Is there a significant amount of problem at the moment that people do not want to free residential space in the centre? Business, Innovation and Skills Committee: Evidence Ev 35
25 June 2013 Martin Blackwell and Sara Scott
Sara Scott: There is in the town centre above shops, did I take today?” BIDs are becoming more short-term but also after the high street, you are immediately into focused, so having property involvement in BIDs housing, so it is not really an issue that we tackle. would give them a longerterm focus, which I think would be beneficial. Q156 Mr Walker: It strikes me that we are dealing In terms of LEPs, with the odd honourable with this twin problem of trying to keep the high exception—places like GFirst in Gloucestershire— streets going and also a shortage of affordable most LEPs do not even recognise that a town centre housing. If people can be encouraged to live in those exists. Of the 40 LEPs out there, you could count on spaces in the city centre that are currently unoccupied, the fingers of one hand the number that have it has got to help. recognised that their town centre is economically Martin Blackwell: I am aware of a study done some important, and they are economically important. They years ago by the East Midlands Development Agency. are a huge driver of the local economy and employ It is no longer there, but it did a piece of research huge numbers of people, but they seem to be looking at all the towns in the East Midlands to work concentrating on big investments and high growth. out how much brownfield space—as it was called— How many jobs do they actually create? If we could was available in town centres, and it was a vast figure. do more to sustain our town centre businesses and our It is just not utilised. retailers, and work with indigenous businesses to help them survive, thrive and grow, I think that would give Q157 Mr Walker: How do you think local us more sustainable growth in the long run. LEPs, I organisations like BIDs and LEPs can support the think, are really not thinking about town centres. retail industry? We have heard some suggestions. Mr Walker: They are missing a trick. Obviously, BIDs have tended to be in the larger town Sara Scott: In terms of BIDs, we considered that and city centres, but there is some idea of miniBIDs structure for ourselves and decided against it, purely that could be supporting some of the smaller areas and on the basis that we did not think the businesses would some of the smaller towns. actually pay the levies. If you have no membership, Martin Blackwell: Can I deal with BIDs and LEPs you have no engagement, so how do you actually separately? Business improvement districts are a good influence any change under those circumstances? To thing, generally. There are over 120 in the UK. ATCM put that in context, a lot of our retailers do not even actually introduced the concept to the UK; we took have card readers in their stores. Just that bit of cost, Ministers over to the States more than a decade ago, which would seem a natural thing to do to build their and 18 September this year is the tenth anniversary of business, is just a cost too much for them at this point BIDs legislation in England. They are businessled. in time. If we start talking about charging them £30, They are a mechanism for sustainable funding, and £40, £100 or £150—whatever it might be—it is just they work very hard to support their town centre not going to go anywhere. For that reason, and to businesses, because the majority are in town centres. encourage engagement, we formed the community There are some in industrial parks and other areas. interest company for our town, and the membership There are some, actually, in some quite small was set at £2, so all comers are welcome. That has locations. However, it does create a problem in a worked for us in terms of engagement. It does not smaller location, because you have a smaller number answer the problem of how we are going to fund our of levy payers, and therefore it generates less money, activities going forward, but that is a different or you have to have a fairly high percentage that you challenge. collect. My perspective on the LEPs, having been invited to a There are a couple of issues around BIDs that would couple of their things in Lincolnshire—I was be very helpful to look at at the present time. One is canvassed yesterday to get my opinion on certain that you cannot have crossboundary BIDs, in terms of issues around growth—is that I just see that as a very local authorities. If you wanted to have a tourism BID topdown approach. The event that I attended was big that covered, for example, the Lincolnshire Wolds, representatives from big businesses. There was not that would probably cover too many districts and much talk of the high street; there was not much would be very difficult. The other major issue around recognition that growth can happen from the bottom BIDs at the current time is that the levy payer is the up, too. Between us at grass roots and these LEP occupier, not the landlord. There are some very large people at the top, there is a bit of a void in the middle, propertyowning organisations—pension funds, etc.— and no apparent mechanism for us to do any that are not legally part of a business improvement joinedup thinking. district, because they are not a business rate payer. Having propertyowning elements in BIDs would be a Q158 Mr Walker: The picture you both paint of the good thing. LEPs is one I recognise. I mentioned that I ran an One of the situations that BIDs face relates to the fact event in Worcester last week. We invited our LEP that they are funded entirely by the local businesses, along, and it did say that it realised from that event and a lot of those are retailers. My background is that it needed to engage much more with the retail retail. It was interesting listening to your earlier sector, and that in future it would try and have a retail speakers, because I started off on the shop floor of a member on its board. However, it is extraordinary, national retailer, ended up managing stores, and find really, that that should come to it so late in the day, myself here. I went through that process. The issue and that that is not a starting point, given the with BIDs is that they are focused on delivering things percentage of employment that is created by the retail now. A retailer is interested in, “How much money industry. That leads, really, on to my next question, to Ev 36 Business, Innovation and Skills Committee: Evidence
25 June 2013 Martin Blackwell and Sara Scott which I think we all probably know the answer: is the Q166 Ann McKechin: I just wondered if I could ask retail sector receiving sufficient attention from policy you a few specific questions about the Portas initiatives such as the Regional Growth Fund? initiative. We heard from the USDAW representatives Martin Blackwell: No. I would like to give a plug to earlier this morning that overall only about 7% of the the retail sector at BIS. I think they try very hard to total funding had been spent. I just wondered what do a good job with very limited resources. At BIS, your own experience was in Market Rasen. there is a recognition—linking up with things like the Sara Scott: We have spent about 50% of our funds, Technology Strategy Board—that retail can be a but as I was saying earlier, it was five months into the driver for the economy, but resources are an issue for year before we had any funds in place. We managed to everybody. get a lot of our programmes moving without spending anything. There was no actual deadline for spending Q159 Chair: Could I just supplement that? You said, it, either, so in that respect it is very difficult to know “No”, but is that because the bids are not coming in, whether we are on track or not on track. Certainly, as or because the bids are going in and they are not a set of volunteers, there is a rate at which you can being accepted? tackle projects, so that has kind of dictated where we Martin Blackwell: I am not close enough to see what are at. bids have come in. My only involvement there was to join up with the National Skills Academy for Retail Q167 Ann McKechin: It is a capacity issue, okay. and put an application in to the Regional Growth How much support from the Government have you Fund, and it was, we understand, hugely had over this period? Do you think you have had oversubscribed. I am not aware of any Regional additional support or advice from them as a result? Growth Fund initiatives that are targeting town Sara Scott: We have had a representative all the way centres, but they may be there. I am not aware of through the process, so there has been somebody who them. we can get in touch with and get advice from. As for how much actual practical support there has been for Q160 Caroline Dinenage: Martin, you are a member the initiative that we have undertaken, there has of the BIS Retail Policy Forum—correct? perhaps been less, but we carved out a very unique Martin Blackwell: No. plan for ourselves. Q161 Caroline Dinenage: You are not a member of Q168 Ann McKechin: Has it been one person who the Retail Policy Forum. Do you know anything about has been your point of contact with the Government? the work of the forum? Sara Scott: Hilary who is sat there, yes. Martin Blackwell: I am aware that it exists, but we are not a retail organisation and we do not represent retailers. Therefore, that is probably why we have not Q169 Ann McKechin: How often are you in been included. contact? Sara Scott: We have met at the various events, and Q162 Caroline Dinenage: Have you had any then we have e-mail contact in between and we pick dealings with it in the sense of how it supports up the phone occasionally. Hilary has been to visit us retailers? in Market Rasen, so it has been as much as we have Martin Blackwell: I am afraid I do not know. required, really.
Q163 Caroline Dinenage: You do not. Sara, have Q170 Ann McKechin: That is good. Now, obviously, you had any dealings with the forum? there have been contradictory reports about the Portas Sara Scott: To be honest, the first time I had heard Review. The Guardian reported that, since becoming about it was yesterday, so I have absolutely zero a Portas pilot, your own town has seen an increased awareness, and that is having attended quite a lot of number of empty shops. Is that correct? national forums now as part of the whole Portas Sara Scott: It is absolutely not correct. We were made experience. I am really not aware. aware of those statistics on the day before they were published. Their period does not match our period of Q164 Caroline Dinenage: Are you aware of any reporting, and certainly for us, with a high street of other retailspecific business support schemes that 100 shops, one or two variations in terms of the period BIS runs? can make a massive difference. We raised those issues Martin Blackwell: No. There is a very small team at with the various reporters that got in touch, but it did BIS that would like to do more work, and there is not appear to make a difference. some work being done about putting a new strategy together for the UK and beyond—a local, a national Q171 Ann McKechin: So has the number of and an international strategy, which is very helpful. occupied shops increased since you started the The Portas work started in BIS, but then moved over initiative? to DCLG, because of the large community aspects to Sara Scott: Substantially, yes. We had 20 vacants at it. I think that was probably the right thing to do. the start of the period, so that was a case of physically walking down the high street and counting them. At Q165 Caroline Dinenage: Sarah, you are not aware the point of the anniversary, we had halved that. It of any retailspecific organisations? was good for us, but obviously it varies with the Sara Scott: No. figures published. Business, Innovation and Skills Committee: Evidence Ev 37
25 June 2013 Martin Blackwell and Sara Scott
Q172 Ann McKechin: That is promising news, and Q174 Ann McKechin: It is quite difficult to think of no doubt as a result of your hard work. a solution that would allow a fairer playing field, Just a question for both of you now on a slightly given that the increase in online shopping each year different subject: business rates, which we have been in the last five years has been really significant. It is discussing throughout this morning. Can I ask both clearly a trend that has still some way to go. of you what your views are on business rates, and Martin Blackwell: Absolutely, and I am by no means particularly the delay in the business rate revaluation a tax expert, but the system currently is not fair and until 2017 now in England? Could I also ask you proportionate. It is not linked to genuine economic about the point that Nadhim Zahawi raised earlier this performance. morning about whether we should try to rate this more in terms of turnover and other changes in rent, and Q175 Ann McKechin: The Government have whether we need to look at rent and rates together, in indicated that they want to postpone this revaluation terms of readjusting where the retail market now is? to 2017. Perhaps I could put this question the other Sara Scott: Purely from a grassroots level, in terms way around: would that present an opportunity for the of engaging with businesses that are thinking about Government to start looking at this area in some depth, to consider whether the tax system, as you have coming on to our high street to start up, set up or said, is not fit for purpose, and whether alternatives trade, business rates is the one thing they all mention. need to be considered? It is the difference between being able to do it and not Martin Blackwell: There is damage being done every having the confidence to start up, so in that respect, it day, and postponing a revaluation was taken very is certainly a big issue. In terms of the way they are badly by the retail industry. You are right that it does, set, it does not seem over-fair to me. As for what the perhaps, give an opportunity of an extra two years to appropriate structure is, all I would say is that for a look at this in detail, because if we do think the system town like ours, where we are trying to stimulate is not fit for purpose, what is going to replace it? That growth, some kind of free period for startups would be will require a lot of detailed thought and something I would absolutely campaign for, because it consideration. would give some people the confidence to make the start. If we can give them the start and then help them Q176 Rebecca Harris: We have touched a little bit to develop, that would certainly make a difference in on planning policy, whether it is about changing use our town. to be more residential, but there are also obviously things like the whole area of outoftown centres, and Q173 Ann McKechin: Do your members consider there might be a change of use more generally in that if there was a revaluation at the original date, terms of things that more support the nighttime actually they would be paying a lower rateable value? economy, for example. My first question, really, is: do Sara Scott: I do not really understand the mechanics you know of examples where BIDs or Portas pilots of how that revaluation would work, but I think the have had to address the planning policy area? perception is that they would benefit. Sara Scott: The only experience we have had in terms Martin Blackwell: Fundamentally, the system is no of planning has been related to standards on the high longer fit for purpose. To have a system that is based street, so getting people to maintain their properties on fixed capital and fixed premises is no longer and improve their appearance. Fortunately, among our current in today’s world. The world has changed group, we have a couple of people who understand hugely in the five years since the last revaluation in how that works, and we have worked with our district 2008. Earlier, you were talking about things like the council to serve a lot of notices. While it is taking a digital high street. All these things are having an while for that to flush through, we have had some impact, and most of those retailers have fixed success, although it is difficult. premises and fixed capital costs, and business rates For example, we have quite a big listed building, and are currently based on that building. Since 2008, we it is right where the traffic lights are in our town. If think rates have come down by about 30% across the you were driving through, it would be where your car board. stops, and it was empty for five years with squatters in there, and semiderelict. We served special notices We recognise that with business rates, this is a on it, and it has taken a while for that to flush through, zerosum game—if there are some winners, there will but it has been repainted and it looks much better. In be some losers—but we would think that in most terms of giving a first impression to visitors to our places for retail in town centres and high streets, it town, it is a massive tick in the box. However, my would come down. It will not come down by 30%, understanding is that all the moneys that were spent because of the winners and losers. The Government on that property are now held against it, so if need to end up with the figure that they first thought somebody actually wanted to purchase it, they would of, if you like. However, the sense is that it would be end up paying the bill for the works already done, a benefit to retailers in the high street, but it has to be which means that in effect we have just shunted the looked at in the context of those retailers that have problem forward in time. It just makes it that much mobile capital, and that trade largely, but not wholly, more difficult to crack. For us, it has been a bit of a online. They have a huge unfair advantage. It is not a doubleedged sword, and it has certainly been one of level playing field. The system of property tax based the areas where, as a kind of naive group, we do not on property in town centres is no longer valid in really understand the frameworks. There certainly today’s world, but it is a global issue. have not been experts we could pull in to understand Ev 38 Business, Innovation and Skills Committee: Evidence
25 June 2013 Martin Blackwell and Sara Scott how we might apply that, but in some respects, it is a I think that is deceitful in planning terms. There are little bit outside our remit. some strange things happening out there, so finding Martin Blackwell: In planning, if we had not had the right framework that gives enough scope for local Town Centre First, we would, as I said, be in a very decisions to be made is a really difficult balance. much worse state than we are. It does seem to be almost optional now as to whether you pay attention Q179 Rebecca Harris: In terms of this Committee to it. Town Centre First should not be about restricting as the BIS Committee, and the work we are doing, do economic growth, but it should be about restricting you think that the BIS Department itself can actually economic displacement. If we have an oversupply of deliver retail strategy without, for example, having retail in town centres, that is because there has been more direct influence on things like the planning massive growth in outoftown retail. We probably need process? to ask ourselves why it is cheaper, quicker and easier Martin Blackwell: Absolutely not, no. I think there to develop out of town than in town. It is: if you give has to be joinedup thinking across Government. Town a retailer an option, they know that they can do it centres are complex things. We are talking about quicker, cheaper and easier out of town, so why would retail, but retail will not thrive unless we get policies they not? around living and everything else in place. It cannot You asked for an example, and I can give you a be looked at in isolation. positive example through DCLG’s High Street Renewal Fund. It was called the X-Fund; it is now the Q180 Rebecca Harris: I have got two more High Street Renewal Fund. One of the examples there questions. One is to go back again to the balance of was Ipswich. Ipswich lost a major anchor; I think it the residential to retail in town centres. It is a big issue was TJ Hughes, but I am not absolutely certain. Of in my local area; we are having to regenerate one of course, losing that anchor in a shopping centre had a our town centres, and some of the pay for that will be knockon effect, and the vacancy rate went through the housing. It was, really, just for you to talk a bit more roof. The owner of the shopping centre—and it was on what you think the right balance and the risks are, made easier because it was a shopping centre—came in terms of change of use. to the local authority and said, “Can we have Martin Blackwell: There should be designated permission for change of use from A1 retail to primary areas for commerce. When you are looking leisure?” It was completely against the local plan, and at change of use for the question of what is a latenight after a long period of discussion, the officers venue quite often, we have also seen it the other way recommended it and the local authority have passed it. around, where permission has been given for That unit, as I understand it, is now going to become a residential and there has been a longstanding late- cinema, and all the surrounding vacant shops are night use there. The residents then complain, so it is going to be evening leisure opportunities. That is an a question of what came first. I do not think these are example of a very pragmatic stance by a local decisions that can be legislated for at a national level; authority that is creating new businesses and new jobs. it does need local political decisions to be made about what to allow where. The use class system at the Q177 Rebecca Harris: In your experience, are they moment is pretty restrictive, in that if it is A1 retail all being so pragmatic and sensible, or are some of use, any retailer can go in. The local authority cannot them more likely to stick to the letter of their say, “But we do not want a pound shop or another planning policy? branded coffee shop,” because most coffee shops are Martin Blackwell: Pragmatic and sensible is the A1 retail. They do not make anything; they just warm unusual, not the norm. things up. The ability of the local authority to say, “We want this type of business and not that one,” just Q178 Rebecca Harris: That brings me on to the really is not there. DCLG initiative you talked about and what more can particularly be done to promote town centre Q181 Rebecca Harris: That might lead to less of the development. Who should be taking the lead? Should sort of 1970s high street, which some people are it be DCLG, the local authority or BIS? Where do we harking back to in any case. need the push to come on? My final question, which we touched on with our Martin Blackwell: Depending on different earlier witnesses, is on access, strictly speaking: circumstances, I spin one way or the other. Regarding parking, and the risk of councils treating parking as finding the right balance between what should be cash cows. You will hear the argument, “Well, allowed at a local level, I will give you another actually, we are helping the shops. We are stopping example, but without naming the location, if I may. the commuters parking there all day.” I just wondered Planning permission came in for a town centre if you had any comment you would like to make on development from a major retailer, and planning that, and how we can improve. permission was given. The development was going Martin Blackwell: Oh, yes. ahead, and once it got to the point where they had got Rebecca Harris: Please do. so far they could not stop, permission was then given Martin Blackwell: Thank you for the opportunity. for a major outoftown direct competitor. Through the Mary Portas called for free car parking. It is not going Freedom of Information Act, they found out that this to happen, is it? In fact, it should not. Sara and I were was actually planned all along, but they had held it talking about this earlier, and there is free car parking back until the first development had got beyond the in Market Rasen. It is said that there is no such thing stage where it would be uneconomic to pull the plug. as a free car parking space, and there is not, because Business, Innovation and Skills Committee: Evidence Ev 39
25 June 2013 Martin Blackwell and Sara Scott it has to be paid for somewhere; it has to be managed, quite a bit of stock—have a car parking strategy. They etc. We did a major piece of research—I would be have not asked themselves, “What is it for?” Car happy to supply some copies to the Committee and parking could be to generate revenue for the local the Library, if you wish—that tried to look at whether authority, it could be a service to their local customers there was a relationship between footfall, the quality and residents, or it could be part of their economic of the offer in a place and car parking. development strategy; but they have not asked those The example we came up with, just to try and bring questions. Generally, the feeling we have is that quite it to life, was Birmingham. If you wanted to park by often, car parking policy is set by the engineers and the Bull Ring in Birmingham and walk to Harvey the accountants, and not by those people who are Nichols and Selfridges, you would expect to pay a trying to create business. Sorry that it is a long answer. premium price for car parking. If you went to Solihull or Worcester, where there is still a pretty good offer, Q182 Rebecca Harris: No, it was a very good you would expect to pay a reasonable price, but answer. Thank you. Do you want to add anything to maybe not as much as to park in the Bull Ring. If you that, Sara? wanted to park in Sparkbrook, which is a suburb of Sara Scott: It is a happy accident that we are working Birmingham, you might not wish to pay at all. When in a town that has free car parking and no intentions we did this analysis, there was a line that said that the to do away with that. It works really well for us. To price comes down as the quality of the offer comes my mind, if you want people to come to a place, you down—the number of opportunities and the number have to make it easy and convenient for them to do of key places you have, etc. There is a recognised so, so slapping big charges on them or having difficult quality index, if you like. car parking schemes is not good for that. It certainly However, it is not a straight line. What the study would not work in our town; it would just put the suggested was that the mediumsized and smaller nails in the coffin, so to speak. market towns were overcharging for what was there. The only disadvantage to the free car parking scheme You can charge a premium price if you are in central is along the lines of what Martin said. Because we are London, central Birmingham, or elsewhere, but if you in a commuter area, some people use our town centre are a market town, you need to look very closely parking as park-and-ride for the big cities, so they about what you are charging. That seems to be the park up there, jump on the train, and of course those opportunity to free up some of the spaces. We do not car parking spaces are then full for the day. Something think making them free is the right answer entirely. that makes it timelimited would work for us, but it is There could be a free period—say, two, three or four very specific to our market town form, if you like. hours—but experience suggests that if you make it The geography and the physicality of the space free parking all day, all the spaces are filled by nine influence how it works for us. o’clock by people who work in the town centre and Chair: Thank you. That concludes our questioning. there are no spaces left for customers. You have to get Can I thank you and the previous panel? Again, I the balance right here. think you have offered to provide us with some further The other key thing that came out of this piece of evidence; we would be very grateful to receive it. research was that we found that very few local Similarly, if you feel there is anything you would like authorities—who do not own all the car parking to add to anything we have asked you, we would be spaces, by any means, because there are quite a lot of grateful to receive that as well. Thanks very much. private operators out there, but who quite often have Ev 40 Business, Innovation and Skills Committee: Evidence
Tuesday 2 July 2013
Members present: Mr Adrian Bailey (Chair)
Mr Brian Binley Rebecca Harris Paul Blomfield Ann McKechin Mike Crockart Mr Robin Walker Caroline Dinenage ______
Examination of Witnesses
Witnesses: Alex Gourlay, Chief Executive, Health and Beauty Division, Alliance Boots, Tony Wheeler, Head of Branch, Peter Jones, John Lewis, Mark Lewis, Online Director, John Lewis, and Tony Ginty, Head of Public Affairs, Marks & Spencer, gave evidence.
Q183 Chair: Welcome to our session today, and that our customers now like to shop across all the thank you for agreeing to give evidence. Before we different channels that we put in front of them, and start the questioning, I need to declare an interest, and this is a change that is being driven by customers as I believe Mike Crockart does as well. I, of course, am much as it is being driven by anything that any one a Labour and Cooperative Member of Parliament, and retailer is doing, or the technology that is available to prior to coming to this place I spent 18 years—may I our customers or us. We, for example, see at the say, a very happy experience—working for the moment that about twothirds of our customers, when Cooperative movement, so I do have a background making a purchase, will actually use a combination of there. Mike, I think you also wanted to declare an channels to execute that purchase. They may browse interest. in Tony’s store; they may then come onto our website Mike Crockart: Yes. I should just declare that my and purchase online. They may ultimately wife provides the public affairs consultancy for clickandcollect that item from one of our stores, or Marks & Spencer in Scotland. one of our sister company Waitrose’s stores. For us, Chair: Thank you. Just before we start our being omnichannel means meeting that need of a fully questioning, I will ask you to introduce yourselves— integrated customer experience, and providing one starting with you, Alex—for voice transcription seamless experience for our customers, no matter how purposes. they choose to shop with us. Alex Gourlay: Good morning. My name is Alex Gourlay. I am the Chief Executive Officer of the Q185 Chair: I will go on, as you seem to be the Health and Beauty Division of Alliance Boots, with authority on this. What is the breakdown in the responsibilities for Boots the Chemist, in the UK. percentage of store shopping versus online? Tony Wheeler: Hello, there. Good morning. I am Mark Lewis: In our results for last year, we published Tony Wheeler, Head of Branch at Peter Jones. I have that about a quarter of our overall sales are now been with John Lewis for 28 years, and I have run transacted online. That is a mixture of on our four of their shops: Norwich, High Wycombe, websites, and also increasingly people transacting on KingstonuponThames, and Peter Jones. mobile devices. Mark Lewis: Good morning. I am Mark Lewis. I Chair: So that is well above the average percentage joined the John Lewis partnership at Easter this year, of online versus conventional retailing, isn’t it? and I look after the online business—so Alex Gourlay: In a business like Boots, which is johnlewis.com. health care and beauty care, the number is more like Tony Ginty: Good morning. I am Tony Ginty, and I 3%. It is probably 4% on average, if you look beyond am Head of Public Affairs at Marks & Spencer. Boots into pure online players. It does vary by category, and it varies by the personal care and Q184 Chair: Thanks very much. Now, we have got experience the customer wants. I agree with Mark: it four of you. We have only got an hour or so, and we is completely driven by what customers want— have got loads of questions. Could I just ask you to convenience, value and care—and therefore it does be brief in your responses, and indeed I may ask the vary a lot by category. Therefore, in the categories members of the Committee to be brief in their that we are focused on, it is a much lower number questioning. Do not feel that you all have to answer than 25%. every question, if you feel that what you have said Tony Wheeler: We anticipate that our online trade will has been covered by another speaker. get to about 40% by 2020, but it does mean that the The current buzzword, or buzzsentence, in retailing is majority of our business will still be done in physical “omnichannel retail experience”. How would you shops. define it? Who is going to lead on that? Yes, okay, Mark, since it is your responsibility. Q186 Chair: I appreciate that some of this could be Mark Lewis: My responsibility is for the online bit of commercially confidential, and you may not want to John Lewis—johnlewis.com. The main thing I would say too much, so I will rephrase my question. There encourage this group to consider is exactly that is an increasing trend for certain types of retailing to question. For us, omnichannel means understanding have a display shop in the town centre, whereas those Business, Innovation and Skills Committee: Evidence Ev 41
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty who come and look at them will actually do the come through to physical space. With clickandcollect, purchasing online. What is your view on that? Do you it is really critical, and I do see on a daily basis think it is going to expand? customers pitching up in the shop, picking up their Tony Wheeler: Our shops are very, very important in clickandcollect purchases, and then enjoying the rest terms of interaction with our customers. They do of the shop, whether that be food or interaction with enable us to showcase, of course, but they also enable partners. Another really important point for us that has us to give customers excellent service. From John worked is that we also have clickandcollect Lewis’ perspective, customers want excellent service collections in both John Lewis shops and Waitrose and great products, and the shops enable us to shops. It is absolutely paramount from a customer’s showcase that really effectively. We do think, going perspective that it is easy and it is convenient. They forward, that we will continue to invest in shops, have got the choice to do whatever they wish to do, because we see that as integral in terms of and many choose to have an item delivered, but many complementing our online business. now choose to collect it, both in John Lewis and in Waitrose. Q187 Chair: That is just the word I was going to ask Alex Gourlay: In the Boots model, almost 50% of you about. I will come to you in a moment, Tony. customers collect in store. As Mark has said, it is a How do you complement your business? completely integrated offer, and we are a very mass Mark Lewis: I would totally endorse what Tony has retailer. We have essential services in 2,500 said. Although our customers may ultimately pay and pharmacies and shops, on almost every high street in transact, press the button and commit to buy online, the UK. This effectively allows people to order online in twothirds of those cases that shopping journey—if and collect in the store—at no extra cost to them— you look at it as a whole—has involved walking into lowcost merchandise, and merchandise that is one of our stores. That could be a combination of sometimes for essential healthcare needs as well. We having a chat with one of our partners in the store, absolutely embrace the world of integrated retailing, receiving advice on the product, and understanding which I think is the right terminology for it, and we which camera is exactly the right camera for their think it is really, really important for consumers and needs. It may be feeling the cloth or the fabric of a for communities that they can pick up the things they sofa, or whatever it may be. For us, those two need quickly, whether they are looking at sofas or businesses entirely sit side by side. basic medications or daily products. I think that the comment before, that that may not be the case in all categories, is probably very fair, but Q189 Mr Binley: Can I take your point about certainly in the categories that we trade in—be that communities and also make the point that you cannot home products, fashion, or electrical items—that is divorce retail from the high street; the problems of the certainly the case. We see the two businesses sitting high street impact directly upon retail. What you are very closely together. To your comment of “25% feels telling me gives me some hope for the high street. My like a large share of trade that has moved to online”, apologies for my phone, Mr Chairman. I would say that that is because we have taken steps Alex Gourlay: It is an order. to embrace that shift in consumer behaviour quite Mr Binley: It is your blast from Boots. It seems to early on. me that this is one of the hopes for the high street. Can you expand upon it? Maybe I can bring Tony in Q188 Paul Blomfield: I have a quick question, there, because I know that you clearly wanted to get following up on the online/inshop sales split. You in. Can you expand on that, and maybe hint to us how have been very successful in pioneering we might use whatever influence our report might clickandcollect. What is your split in terms of sales have to tell local authorities and those people who are between home deliveries and collect in store, and what responsible for designing our high streets how they is the impact of collect in store in driving more might work a little to help them improve high streets conventional retail sales? for you? Mark Lewis: The split, at a rough order of magnitude, Tony Ginty: Just to add one or two comments would be about a third of our orders purchased for regarding points already made by my colleagues, we clickandcollect into our stores, and that is both into call it “multichannel” at Marks & Spencer, but it is the John Lewis stores and into the Waitrose stores effectively the same thing. Our overall strategic within our partnership. That is a very fastgrowing part priority is to become a leading international of our business. Customers have absolutely adopted multichannel retailer. That is our driving strategic it with vigour. They really like it, and the customer priority. Multichannel itself is about integrated satisfaction scores are very high on that element of retailing. It is actually about a seamless experience for our service. We like it, because customers like it, but the customer, and in that case, it is about the offering. also when they do go into the store—although we We have something called “Shop Your Way”, which make it very easy and convenient for those customers allows people to order and collect by whichever who just want to pop in, pick up the item and go— channel they actually wish—the one that is most some of those customers then either browse or convenient to them. Indeed, to take Alex’s point, last research or purchase something else while they are year something like 44% of people chose to collect there. Obviously, it does drive footfall into the store. from the store. That actually is increasing, in fact, so Tony Wheeler: It is absolutely essential for us that there is an integration between the two. We see it as clickandcollect continues to grow. Once again, the very much an integrated offer, and in that sense it does value you get from an online business really then does actually offer some hope for the high street itself. Ev 42 Business, Innovation and Skills Committee: Evidence
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty
As far as the high street is concerned, the key thing currently doing it; it is the learning experiences that is for people to recognise the major transformational we pull out of it, and then finding a way of actually change that is occurring in retailing, which is driven making sure that they are put through both to the by ecommerce and by the digital economy. One of Town Teams elsewhere and, most importantly, to the things they have got to do is to think about the local authorities. composition of the town, but also to consider how they actually apply technology to that town, because Q191 Mike Crockart: I have a very quick question, I think they have an equivalent challenge there. We as before we move on to look more at government retailers are actually thinking about how we deploy assistance. It was just really on the point of high street technology for the benefit of our consumer. Towns versus online, because you are painting a very rosy themselves and local authorities in towns need to have picture, saying that one complements the other and the same thinking process of saying, “What is the that there is no damage caused to one by the other. structure of the town that I actually need?” Retailing Isn’t this really just a zero sum? If things are moving will be an essential component of that, but not the online, they are moving from somewhere. If they are only component. Then they should think, “How do I not moving from you, are they moving from other engage technology, in terms of actually selling the high-street participants who do not have an online town?” Frankly, that is what customers want, and it is presence? What is the impact on the high street from what people who use towns want. online? Tony Wheeler: I think that is absolutely correct in Mark Lewis: I would say a couple of things. Broadly, terms of the high street. One of the things, firstly, that we are very positive and optimistic about the Governments really do to help is to provide opportunities that the shift in shopping patterns creates frameworks that encourage partnerships between for us, and for retail in general. That does not mean various stakeholders in inner towns or city centres. I to say that it is straightforward, so if you were to look was chairman of the Business Improvement District at at the broader retail landscape, there is an inevitable Kingston-upon-Thames, and during that time I found shift to online in certain categories—media products the relationship between private and public sector are a very good example—because of the nature of really fascinating. The value we got from an those products and the ability to digitise that content. integrated strategy for that town centre, which That has very significant implications. What we have involved retail, public sector and community groups seen is a shift in how customers want to shop, and as trying to make sure that we had a strategic vision for a retailer in that environment, we are not afraid of the destination that attracted consumers into that competition. We compete for our customers’ trade and space, was absolutely vital. hardearned money, day in, week in. What we are finding is that the rules and the nature of Q190 Mr Binley: Can I ask a very quick that competition, and who wins and who loses, is supplementary? Are local authorities, planning moving. For us, it becomes important to anticipate and departments and development people aware of a stay ahead of those trends. That is not a trivial thing changing need here that is important, in terms of to do. We started trading online in 2001, so we have structure? been doing this for an awfully long time, and one of Alex Gourlay: Again, I really speak from some of the the elements that allowed us to be in the position that work we have been involved in in Boots, both in BIDs we are in today is the fact that we have been prepared and LEPs, and also more recently in the Portas review. to invest very significantly in the early years of that It is growing. It really is quite encouraging. I am migration—not necessarily on a profitable basis—to seeing, in the Portas pilots for example, many local enable us to put in place the infrastructure to serve authorities embracing a process that is integrated and customers the way they want to be served. Although working with businessled leadership to create a real we are painting a very positive and optimistic story, vision for their town centre and then a solution. It is we have got there by some pretty heavy lifting, for at the early stages. There is a long way to go, and example in the supply chain, to allow us to provide investment will be required in many of these places the shopping experience that our customers want. It is in the medium term. I think people are really starting quite dramatic, in terms of the implications for to understand, and many customers want their high investments for us as a business. streets back. They see them as community high Alex Gourlay: It is a zero sum game, here in the UK. streets. It is a social issue as much as a business issue. I think as Tony has indicated, there is reasonable Chair: Quickly, Tony; we need to move on. evidence to suggest that the UK market from an Tony Ginty: The answer to your question is that it is integrated, online, multichannel point of view is the variable. Some local authorities are absolutely first most advanced market in the world. There are pretty class in terms of thinking about the future, addressing strong data to support that. That gives UK retailers the challenges that they are going to have to deal with, the opportunity to internationalise their products, their and starting the process of putting things in place. services and their brands in a more costeffective way, There are others, inevitably, who are lagging behind generating more opportunity for the UK to prosper. I in that particular process. One of the things we would think it is a zero sum game in the UK, for sure, be looking for, certainly from the Portas pilots, is to especially in the current situation, but the opportunity take the learning experiences from those pilots and to defend your position and then grow it disseminate that best practice information throughout internationally is the opportunity we are all trying to the various towns in the UK. That, to me, is the big work our way through today. potential of Portas. It is not so much the 27 that are Tony Ginty: I completely agree. Business, Innovation and Skills Committee: Evidence Ev 43
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty
Chair: I really need to move on now. stores, the majority of which actually do sit in town centres themselves. Q192 Mr Walker: All three of the businesses represented, I think, have both outoftown shops and Q194 Caroline Dinenage: There are several high-street presence. In terms of some of the things initiatives to help on the high street: Portas pilots, the we have been discussing, can you outline the Town Teams and the BIDs, as well as the High Street differences in the way they are performing in the Forum. Is there a danger that the sheer number of omnichannel world? initiatives could in some way dilute the level of their Tony Wheeler: Two-thirds of our shops in John Lewis impact and confuse retailers and customers? are town or city-centre based. We very much support Alex Gourlay: I think that the way they are being the Town Centre First planning policy. Where we have communicated today is an issue. I do believe that outoftown shops, invariably that is because the town there is a lot of communication of some of the things or city centre does not have either the space or that are not working, rather than the things that are infrastructure for us to put a shop in that space. The working. I think it is really important that we have the trading dynamics are actually very similar, in that— data on both the things that are working and the things and I know we keep saying it, but it is absolutely that we will have to work at. That is a really important true—our online business and our physical space work communication piece for us all to work on, rather than very well together. I used to look after our shop in saying, “There is too much going on.” For example, High Wycombe, and that is an outoftown shop. What the Portas review was pretty clear, and the was fortunate about that was that, as clickandcollect recommendations of the Portas review backed up grew in popularity, with customers buying online and many previous recommendations from the BRC and then collecting in the shop, we saw a significant from many other previous reports. The one additional increase in footfall to that outoftown space. The trend thing it talked about was the social impact beyond the dynamics do differ in regions, of course, but high street, and that was where the Portas pilots came ultimately the strategy and the way both our online from, to really develop the idea of local leadership and physical space works is very similar, whether city/ and local ownership of community high streets. I think town-centre based or out of town. it is a communication issue, rather than too much activity. I do not think we can go fast enough to really Q193 Mr Walker: Has there been a shift in the start to deal with the issues that have been around for balance between city/town-centre based and out of a while—to recover the social fabric and the look and town? We have heard some evidence in earlier feel of many of our town centres. sessions that, despite the Town Centre First policy, Tony Ginty: Just adding to that, given the complexity more planning approvals have been given for of retail, I think it is inevitable that you are going to outoftown retail developments than city centre ones. face a number of initiatives to tackle various aspects Alex Gourlay: I think the evidence would suggest that of the overall issue in relation to high street vitality. there is potentially just too much retail space in the BIDs, for example, have been around for many, many UK. If you look at it from a complete space point of years, and we certainly think that is a very, very view, that has been said by many commentators. In successful model. Marks & Spencer is currently in our business, we have not really opened up much new about 50 BIDs, and we think they are excellent in space in the last 10 years. We have focused much terms of specifically going after and regenerating parts more on what we have, and also developing our of the town itself. multichannel/integrated offer. We are seeing similar With regard to the other ones, to some degree there patterns to what Tony has described, which is more or is a connection between them, because obviously the less the same trends in store and out of store, but we Portas review started off the whole process. That have seen big growth in the online and integrated spawned the Portas pilots, which I think were a good channels, which are becoming more convenient for idea, because it was right to trial various things to see the consumer than travelling to outoftown stores, what worked and what did not work, so that we could particularly for some categories. develop best practice. If you then also take the High Tony Ginty: Just very quickly on that, I would agree Street Champions and the Town Teams, for example, with the points that my colleagues have made. they are all part of the same issue about getting local Marks & Spencer are investing both in town centres engagement. In the case of Town Champions, and out of town, and we obviously build and develop Marks & Spencer has two Town Champions in and get involved in retail parks. We have also got a Lowestoft and Ashford, giving some degree of significant investment in town centres as well. If you commercial expertise to the Town Teams. look at the portfolio at the moment, despite all the In terms of confusion, the key thing now—and this is changes, you are still talking about 70% of our where I think the High Street Forum will perform an portfolio sitting in town centres and 30% out of town. extremely important role—is ensuring the High Street The predominant stores are actually sitting in town Forum takes all the lessons of the various initiatives centres, so clearly town centres are extremely going around and develops them into a slightly more important for us going forward, given that particular strategic approach in terms of how we tackle town breakdown. The other thing, also, is that apart from centres. That would certainly be my hope and the actual new investments, we have carried out a expectation for the High Street Forum. major modernisation programme of our estate over Caroline Dinenage: Tony? many, many years, and we have therefore also put in Tony Wheeler: One thing I would add is that I am just significant amounts of money in terms of modernising delighted that there is so much focus on retail. You Ev 44 Business, Innovation and Skills Committee: Evidence
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty could argue about whether there are too many retail—it is much more than just retail, which is initiatives or not, but ultimately there is real focus on really important. the high street and retail, which can only be a good I would say that the next two years is a really thing, particularly at a time when there is so much important time for us to get behind this piece of work change. We have not been so involved in the Portas and to make both the short, the medium, and the long Pilots, just because of the locations, but we are term come alive, in terms of policy changes if involved in the Future High Streets forum. Like Tony required, engagement of local authorities if required, says, we believe that there is an absolute need for and, importantly, really driving people to invest strategic thoughts and planning in terms of “How do properly both in retail and non-retail in the high streets we make our high streets as attractive as possible?” and on brownfield sites. That is where we are; I think As we have mentioned before, the ability for various we are in reasonable shape, but the next two years stakeholders to come together and work in partnership will be critical in ensuring we follow through and we in a galvanised way to make the high streets, town are not here again in five years with an even worse centres and city centres more attractive from a situation. consumer’s point of view is very, very important. Chair: I think Caroline wanted to come in on that. Tony Ginty: The key thing is going to be the importance of developing sustainable initiatives. Q196 Caroline Dinenage: I just wondered to what There is a danger sometimes of what I call the extent these new initiatives have given you, as “sticking plaster approach”, and that has its value, but significant retailers, a greater opportunity to if we really are going to fundamentally change the correspond and communicate with some of the smaller dynamic of towns, we have to hit the really big, independent high-street retailers, and help them to fundamental issues about the sustainability of towns. prosper on the high street, as well? These are things like: access; car parking; security; Tony Wheeler: In the King’s Road in Chelsea there is the public realm. We can do lots of other things. a King’s Road Retail Forum that is an eclectic mix Putting on events and all of that is a very, very good of retailers predominantly, but landowners, the public idea, but if you do not have the fundamentals right— authority and community groups as well. We have if you do not have the access right and the security spent a lot of time working as a group of people and the public realm—you can do all sorts of events, together, trying to make that destination better. One but people simply will not come into the towns, quite aspect that is really important for the bigger retailers frankly. That is absolutely crucial. is to take responsibility for how we do that. Mark Lewis: That is absolutely right. It is important One of the most important aspects of my role is to to understand that these are significant, long-term work with various stakeholders, to support and make decisions for us. If we decide to open a store in a sure that we have a strategic vision for that space, location, that is a multi-year project, and we would but equally to, without being patronising, coach and expect to trade in that location for decades to come. support some very small independents in how they Getting clarity on the longer-term implications, the might present their shop, how they might do their longer-term understanding, is very critical. window displays, etc. My team and I spend quite a lot Rebecca Harris: We are pressed for time. Chairman, of time talking to colleagues on the high street, being I think my questions have been more broadly very open with the advice that we give, to try to help answered already. and ensure that the high street is as vibrant as possible. Chair: No, I wanted you to ask about the High Mark mentioned it earlier; it is very important we Street Forum. have good competition, and that we try to make sure that competition is fit for purpose and meets the Q195 Rebecca Harris: I think we have covered that consumer needs. We do see that as a very important quite well—the role of the High Street Forum and responsibility, and we spend a lot of time on it. how it might differ from other forums on promoting Tony Ginty: I would agree with that, in the sense that retail. if you look at the Portas pilots and the Town Teams, Alex Gourlay: The role of the High Street Forum is an awful lot of the Town Teams have got small retail to take the recommendations, primarily from Portas, independent players on them. Certainly with the two the 26 out of 27 that were agreed by the Government, Champions, one of the things that they have attempted and implement them. The Minister, Mark Prisk, has to do is to add their commercial expertise into that been very clear that it is about Task and Finish group of retailers. Beyond even the Town Teams and Groups. Therefore we have organised around three High Street Champions, in other Pilots we have asked Task and Finish Groups. One is all about local our store managers to be helpful to the Town Teams in leadership of the high streets, the idea of that, which passing on that knowledge, experience and know-how. is a very powerful thing that is happening. That has been very healthy from our point of view, The second one is about understanding how we enable and hopefully it is helpful for the smaller retailers the right conditions for the high street to prosper—the themselves. point about sustainable high streets. The third one is It reflects a point made earlier on: a healthy town is about a vision for the high streets in the longer term not about one retailer; it is about the mix of retailing, to make sure that we predict better what is happening because it is the mix of retailing, and the variety, that to our high streets rather than reacting after the event. will bring people in. That is what the purpose is: to get real work done against these three objectives, and there is a broad Q197 Mr Walker: Tony, when you mentioned the collection of retailers and high street users beyond King’s Road Retail Forum, you mentioned that Business, Innovation and Skills Committee: Evidence Ev 45
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty landowners are involved there—that is relatively in Nelson, and also making some structural change to unusual in some of these organisations. The one things like business rates, which allows the cost of criticism that has been levelled at some of the bids is doing business to be fair for retailers. The reality of that they are good at engaging the ratepayers but not this is that if you look at corporation tax, if you look at necessarily the landowners themselves. Do you think business rates and if you look at the cost of employing that there is anything that can be done to get the people, two-thirds of the cost for retailers is from landowners and the freeholders of some of the indirect taxes, business rates and the cost of commercial property we are talking about more employing people, not corporate tax. involved with the process of regeneration and Tony Wheeler: With the smaller retailers that I work supporting the high street? with, there are no two ways about it: the business rates Tony Wheeler: Certainly in Chelsea, Cadogan Estates and costs of running retail are rising and are difficult. are an important landowner that we work very closely It is true that in the property-intensive business that with, and they have a very strategic view of their retail is, business rates hit retailers quite hard. We property and what they want to do with it. The point would be very keen for a rebalance of business was made earlier that some of this planning for the taxation that recognises the changes that are going on high street takes a long time. In fact, if I talk to my in the market space now, so that we have a tax system colleagues in Cadogan Estates, they have been for business that helps both physical and digital planning this for 15 years and, as a result, have very businesses thrive. From our perspective, that would be long strategies in terms of the environment and that very important. space. Chair: We now move on to skills. From the Government’s perspective, it is really important to ensure that we have a framework that Q199 Paul Blomfield: I wondered if you could share encourages landowners to get more involved. with us the impact of the shift to omni-channel or Certainly, when I looked after our shop in Kingston multi-channel retail on skills needs. I am thinking not the framework was less prevalent through that BID, only of the obvious stuff in relation to IT skills, but but at my current site it is extremely prevalent; that is the impact that has had in store, and across the board, because we do have a framework of working that in terms of the staff you employ? seems to involve all the stakeholders in that area. Mark Lewis: I am happy to have a crack at that. First off, it has a huge impact; it is a new skill base that is Q198 Mr Binley: My concern is that we have a lot required in the business. If you look at the team of of fine words on this whole subject of bringing new partners that from day to day run our online people, new thoughts and new ideas into retailing, but business—the front end of that, the marketing, the we have not got the structure, and it is too expensive. actual website, the presentation of the product, how They are really put off by that. We have not got the customers navigate through our website to ultimately small units in many of our high streets to be able to select and buy things—a skill set that simply did not cater for them sensibly, and the price of our high exist a very short number of years ago in our business, streets is too high. How do you deal with that or in retail broadly is required. particular problem? Without a doubt, there is a skills and talent gap that Alex Gourlay: The price point is a growing issue— the industry as a whole is trying to fill. We find that it the data on business rates has been around for a while. is very hard to find the right people with the right There is a report from PwC, which I would talent, because it is a relatively new discipline, and it recommend that the Committee read, that very clearly is also quite hard to retain them, because partners that talks about the indirect taxation levied on retailers in develop these skills are in strong demand. An the last 10 years, which is now causing significant implication of that is that we put a greater importance structural problems on the high street. I have got a on training programmes and ensuring that we have to copy here if you want to read it rather than go through develop our own skills within the business in that the detail, as we will not have enough time. That is area. We have a healthy mix of relatively new joiners an important point. to the team and people who have grown over the 12 The other thing that is really important is getting to years that we have been trading online and developed the root cause of why things do not happen, even with within that. That is one area. a powerful commitment from the local people. In The second area is the implication for the more Nelson, near Burnley, for example, there is 23% frontofhouse partners or staff in the stores, who vacancy rate, but the Town Team tells me that it could themselves now are engaged in technology and web not unlock two shops to give to an entrepreneur to set platforms in a completely different way. For example, up a new business, because it could not get to the if you walked into one of our stores today and tried landlords, because the landlords effectively were in to buy this shirt, and found that by chance we did not the bank. We have unlocked that for them—a have it in the size or colour that you were looking for, combination of various people unlocked it. I think our partner would say, “Don’t worry. I could have it property owners can play a much more practical role, delivered to your home tomorrow; or I could have it and should play a practical role. There is also a lot of into the store for tomorrow, so you can come and Town Centre First planning regulation that could be collect it.” They would try to walk that customer over more bravely interpreted locally to make these things to a terminal where they would show them the range happen. of items online, and conduct that transaction on the It is a combination of understanding the local issues terminal, using essentially the website in the store. and having the commitment to get through them, like That is a new skill for which we have had to invest in Ev 46 Business, Innovation and Skills Committee: Evidence
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty training for our partners in the frontline selling of our two years ago, because of the dynamics around the business. It is not just the core online team; it is across marketplace. the broader business more generally. Alex Gourlay: I agree with what has been said. Tony Ginty: I would agree with all of that, and Fundamentally, retail has not changed; it is about a particularly the last point. If you take our general sales trusting relationship between two people—one staff, in the main you are talking about customer- buying, one selling. What has changed with facing skills as being the traditional requirement that technology is the ability for people who want to be you want. You still need the same skills, but now entrepreneurs to start up their own business and do allied to being able to do it through technology— something different to access the market; it is much exactly the point that Mark made. It is the same sort more open. I suspect that if the conditions are right in of requirement, but doing it in a different way, and the UK, you will find many more start-up businesses that is going to call upon more technical skills, which and many more independent businesses that are able will be interesting from a public policy point of view, to get to markets, both through the online business because it means we are going after the same sort of and eventually through showcases, in a way that they people as an awful lot of other sectors, because we have not done in the past. are applying customer-facing and technology skills I think 40% of youths in the UK are employed by the together. retail sector; I started off as a 16-year-old in Boots, and there are many stories like mine in the sector. This Q200 Paul Blomfield: You are both probably is a fantastic sector to understand and in which to companies that have traditionally invested fairly learn business and commercial skills. People coming significantly in your human resources. I am interested into our business today come with a natural ability to know how you think across the board in retail; with technology, which they have learned as they have looking beyond your own stores, things might have come through the education system; they are much changed. I may be wrong, but I have got it in mind more natural than we are in using that technology. I that for many shops, if I am going to make a choice go back to the fact that the UK is probably more about whether to buy online or in store, what is the advanced than most in turning these skills into additional USP, if you like, that an instore purchase commercial, entrepreneurial opportunities to sell can offer? If it is just about a simple transaction, then products and services. It needs honing; it needs to be you might as well just do it online. Does that change done through deliberate policy, but the opportunity to the skills needs of the sector beyond the obvious develop these skills and to protect employment, and technology ones, in terms of having a better drive entrepreneurship in this new world is there, for understanding of products and helping people everyone—whether you be John Lewis, Marks & navigate purchases? Spencer, or independents. Tony Wheeler: It is a really interesting point, but I do not think it does. From a customer’s perspective, what Q202 Paul Blomfield: Perhaps off the back of that is absolutely important to them is that they interact point you could, very briefly in view of time, describe with somebody who knows what they are talking the work that you do—Alex, you described your story as joining at 16—in terms of induction, lifelong about, gives them unbiased opinion and helps them learning, apprenticeships, graduate schemes, and so navigate through what might be a very big assortment on, to get the best out of your work force? of goods to find out what is right for them. Inevitably Alex Gourlay: Really quickly, we have always done our teams are our biggest asset, and our USP is how structured development through levels of careers, so we invest in them to give differentiated customer there would be training to look after customers service, which is frankly what I am talking about. properly or training to look after people properly in terms of management, or training to look after the Q201 Paul Blomfield: I would accept that, Tony, in company’s moneys properly in terms of the general relation to John Lewis—well, all of you represented management career. That has always been a feature here today—but that is probably not people’s of organisations like Marks & Spencer, John Lewis experience across retail as a whole. Does retail, and Boots. looking beyond your own stores, need to up its game The thing that is different with technology is the in terms of customerfacing skills? ability to get in-the-moment advice down to our Tony Wheeler: I will just finish off. Generally, it is an associates to care for customers and give them great incredibly competitive market, and that is a good advice, whether it be on shirts, or in our case on health thing, because it means that service levels can only care, through using new technologies. Online get better. We are big retailers, but I think all retailers development, backed up by face-to-face developments understand the importance of the interaction. In wherever possible, is definitely there. In the modern answer to your question, inevitably service will world, consumers love to be empowered and in charge continue to grow, and in the UK it should grow; there of their own decision-making. Even in health care we is a need for us to continue to meet what customers see many more patients searching online to take require of us. We need to continue investing in our charge of their own advice. The ability to speed up teams to ensure we meet what customers want and advice and get the right advice, and give people the what good service looks like from a customer’s power to make the right decision, is being driven perspective. What is vital to us is ensuring that we through structured training and through technology listen to what the public want in terms of service, enabling that to happen much faster and much more because it is very different now from what it was even accurately than before. Business, Innovation and Skills Committee: Evidence Ev 47
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty
Tony Wheeler: For us, this is one of the most exciting shoppers through the telephone channel, and had been aspects of being in retail. I could be here all day able to transfer those skills across. An active rotation talking about this, so I will have to curtail myself. The of staff is important for us. truth be known, first and foremost in retail what is Tony Wheeler: I would just build on that to finish off. most important is that you recruit and employ the right One thing that I think is really important is that skills person. That is absolutely fundamental in terms of funding is business-led—that is important from a both their skill set and their attitude. From then on in, framework perspective. One example of that is people who work in our business, or our partner, will apprenticeships; one thing we would suggest with that then go on various different journeys. I have been in is that funding should be business-led through the the business 28 years, and my journey has been PAYE system, where it is offset through the PAYE unique compared with anybody else’s, I suspect, but system. That would motivate business to get more what is fundamental is that a partner will take involved with apprenticeships. responsibility for their own development, first and Tony Ginty: I would perhaps just make two quick foremost. points. As for my colleagues, people are obviously our We will recruit people through apprenticeships, most important asset. We use a whole range of through graduate schemes, and through recruitment training and development programmes within the maybe for Christmas. Very often you will talk to a company. General staff coming in have a six-month partner in John Lewis and they will say, “I joined as structured career path, based on competencies, with a temporary over Christmas, really enjoyed it, thought coaching over that period of time. It is a very it was wonderful, and then stayed.” There is formal comprehensive approach in terms of getting them to training, both in group work and in one-to-one understand what is required of them, and to help them coaching, and moreover these days there is more e- develop the skills that are required to deliver it. learning. There is more independent learning, The other point is that we as a company, like a lot of whereby a partner will learn one-to-one with a PC other companies, believe very strongly in work screen or a tablet, to support their coaching and their experience. There is an issue of giving people, work with their line manager. What is absolutely particularly those who have had difficulty accessing fundamental for us is the relationship between a the market, an opportunity of getting an insight into partner and their line manager. Our leaders in our the world of work. We have done a range of business take that responsibility very importantly, programmes. The one that is probably most well because somebody reaching their potential will be a known is Marks & Start. With charity partners, we super investment going forward. work with a range of people—from young Mark Lewis: That is right. I would add a couple of unemployed, to the homeless, to lone parents, to points. In our online world, we feel as though the UK disabled—to give them a twoweek work experience. is at the forefront of this and it is changing at a It is extremely valuable for them in terms of getting dramatic pace. We do not assume that we are going an insight into work, and starting to think about some to find people who have educational backgrounds or of the skills they need. training backgrounds that will provide the skill set that We are just about to roll out another programme called we need, because it is very hard for us to anticipate Make Your Mark; we are going to take on 1,400 the skills that they will need in two years’ time. people, about 2% of our staffing numbers, and give Nobody in this country has been developing apps for them a four-week experience that is very structured in tablet devices for more than three years, because these terms of giving them an insight into the world of devices did not exist more than three years ago. work. There will be buddies and coaches there to help Critically, we assume that we will have to invest them during that four-week period. The other thing heavily in developing and training those partners we are trying to do is to call for companies, including within our business on the job, through various our supply base and including other businesses, to do schemes, etc. We look for people who have got a base the same sort of thing. There is an issue, as we all set of skills that we will be able to develop internally. know, with young unemployed, and we need to give One of the things that I would suggest the Committee them that sort of experience, because it gives them the reflect on is the framework that allows retailers to best opportunity of subsequently getting a job. provide that training in their own environment, From Marks & Start, for example, 50% of people because that is where it is happening, and things are found a job with us or somebody else within 13 weeks changing so quickly, and what support could be given of completing the programme. It does work, and it is to retailers to allow that to happen. effective, but we are calling both on our supply base, Another dimension is really important here. Because and on others, to say, “Why not all set ourselves that our customers are driving a convergence of shopping target of having a go at trying to make a difference as patterns across the channels, we actively encourage far as young unemployed people are concerned?” our partners to rotate or move from one area of the Paul Blomfield: There are a number of issues I would business into the other. For the long-term health of love to pursue, but we have not got time. the partnership, they have to understand how these Chair: We are moving on, but if there are any further different disciplines fit together, and they have to have comments you wish to make on that, we would be a broad set of skills. Last week, for example, I was in grateful to receive them as supplementary evidence. our customer contact centre up in Glasgow, sitting Mike, you want to go on another angle on this. next to a partner who had spent many years as a selling partner in the front line of the store and was Q203 Mike Crockart: Well, it is very much the now handling contacts and questions from online angle that Tony has just been talking about, because Ev 48 Business, Innovation and Skills Committee: Evidence
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty retail does have a traditional position of employing where it should have been, in my view—there are a certain groups to a greater extent, whether that is lot of comments about that—the next phase could be school leavers or people with disabilities. Those are reduction of space for retail as a whole, and therefore particularly difficult groups for us at the moment, in a reduction of jobs on the shop floor. That is a risk, which unemployment is quite a bit higher. Is there given the level of employment of young people in anything you think the Government should be doing retail, and what we get from that, as we have in terms of skills policy to ensure that can continue in described so enthusiastically today. I go back to the retail sector? indirect taxation on physical retailers and rebalancing Tony Ginty: It is, in a way, in the hands of business the costs of doing business in a physical shop: there to deal with that. We are essentially a people business. is real opportunity for the Government to act. We recognise that there is an advantage in getting a range of people into work. One of the reasons why we Q205 Mr Binley: Social skills lie at the very heart of did the Marks & Start work programme was to give retailing. It is a very basic requirement. Do you get that particular chance, and we saw people develop it. enough quality from our education system to give you It does give that particular insight. From our the social skills you need to develop people further? perspective, we do not need any further Tony Wheeler: I actually concur with Mark that there encouragement from Government to do so. We think is a skills gap at the moment when we are recruiting, this is something that business can make a and some of it is very obvious, to be honest with you. contribution on, and we are quite happy to do it, in Whether it is social skills is quite a difficult one to the sense that it does make that contribution, but there answer, but we find there is a skills gap in IT are advantages to us as a business in terms of dealing knowledge, analytical skills and strategically how new with it. recruits work. The curriculum in schools and in Apart from the people who come in, one of the other colleges needs to be addressed. It needs to be benefits that we have got from this is that the people understood that for people going into business and who act, for example, as coaches or buddies for the retail now, the needs are different. We would ask, from people who are doing the attachment get enormous that perspective, that there be a framework to look at benefits out of that particular activity. There are all the curriculum and make sure it is fit for purpose, so sorts of gains and benefits. From our perspective, we that people leaving schools and colleges have the would not be looking for any particular thing from skills that are required going into retail. Government, although they may be able to give some Alex Gourlay: There is a gap between education and help possibly in terms of encouraging SMEs to get business that needs to be closed. What I mean by that involved. is perhaps not so much skills—I have not seen the same issues in our business, to be honest—but the Q204 Mike Crockart: Mark, can I turn to you, relationship. Again, we have work-inspiration because you are talking about people who have programmes, which are very similar to what Tony has knowledge of iPads and apps and things. You could described at M&S. When you bring young people into not do much better than bring in young school leavers. your business for two weeks and you treat them Mark Lewis: Absolutely. There is an element of that properly, with a proper programme and an part of our business that is dependent on typically understanding of what it is like to work in retail and bright, entrepreneurial activity from a generation that what it is like to work in a function, you see people is very comfortable with these devices and with who love it and people who say, “It’s not for me,” but technology. I encourage the Committee to reflect on they get a real experience of work. the changing nature of retail, and what that means for Closing that gap between education and work in a those roles, for opportunity and for employment. It is more deliberate way—it is a relationship and a perhaps an over-simplification, but if we think of what process—is more important, potentially, than the skills a modern retailer looks like, and the direction of travel they learn in classrooms. over the next few years, lots of those school leaver Tony Ginty: The key thing we look for is attitude. jobs, for example, that we may have in our mind Once you have people with the right attitude, you can involve working on the shop floor. A modernday build on top of that the knowledge and skills that are retailer will have many opportunities in its supply required. An awful lot of our recruitment procedure chain, for example, because that becomes an consists of looking for people who want to be increasing part of the business, and in customer involved with other people, because essentially a lot support, contact centres and the like, because they of the roles are about that, and looking for people who have become an important part of the business as we have the right attitude in terms of dealing with people, collectively migrate more to online, to omni-channel because you then just build upon that. retailing. I wonder whether the range of opportunities In terms of whether we have a problem with it, the has a shift in mix that perhaps there is an opportunity answer is we are in the lucky position of being a well- to stay ahead of and get ahead of. known brand. For our vacancies, we get 250,000 Alex Gourlay: There is potentially a bigger risk to the online applications a year. We have 5,000 vacancies 40% of people today who join retail as a first job. As at any one point in time through normal churn, and we the shift to integrated retailing happens and there is take on about 10,000 to 15,000 people at Christmas. less physical retailing and more online and supply- However, we have literally 250,000 online chain retailing, fewer people are employed in the applications, plus, on top of that, normal referrals sector. I think that is a risk, and so far, because the from people who have worked for us or other people property bubble in retail has continued to go beyond etc. Business, Innovation and Skills Committee: Evidence Ev 49
2 July 2013 Alex Gourlay, Tony Wheeler, Mark Lewis and Tony Ginty
Mr Binley: Could you pass some of those to my opportunity for the Government to look at taxation in company, please? I do not find them that easily. the round in the retail sector and consider whether the Mark Lewis: Could I just add a couple of concepts? current business tax model is fit for purpose? On the social skills point, I would not say we Mark Lewis: I would suggest that is probably fair. We necessarily have a huge problem, but I would make are seeing an industry that is in a period of dramatic the point that, again, as our industry changes, the changes: in operations within the country, shifts of types of social skills that are and will be required are patterns from one channel to another, the blending of also changing. A front-line customer interaction, channels and, then, also the breakdown of which, historically, would have happened in a branch, geographical barriers to trade. This creates great is increasingly likely to happen over the telephone, opportunities for retailers to trade internationally and over a live-chat channel or through Twitter. Inevitably, also for overseas retailers to trade into the UK. From that requires a different set of social skills. The core our perspective, a review of the taxation structure in need of being able to empathise with a customer is the round would be very welcome. still there, but there will be an increased focus, for We have not touched on the third point that I would example, on literacy skills, because you are typing— suggest. We have talked a lot about the convergence and things like that. We are seeing the start of a shift, of channels between physical stores and online. What which, I would suggest, will accelerate. we are also seeing in the world of online is a very If I could broaden my answer briefly, though, I would rapid migration from, essentially, computers to mobile say that one interesting area—having had the devices. There is an infrastructure piece to be opportunity to compare the UK with California and considered to ensure the UK’s leadership in online the west coast of America—where I fear there is a gap retailing. We need the broader infrastructure that will is in developing a generation of people who have a allow high-speed connections and allow us to stay real overlap and blending of IT and business skills. ahead of the curve in mobile devices. The real talent shortage is in that rare commodity of Tony Wheeler: Very quickly, in terms of what the people who can wire together the technical side and Government can do that would really help, one of the the business side with the creative flair of retailing. absolute commercial advantages that John Lewis has I have seen more of that package overseas than in is that we are a longterm business. We plan years the UK. ahead. A department store will often take us 10 years to plan. One of the things we would be very keen on Q206 Ann McKechin: Earlier this morning, is a planning policy that is long term and is consistent. Tony Ginty urged the Government to avoid sticking These shops are a significant investment for us. Some plaster solutions. Could I turn, now, to the of these shops will cost us around £30 million. BIS Department’s own Retail Strategy? What do you Certainty around planning policy—and particularly think are the key areas it should prioritise? long-term planning policy—is essential for us. Tony Ginty: I will start off on that. Alex Gourlay: Number one for me is definitely the Chair: If you could, summarise very quickly, because focus on changing the costs of doing retail, including we are running over time. taxation between properties and non-property. Second Tony Ginty: I can do it very quickly indeed. For us, for me is about really encouraging Town Centre First as I mentioned earlier, the major strategic priority is planning from the end-to-end point of view, to develop an international multichannel business. sustainably, to make sure that people use the From that particular perspective, if you look at the regulators that are there to encourage best practice in Retail Strategy, one of the key elements in there is car parking, investment and transforming those town international sales and, also, e-commerce. That is the centres that maybe have too much retail into holistic one thing that is most important to us. It is the one town centres. that we are spending the most time thinking about and Thirdly—and really importantly—is, for me, changing interacting with BIS on, in relation to its development. the communication from “the high street is dying” to Mark Lewis: I would say three things. The first we the opportunities of a fantastic industry in the UK—it have touched on, which is skills and training, so I will is probably the best retail industry in the world—and not go over that again. The second is taxation. We allowing people to celebrate that, while moving to have touched on it briefly, but, as trade moves more develop an international strength to drive our great omni-channel and more online, the geographical brands, products and services in international markets. boundaries fade into the background. It is a communication issue. Chair: Can I thank you for your contribution? I am Q207 Ann McKechin: Can I ask you about that? conscious of the fact that we have had to rush one or Other witnesses have talked about business rates, and two areas. If you feel there is something you wish to the fact that the valuation has been postponed and that contribute over and above what you have said today, businesses have been penalised—perhaps not so much do please send in supplementary written evidence. in your sector, because you are in the larger-store Equally, of course, if we feel there are some questions sector, but rather in the smaller stores. Given the fact we should have asked but did not, we will write to that so many retailers are now moving online, where you and would be grateful for a reply. they are not subject to business taxes, could this be an Thank you very much; can I now have the next panel? Ev 50 Business, Innovation and Skills Committee: Evidence
Examination of Witnesses
Witnesses: Martyn Hulme, Managing Director, Co-operative Estates, Tim Fallowfield, Director of Corporate Services and Company Secretary, Sainsbury’s, and David Hobbs, Director of UK Operational Strategy and Business Planning, Tesco, gave evidence.
Q208 Chair: Good morning and thank you for uses online. I have to phone on quite a regular basis agreeing to address the Committee. I will start, as I to explain how to use the thing at times, but it is did with the other panel, by just asking you to appropriate for all ages, and all ages are seeing that introduce yourselves for voice transcription purposes, revolution happen to them. starting with you, David. Chair: Is there an obvious bias between the ages? David Hobbs: My name is David Hobbs. I am the David Hobbs: There is: there is no doubt the digital Business Planning Director for Tesco in the UK. natives can imagine no other way of being able to Tim Fallowfield: I am Tim Fallowfield, interact. Their expectations are dramatically higher. Corporate Services Director at Sainsbury’s. They expect to be able to interact in any way that they Martyn Hulme: I am Martyn Hulme. I am the see fit. Managing Director of Estates for The Tim Fallowfield: If I could just add to what David Co-operative Group. said, I largely agree with what he said. I heard some of the evidence from the previous session. Everyone Q209 Chair: Thank you very much. Again, I will talked about the multichannel retailing now. It is repeat what I said before: do not feel you all have to absolutely the same at Sainsbury’s. One of the things answer every question if what you believe has been we did not get on to in the previous session was the covered by a previous speaker. I will open, anyway, number of convenience stores, particularly food stores on the changing nature of the retail industry and obviously, that are also growing in the market. If you whether the closures in the sector have been driven by look at Sainsbury’s business, our online business is changes in the business model versus high costs and growing by about 15% to 20% per annum from a lower demand. What is your perspective on this? Who relatively low base. Our convenience business is also wishes to lead on it? growing by about 20%. We opened 87 stores last year. David Hobbs: The consumer is changing dramatically The vast majority of those are in the high street— at the moment, with their expectation of being able to again, responding to customer needs. buy what they want when they want and how they Effectively, one of the things we have seen—probably want. We are seeing significant change. It is about the since 2008, when we saw the recession—is that industry evolving to meet those changing needs. customers became more and more savvy with their If you look at our business, we have a successful shopping. We use the expression “savvy shopping” all online business and a successful stores business. Our the time, which has basically seen more and more stores business is still significantly larger than our customers go to convenience stores, because they can, online business, but the online business is growing. amongst other things, regulate their waste better. They We have a grocery business, a general merchandise buy what they want for their next meal and, in business and a clothing business. The suit I am addition, they do not have to get the car out of the wearing today is a Tesco suit. I bought it on Friday garage and therefore use petrol at a time of high petrol night online and it was delivered on Tuesday to my prices. We have also absolutely seen that development work address. in our business. We anticipate it will continue to grow. Caroline Dinenage: And very nice it is. We anticipate, for instance, this year that we will be David Hobbs: Thank you very much. It was £65. opening between one and two convenience stores Mr Binley: Could you stand up, please? every week across the country. David Hobbs: I do modelling in my spare time. It was Martyn Hulme: There are two key points in terms of £65; that is very good value. what has happened so dramatically and some of the However, the online element is growing. For example, failures we have seen. It was probably not that long at Christmas, we had over 500,000 orders fulfilled ago that you would go along, park your car for free online. It really is not an online business, however; it in the high street, walk up and down and fulfill your is a multi-channel business. Of those 500,000 orders, shopping needs. We have a very different shopping 5% were picked up in store, through our world now; the high street itself is competing with an click-and-collect operation. Indeed, 30% of our online environment where people can probably sit at orders—or online traffic to our grocery website—are Glastonbury at the weekend and order their food now through a smartphone. Customers are changing shopping for the week without moving from the the way they interact with retailers dramatically; concert venue. Alongside this, out-of-town retailing is retailers need to evolve to meet those changing needs. taking place, which is impacting on the high street as well. Those retailers who were faced with a fairly Q210 Chair: Presumably, it is changing by age simple world not so long ago now have to react to the group. Particular age groups are far more likely to use changing demands that are made on us. phones and whatever else. Very specifically, what has probably topped that in David Hobbs: There is no doubt that “digital natives”, recent years, quite clearly, has been the economic as they are called, the young people who have been environment, with austerity for the last five years. It brought up in this world and know nothing else, is something I have not seen in living memory, in cannot imagine any other way of living their lives. terms of the dramatic effect it has had on consumer The digital revolution, however, has hit all age groups. confidence for such a long time. If you put alongside I have an elderly mother: she uses the internet; she that the customer push for value and lower prices at a Business, Innovation and Skills Committee: Evidence Ev 51
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs time when we see costs rising, particularly commodity Q213 Chair: We are going to go on, in a moment, to costs, the success of sustainability is for those retailers this particular point, so just leave it for the moment. and businesses that can react to these very different, Can I just bring in one other factor? What is the changing circumstances. difference between your out-of-town shops and your anchor stores in the high street—if, indeed, you have them? Q211 Chair: Can you just give a brief breakdown of David Hobbs: We have a whole range of stores, from the percentage of store shopping versus online? small Express stores to large Extras, that are suitable Tim Fallowfield: In our business, we do 23 million for different physical locations, and we are able to customer transactions a week, of which around adapt them for affluent locations and more 200,000 are online transactions. In comparison with pricesensitive locations. In fact, we are doing a lot the kind of proportions you were talking about more work at the moment on how we adapt stores to previously, food is still different in our business. meet the needs of their local consumer much more. David Hobbs: I would argue that the online/offline This is never more so than in London, where you can split is actually quite arbitrary these days, because the have two stores just a few hundred yards apart with business is so interconnected that you cannot really very different customer bases. How do we adapt those differentiate the two. Grocery home-shopping is stores for those different needs? predominantly picked in store by our teams and then Our out-of-town stores are still popular. We have a delivered to somebody’s home. Groceries can also be store in Camberley that we recently increased the size collected from a store. The direct business can be of. You go there at the weekend and it is clearly collected from a store, but it is ordered through a meeting a customer need for a destination experience. warehouse. The business is so interconnected that it is It is a site that is shared with Marks & Spencer. You an arbitrary split between online and offline these go there and you see customers doing their grocery days. shop, having a meal in the restaurant, looking at the Martyn Hulme: It is massively different depending electronics, buying clothing—it is something to do on on which business we are talking about within The a Saturday afternoon. Out-of-town stores are not dead, Co-operative Group. Within food, we are largely a but they do need to continue to reinvent themselves. convenience retailer. Interestingly enough, the online We have recently made some acquisitions of Giraffe shopper shops in a convenience store three times more and a share of the Harris + Hoole coffee-shop business; that is part of our strategy for how to make often than a non-internet shopper. There is actually a those out-of-town stores more like destinations. nice fit in terms of the model that we have for the Tim Fallowfield: We have a range of locations for our internet shopper. Clearly, in banking it is a large supermarkets. I have already talked about the fact that proportion of our activity, and it is less so in our we have 550 convenience stores. Those are largely pharmacy. located in high streets. We have 200 supermarkets in You will be interested to know that we are investing town centres and just over 300 on the edge of town fairly heavily in our funeral business’s online or out of town. Customers will use a range of these capability at the moment, but it will largely be for their shopping. Effectively, we apply a universal information, I suspect, and making sure we get the appeal approach to our customers, so we are looking right service for the bereaved. to provide great customer service and respond to customer needs wherever we have a store. Q212 Chair: From your perspective, how is this Chair: Do you have anything to add, Martyn? affecting the traditional small shop that does not have Martyn Hulme: I do not, because out-of-town is not the capacity either to be part of an online setup or to really where the Cooperative is at. The key thing is complement a bigger retailer? Do you think they are that we are a community retailer; we are in every closing? You can then perhaps set up one of your postcode district in the country. We are trying to serve convenience stores, which does have that capacity. that need. Martyn Hulme: You mean an independent small store. Q214 Rebecca Harris: How do you see changes in Chair: Yes. consumer behaviour and footfall affecting the role and Martyn Hulme: Yes, there is definitely an impact, if the basic nature of our town centres and high streets? they are not reacting in the way I was describing. David Hobbs: The challenge for the high street is not the supermarket; the challenge for the high street is to There is a key part of the market for the small evolve to changing customer needs. This cannot just independent retailer that recognises the change that be a retail solution; it needs to be much broader. It has taken place. A lot of the more commoditytype needs to be leisure, services and faith groups all and bulkier goods are clearly being delivered, but the coming together to create town centres that customers independent retailer that recognises the transition that want to go to and shop. is happening in convenience retailing, from As Tim was alluding to, we have seen that multiple emergency through to more of a meal solution— convenience businesses opening up on high streets something a bit more exciting—will succeed. create a magnet to encourage footfall, and that Tim Fallowfield: It is worth pointing out that therefore encourages other retailers and leisure convenience stores can definitely be a force for good services to be successful. This might be a changing in the high street. They help create footfall and create profile for high streets, but it is about how high streets regeneration in high streets as well. in town centres can evolve to create these destinations. Ev 52 Business, Innovation and Skills Committee: Evidence
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs
It would be no different if you were looking at an framework has been put in place and still needs to out-of-town store: it needs to create a destination. The work. town centres need to create destinations for customers and a reason for them to go there. Q216 Rebecca Harris: How optimistic are you about Tim Fallowfield: I do not have much to add. I the potential for the Town Centre First policy absolutely agree with that. It is obviously helpful delivering? when local authorities work on that basis as well, and David Hobbs: We would be fully supportive of Town think about having a vision for the future and how to Centre First. As I say, over 50% of our sites are town move the high street on, so that it becomes a centres. We would always prefer to open in a town destination for the 21st century. centre. Rebecca Harris: Do you mean in terms of things like Martyn Hulme: I completely welcome it. planning policy, car parking and that kind of thing? Tim Fallowfield: I agree, absolutely—subject to what Tim Fallowfield: Yes, that is right. I said about certainty and long-term planning from the authorities. Q215 Mr Binley: I want to pursue this point. The point about the high street being much more holistic Q217 Caroline Dinenage: There are several than it has perhaps been viewed as in the past is very initiatives to help retail on the high street: the Portas important. However, all the research I have done pilots, the Town Teams, BIDs as well as the Future suggests that local authorities, in the main, have been High Streets Forum. Is there a danger, do you think, the enemies of the high street, rather than their friends that the sheer number of different strategies and and supporters. Is that too harsh a statement, or do initiatives are diluting their impact and confusing you see some truth in it? retailers and customers? Martyn Hulme: It certainly varies up and down the Tim Fallowfield: The first thing to say is that it is country. I have had some very positive experiences of very positive that there is that much focus on retail; working with local authorities, but there is a key part we should generally encourage that. As you say, there of this that is relevant. From some of the Portas work, are a lot of different initiatives. It is probably time to we have seen Town Teams that have been almost allow them to bed down a little bit and find the best divorced from local authorities. As Tim said a learnings from them. Our own experience, for moment ago, the bigger point is about the vision and instance, is that we see the best results coming out of making sure there is a real understanding of the BIDs. We work very closely with 64 different BIDs neighbourhood plan, where the retailers, the local around the country. They have the framework and— authorities and the leisure activities are working particularly when they are supported by great plans, together to bring life back into what is, in my view, a expertise and financial backing from local key part of society. authorities—can really make a difference. Tim Fallowfield: We continue to open high-street We are, frankly, less involved in Portas pilots and supermarkets. In fact, we are opening one next week. LEPs, but we need to let all of them bed down a little In those circumstances, it is important to have the bit, see what comes out of them and take the best confidence to know that local authorities are going to learnings and roll forward with them. maintain a consistent policy in relation to traffic Martyn Hulme: My view echoes that. Many of the planning. initiatives stand alone in a way, but are Delivery restrictions affect a lot of our business. We complementary of each other. It is very welcome; I find that in many circumstances we have had a like the idea that there is this focus on something that supermarket in a town centre for some considerable is so important to this country at the moment. time; some residential property has opened subsequent David Hobbs: I would just echo that. It is very good to that; we have noise issues raised by the local that there is so much focus on retail. There is no silver residents; and at that point, delivery restrictions are bullet; it will be a number of different things that will imposed on the store. Those are the kinds of make the difference in the end. characteristics, together with the activity of other competitors, that are all important in trying to create Q218 Mr Walker: Talking about the planning certainty in relation to investment in town centres. system in terms of longterm planning, do you think David Hobbs: Certainly, our heritage is in the town there is a direction of travel towards more mixed use centre. We started as a market stall in Hackney 100 and more overlapping of residential and commercial years ago. Now, over 50% of our sites are in areas? Particularly, if we accept the basic premise that town-centre high-street locations. There is no silver the total amount of retail space is probably too great, bullet in terms of what local authorities can do. It does should there be a deliberate effort in planning policy need to be a co-ordinated effort to continue to evolve to allow more mixed use and bring the two together? and grow the high street. Martyn Hulme: In my view, that is part of the Martyn Hulme: If I may, on a related point, local solution for the changing high street. Some of the new authorities need to understand the National Planning changes in the budget were welcome for that reason. Policy Framework and Town Centre First. There is We have to be careful that it is still part of an overall still decision-making taking place that seems at odds vision—a local plan. We have to be careful that it is with that. I do not know whether that is driven by not just here and there, but there is still the thinking some of the need for finance they have—if they have to say, for example, that perhaps at both ends of a a piece of land that breaks that particular rule. town we would change that use and keep the core However, it is unsettling to see that when that retail and leisure together so that it is not fragmented. Business, Innovation and Skills Committee: Evidence Ev 53
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs
Tim Fallowfield: I do not have much to add to that. Tim Fallowfield: There are other ways in which we What David said previously about the vision for the try to engage with local communities as well. We future is the important thing in that respect. work very closely with Business in the Community, which has put business connectors out into local Q219 Mr Walker: I was interested in your environments to provide a different link between comments, Tim, on delivery restrictions and some of business, local authorities and town centres generally. the challenges that you can sometimes have when you Some of those have worked really well, as an are working in those areas. Traditionally, for both alternative, where we have worked closely with Tesco and Sainsbury’s, working with larger stores, Business in the Community to set that up. It is that is going to be less of an issue than for the broader alongside, which is slightly different. range of convenience stores spreading out. You are Mr Walker: I would have thought, given your more likely to run into those issues on an ongoing involvement in issues like transport, planning and, basis. Another area this feeds into is in terms of particularly, the skills agenda, there was a natural role opening hours. We recently had a meeting in for retail to play a major part in local enterprise Worcester to discuss the future of the high street. A partnerships and to be more engaged there. That is number of the independents were very keen to push something we may want to look at. the idea of later opening hours and trying to join up the day-time economy with the night-time economy. Q221 Mr Binley: I am a businessman, and have been Are there opportunities for the industry more broadly all my life. Quite frankly, I challenge you, because there? the answers you give me suggest you are missing an Tim Fallowfield: Certainly, if you look at our opportunity to be involved in your local communities; convenience stores, which obviously have longer you ought to think a little more about it. If LEPs are opening hours than most stores, we see them catering led by local councils and by Government, they will to a nighttime economy. Yes, retail has to be a fail and you will have missed an opportunity. I do customer-led business. Customers want to shop at encourage you to think about the involvement and the effort you are putting into LEPs, because they can be those times. Retail is absolutely dependent on giving turned massively to your advantage. Is that too harsh customer service. That kind of flexibility needs to be for you or do you accept it? part of the equation. Tim Fallowfield: No, I am not sure I accept the David Hobbs: Tim is right. The only thing to add is criticism. that each town is going to be different; there is not Mr Binley: I make the criticism in response to what going to be one size that fits all. We need to look at you said, actually. each town on its merits and decide what the right Tim Fallowfield: We will take whatever opportunities solutions are for them. we can to form great partnerships at a local level. Of Martyn Hulme: I would agree with that. course, it is in all of our interests to have thriving local communities. From that point of view, whatever Q220 Mr Walker: You made some positive we can do in order to maintain that, we will get comments about BIDs. We took some evidence last behind. week from the Association of Town & Mr Binley: Let me put my question another way: you City Management, which was rather less positive are very senior people in your organisations; will you about the attitude of LEPs towards the retail sector. go back and become more LEP-minded and, perhaps, Quite shockingly, they were talking about the lack of do more to encourage your people to be involved? interest that LEPs have shown in the high street. It David Hobbs: At the local level, we are very engaged was Martin Blackwell who said that some LEPs did through Town Teams, through BIDs and, indeed, not even seem to realise that town centres existed. Is through our stores. that something that you would echo or do you have Mr Binley: I said LEPs, in particular. examples of LEPs working more effectively with the David Hobbs: It is still very early days for the LEPs, retail economy? isn’t it? Martyn Hulme: Again, it does vary up and down the Mr Binley: Get in there; have a go. country—as you might imagine. The base of Martyn Hulme: It is a valid point, I have to say. I do The Co-operative is in Manchester; it is an absolutely not know if it is chicken and egg, but I do not see the critical relationship that takes place there, but we do LEPs working as effectively as we would hope. see good and bad elsewhere that maybe I need to Mr Binley: Come to Northampton; I will show you. submit in separate evidence. Martyn Hulme: If you are on the inside of them, then Tim Fallowfield: We focus on the positives of the perhaps it would be more effective. BIDs. The fact they have such relevant membership Mr Binley: Come to Northampton and I will show is a positive factor behind them. That is where our you. You have a good Co-operative store situation. focus has been: in relation to trying to support them, Martyn Hulme: I would like to do that, Brian. rather than LEPs or Portas, necessarily. Chair: I am not expecting you to answer this off the David Hobbs: We are actively engaged at the local cuff, but if you could send in details of where your level through Town Teams and through BIDs, and at companies are involved in local LEPs, it would be a the national level. We have not actively engaged with useful piece of supplementary evidence. the LEPs. It is still, obviously, very early days. If there were the appropriate opportunities, we would—but as Q222 Paul Blomfield: I wondered if I could move of yet we have not actively engaged with them. the discussion on to skills, as we did with the earlier Ev 54 Business, Innovation and Skills Committee: Evidence
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs panel, and perhaps start by asking each of you if you Q223 Paul Blomfield: There is an interesting could describe the work you do in the skills differentiation between the levels in the different development of your staff. I do not only mean sectors of your business. You said level 2 in stores induction, but also life-long learning, skills and level 3 in call centres. Do you push further above enhancement, apprenticeships and graduate schemes. level 2 in store? Tim Fallowfield: We have just re-launched our David Hobbs: The apprenticeships are level 2, but the apprenticeship programme to make it really other programmes pick that up. Things like the meaningful, we believe. We are trialling it this year. Options programme enable people to develop further We will have 400 apprenticeships; they will earn a in the business and give them skills. level 3 apprenticeship, giving them lifelong skills. It Martyn Hulme: Education has probably been the core is a long-term project. It will run for 12 months and value and principle within The Cooperative for many will give them life-long skills in leadership and a decades. We continue to have it as a very high priority, qualification that is equivalent to two A-levels. right from sponsorship of Co-operative schools, from We supplement that with a range of training an educational perspective, to when we start opportunities. Probably the most notable is that we employing people and looking at their development. I have had 21,000 colleagues who have gone through truly believe there is a massive underestimation of the our food colleges. We could probably call those skills level that we have in the retail sector— apprenticeships, although we do not. They get an numeracy and literacy, as you would expect, and NVQ that is acknowledged by City & Guilds. It is, leadership skills—often from people who are not paid I think, the largest City & Guilds-accredited course. a huge wage. We expect a lot and we have to support Effectively, they are learning counter skills: bakery, them; it is really critical. butchery and fishmongery. We have an apprenticeship programme running for the We have a programme called You Can, which works recruitment of 2,000 apprenticeships. From my own with a number of colleagues who would otherwise perspective, in Estates, I look into the supply chain to have barriers to work, working with Mencap and see if we can encourage the right approaches taking Remploy. We have 13,000 colleagues we have taken place there for the new business support centre we on, who would otherwise find getting to the have built in Manchester, for 3,500 people. We had workplace difficult. 600 people working on that at peak time and we put One-third of our Store Managers started with the targets on our contractors to say, “Actually, we are business before the age of 18. Effectively, we are looking for you to put apprentices in.” We put an 8% really focusing on training, customer-service skills target on them, for them to be looking for apprentices. and whatever skills are necessary to rapidly evolve the We put targets on them for where they can take people business. That goes all the way through the journey, off local unemployment lists. How you work inside from the first day people join the business to the day and outside of your business is an important area for that they leave us. us. David Hobbs: Building skills is a fundamental part of Tim Fallowfield: It might be worth saying that we do our business. We employ over 300,000 people in the not always get the credit for the training we are UK. Developing their skills is obviously important to providing. Nor, in fact, do we necessarily—I am them, but also it is good business for us. We have a talking about Government and society generally— long list of programmes to develop skills, ranging promote retail careers to be the fantastic careers that from core skills in store—we take them through they are. We certainly focus on being a great place to bronze, silver and gold levels of training, which work. My colleagues’ businesses obviously do as people can develop and aspire to grow with—to what well. we call the Tesco Options programme, which supports Again, as part of our Youth Can project, we now people making the move from one level to the next encourage as many as possible of our 16 to 24-year- level within the business. old colleagues—of whom there are 50,000, which is We have 10,000 apprenticeships, which we are doing about a third of our business—to go back into schools between 2012 and 2014, ranging from level 2 and promote retail careers. We think it is important apprenticeships in stores to level 3 in our call centres that schoolchildren are hearing from their peers, and level 4 in our information-technology team. We effectively, what great careers we are providing. There are very proud of the fact that we have an 85% pass is something we can do to ensure that society accepts rate on our apprenticeship programme. We deliver the that a career in retail is a worthwhile career that is knowledge element of those apprenticeships very meritocratic and in which the right people can ourselves, so we can be confident of the quality. rise through the ranks into positions of significant Indeed, 80% of our management positions are filled responsibility very quickly. internally. If you look at a number of my senior David Hobbs: Last week, we opened our 52nd colleagues, there are numerous examples of people regeneration partnership store. Those are stores that who have worked their way up through the business support giving employment to the long-term from the shop floor. Phillip Clarke, the Group CEO, unemployed. So far, we have given work to 5,000 started on the shop floor; Chris Bush, the UK CEO, long-term unemployed. Our 52nd store opened last started on the shop floor. They worked their way up week in Sunderland and the store manager, through the business to be running the business; that Tim Howell, has done a fantastic job and has beaten says a great deal for the skills development within our its budget within the first week, which can only be a business and within our sector. good thing. That is also a very important part of Business, Innovation and Skills Committee: Evidence Ev 55
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs bringing people in to the work force and giving them Q225 Mr Walker: From the perspective of the skills to carry on working. Government skills policy, is there anything that could be done to help? From what you are saying, are you Q224 Mr Walker: Following up on Paul’s getting broadly what you need in terms of the input? questioning around skills, we heard a lot about the Martyn Hulme: It is not top of the list in terms of an changes taking place in the sector, the shift towards issue—from what I am seeing, anyway—as long as the omni-channel environment and some of the more the businesses are prepared to get involved, in a way, technical skills that are required now. How is that through the various mechanisms, including through impacting on your apprenticeship programmes and the education system. That is something that is worth continuing. your recruitment? Indeed, do you have any comments on how the education system is delivering in terms of people coming through? I was pleased to hear you Q226 Mike Crockart: We have touched on my question a little bit. It is about the tradition—you have talking about going back into schools; it is very already talked about it—of retail having areas from important for the industry to do that. We have heard which it particularly recruits. One of those areas, about all of the changes taking place in technology obviously, is young people. I shared the common story and the move to create more online channels; how of my first job having been on the shop floor in Tesco. does that impact your skills agenda? In the interests of full disclosure, my suit is from David Hobbs: As consumer needs are changing, the Marks & Spencer and I bank with The Co-operative. skills we need to have are changing. The UK has been Tim Fallowfield: I will be speaking to you afterwards. a leader in online commerce. Tesco has been very Mike Crockart: I have to apologise to Tim. However, much at the forefront of that, developing a very there are particular areas: young people, people with successful online business. That means we have had to disabilities and the long-term unemployed. You have seek and develop very different skills—core IT skills, already talked about the strengths you have in web-design skills and web-trading skills—that we recruiting in these particular areas. Is there anything have not had in the past. I can imagine those are the you think that Government can do or that business skills we need to be focusing on as a country in the needs help with to enable that to continue into the future, so that the UK is able to stay at the forefront future? of e-commerce. Those core IT, web-design and Martyn Hulme: There is not much wrong in what I web-trading skills will be more and more important in am seeing—as long as there is the right attitude from the future. the employer and the right diversity programmes etc. Tim Fallowfield: However, as an industry—I am to make sure that we recognise that there is a real thinking of Sainsbury’s specifically—we are quite benefit from that kind of recruitment. It can go into, good at adapting to new customer requirements and as I was touching on, not only you as a business but providing appropriate training. Yes, of course digital how you can encourage the right behaviours from is a growing trend and we have to respond to it, but your supply chain. I am certainly not looking for similarly I spoke about the counter skills of our change. colleagues. Again, we responded to more and more customer requirements there in order to provide a Q227 Mike Crockart: Can I widen it out, then? If great service in bakery, butchery and fishmongery. you do not think there is an issue in helping the large Similarly, when we roll out something like companies to do this—and you have shown that there self-service checkouts, for instance, again there is a are examples—how do we learn from that best growing need for technology; our staff colleagues practice and get it into other industries or smaller have to know how to provide a great customer companies? experience for something new. Tim Fallowfield: Martyn is right in relation to the We are used to this kind of adaptation, preparation need to have the right attitude. Personally, it would and rolling forward for new customer trends. We will not be at the top of my wish list either. From our point of view, our You Can programme has successfully continue to do it. recruited 13,000 colleagues into our business from Martyn Hulme: There is something of a bonus that areas where they might otherwise find it difficult to many of the youngsters coming through have— get into the workplace. We have successfully worked literacy in technology, which is almost a natural gift. in that environment. We would be happy to share our That whole point is happening at a younger and best practice with smaller businesses and that kind of younger age. Not so long ago, my friend was telling thing. There clearly are opportunities there; we have me that, when a new Xbox product came out, the found that it works very well. We have a very positive biggest problem his 10-year-old had was a social view towards that kind of employment and we would media one, i.e. how to transfer all of their friends be happy to share it with others. across to it in the right way. That is helpful, but it is important that businesses and Q228 Ann McKechin: The BIS Department has the education system continue to work together, so introduced its own Retail Strategy; what do you there is not a huge gap. It is still important that we believe are the key areas it should focus its resources keep the basics of numeracy and literacy skills going on? and not just think that it is all about IT now. We do Tim Fallowfield: One of the areas we have been have to adapt to the change, but not forget the core talking about publicly has been business rates. I am pieces that are important going forward. not sure whether that is necessarily a BIS priority or Ev 56 Business, Innovation and Skills Committee: Evidence
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs whether it might be more of a Treasury review, but at that form of taxation in a more enlightened way of certainly we have talked about the fact that, with the business, as it stands today. rapid growth of online retail, there is an opportunity We also need to look at some of the strange things to for the Government to look again at the tax system— do with the RPI inflator happening one month and particularly business rates, which is clearly a tax on having a disproportionate effect on the payment. Over property. 10% between 2011 and 2013 seems very wrong to me, To give you some stats about Sainsbury’s, we are the when costs of retailing are so high and are causing 46th largest company in the FTSE, yet we are paying pressure on the high street. There is also the whole the 12th largest amount of taxation. The vast majority point, which we were touching on earlier, around the of that is in business rates. Our corporation tax bill National Policy Planning Framework and Town would have been about £140 million; we would have Centre First being implemented properly. paid business rates of £360 million, and we are seeing David Hobbs: You asked about the focus. It is very it increasing rapidly. challenging in a sector that is so diverse. The focus does need to differentiate between national, local, Q229 Ann McKechin: Do you think that those who European and international issues and acknowledge are engaging in online shopping, primarily, should the fact that it is multi-channel in the modern world. take a larger share of the tax burden or take a tax The biggest challenges we are facing at the moment burden that they currently do not? are the economic challenges that the whole country is Tim Fallowfield: We certainly think there is the facing. Those are impacting small and big retailers. opportunity for a debate in relation to redistributing The primary focus, of course, that we would like to the tax burden. Previously, someone referred to the see is on a growing economy. PwC report; it is very important to look at that. We The business rates point is an important one. Retail is also have some stats in relation to the UK in disproportionately impacted by business rates, comparison with European countries. The UK’s because of the nature of property in the sector. It is proportion of property-related taxes as a proportion of important to focus on dealing with and supporting GDP is significantly higher than that in any other that. country in Europe. Ann McKechin: Business rates are related to the Q230 Mr Binley: I have had the good fortune to visit value of property. a couple of your stores in Hungary. I know that Tim Fallowfield: Yes. Sainsbury’s are also involved. I am not sure about The Ann McKechin: Some would argue that the value of Co-operative Group. property in the UK—not just in the commercial sector Tim Fallowfield: No, not in Hungary, just the UK. but in others—is just too high overall. Is that the root Mr Binley: You do not have any in Hungary, but you of the problem? Obviously, it drives up rents as well. are involved in marketing outside of the UK, aren’t Tim Fallowfield: You can look at the existing system you, in the United States? Am I wrong? and decide whether you need to change the Tim Fallowfield: Hopefully no one is doing that on component parts of business rates, or you can do a our behalf, but we are not doing it. fundamental review of the business-rates system itself. Mr Binley: There is a good opportunity, so get out In the United States, for instance, they have there and do it, but that is by the by. I want to touch introduced a main-street fairness tax, which is on global retailing, because Britain is one of the redistributing the tax burden by applying effectively a leaders of global retailing. You only have to go to a local sales tax, which would obviously apply equally mall in the Middle East, the Far East or the States to to online retailers and bricks-and-mortar retail. We know just how important global retailing is to this would suggest that would be a very worthwhile country. I recognise that you are not involved, but you review by Government—to try to make sure there is certainly are. I wonder if there is anything we can do a level playing field. to help get Sainsbury’s off their backside and get them Martyn Hulme: For me, the Retail Strategy document out there. highlighted the importance of retail to local David Hobbs: Tesco operates in 12 markets around economies. It is quite close to our heart and something the world. I have had the good fortune to have been that I would certainly echo: there is the multiplier the COO in both Malaysia and China. It has been an effect not only in terms of traders, from a retail amazing experience, as you rightly say. UKTI has perspective, but what else this creates around it been supportive. For example, in Malaysia it helped through other employment. Clearly, if that falls away, us develop the right relationships and contacts with the multiplier effect goes in the opposite direction. the Government in Malaysia, so that they could help Government could take a more active role in some of to push our case and support our growth there. the core challenges. It is really important that we are International retail is a great opportunity; the UK is looking at the parking charges, which produce what I world class in our retail capabilities. Supporting that consider to be a non-level playing-field. Yet there is to grow internationally is a great thing. this tension for local authorities in terms of raising I am not sure about having Sainsbury’s out there, but revenue and the choices that they have. It starts a it is certainly a good thing to do. downward spiral, in my opinion. I would welcome Tim Fallowfield: We certainly recognise the some of the comments that you were just coming on opportunities. We have not invested, as such, outside to in terms of business rates, which, effectively, were of the UK yet. set in motion many decades ago, which is not the Mr Binley: I just wanted that on the record, because position today. It would be worth having a clear look it is very important. Business, Innovation and Skills Committee: Evidence Ev 57
2 July 2013 Martyn Hulme, Tim Fallowfield and David Hobbs
Chair: If you feel that there is evidence you would in retrospect, we feel there is a question that we have liked to have given, but for one reason or another should have asked but did not, we would be grateful did not give at this session, please feel free to if you would respond to us if we send it to you. Thank contribute it as supplementary evidence. Similarly, if, you very much. Can I have the next panel, please?
Examination of Witnesses
Witnesses: David Owen, Chief Executive, GFirst Local Enterprise Partnership, Professor Joshua Bamfield, Director, Centre for Retail Research, Alexandra Birtles, Head of External Communications, TalkTalk, and Liz Peace, Chief Executive, British Property Federation, gave evidence.
Q231 Chair: Good morning and welcome; thank you Professor Bamfield: We do not challenge the change for agreeing to contribute to our inquiry. I will start, as either, but it is possible that undesirable consequences I did with the others, by just asking you to introduce will occur from everybody changing either too quickly yourselves for voice transcription purposes, starting or quickly, with unexpected consequences. with you, Alexandra. We have several problems. One is driven by the slow- Alexandra Birtles: I am Alexandra Birtles. I am the growth economy, particularly after a very Head of External Communications at TalkTalk Group. fast-growing economy in the 1990s and the early Liz Peace: I am Liz Peace. I am the Chief Executive years of this century. We have technological changes of the British Property Federation, which represents online, as you say. We think one of the factors that the commercial property industry, so effectively the has led consumers to shop so much online is that they landlords for an awful lot of the retail industry. have been shocked by the way in which the economy David Owen: I am David Owen. I am Chief Executive has grown so slowly. Then we have the competition of GFirst Local Enterprise Partnership for and structural change, where retailers like Gloucestershire. supermarkets, for example, have very successfully Professor Bamfield: I am Joshua Bamfield, Director hoovered up parts of spare business. at the Centre for Retail Research. We look very much Although everybody blames Amazon for what has at the changing retail structure of Britain and Europe. happened in media and books, if you go around any Tesco or Sainsbury’s you will find they have a big Q232 Chair: Thank you very much. I will start with book operation as well. They are selling newspapers, a fairly general question. I would repeat what I said homeware and crockery. Sainsbury’s is the seventh to the other panellists: do not feel that everyone has largest retailer of clothing in the UK. All these things to contribute an answer to every question, if you really have been happening at the same time. If it was just have nothing more to add to or subtract from what has one of those changes, more businesses in the retail been said. I will start with footfall and changes in sector would have survived. It is difficult, however, to consumer behaviour, as we have had outlined by the cope with all three. previous panel. Do you think that, in the future, the We expect consumer behaviour to change again. As sort of geographical scope of retailing will be the economy moves out of recession, we expect profoundly different as a result of this? Who would people to go back to high streets and spend a bit more, like to lead on this? but it is a bit like the 1930s. When I was a young Liz Peace: I am happy to kick off on this. man, everybody was talking about the 1930s and what Chair: You have beaten Joshua by a short head, but, you should not do. The 1930s had a big impact on Liz, you can start and then I will bring in Joshua. the way in which they thought—and particularly in Liz Peace: I promise I will not go on. Certainly, we Germany this was the case. We will find that people have seen a very substantial change—particularly in will still be talking about this recession, what it meant relation to the impact of retail on town centres and to them and why they cannot borrow or spend as much high streets. Basically, town centres and high streets as they did, for example, about 10 years ago—even in blossomed. Lots more retail came through the 20th century, but now it has shrunk and it will have 10 or 20 years’ time. This is something retailers have to shrink back again. There is less demand for retail to accept and live with. in traditional high streets. Obviously, what you have Due to the structural change and the change in seen is a blossoming of malls, property malls, technology and innovation, our conclusions are that out-of-town shopping centres and out-of-town there probably are too many shops and we may well supermarkets. see 20% of them disappearing over the next few years. From the perspective of the property industry, we are David Owen: The challenge as we see it is more about winners and losers, because we own property in town the definition of what retail is. We see retail as a centres and high streets. However, a lot of my customer experience that goes beyond shopping and members have also benefited hugely from the purchasing goods to going to cinemas, restaurants or developments out of town. We do not challenge that cafés. It is about injecting passion into the high street change; we think we merely have to adapt to it. The and town centres, and injecting an experience. Our key, from a sociological perspective, is how you adapt chair, who comes from a very strong retail background to the impact that has had on the town centres and with a company called SuperGroup, talks about the high street. We cannot put the genie back in the bottle; theatre of retail. It is not just about the shops where we have to learn to live with it. you buy things; it is about the whole experience you Ev 58 Business, Innovation and Skills Committee: Evidence
2 July 2013 David Owen, Professor Joshua Bamfield, Alexandra Birtles and Liz Peace go through. It is a leisure activity, not necessarily a Liz Peace: Thank you. I will take that as a direct purchasing activity. compliment—partially. Some of the challenges this creates are in usage. We Mr Binley: I think that is fair. heard, previously, about the change of usage from mixed residential and retail, but this could also be Q234 Chair: Yes—in more ways than one. Coming about usage between different types of retail and what back to the subject, do you have any further comment we might consider to be part of our retail experience, on that? Could I raise a further issue, which is mixed- and about planning being more flexible around what use development, retail and residential areas? Do you it will allow in specific buildings on high streets or in think there is a case for the Government considering town centres, which adds to that broader experience. policies that might encourage that? Chair: You do not have to say anything, Alexandra, Liz Peace: We are obviously very interested in this, unless there is anything you wish to add. because it is all about the freedom to use your real Alexandra Birtles: I thought I would pick up on the estate—the property, which you own, as the owner or point about consumer behaviour. Obviously, consumer the investor—in the most lucrative way, which is no behaviour is changing. Increasingly, consumers are problem, but also in a way that will most benefit a expecting shops’ retail presences not to be confined to town centre. As I said in my opening remarks, town a physical shop but to expand into online. People like centres’ high streets have spread. There is now not to start their shopping and purchasing journey online. the same amount of demand for that spread of retail. On the flip side, business has also recognised that. Therefore, facilitating sensible shrinkage of retail back There is a tension on the skills side, which I know has to the retail core would be very useful. You could also been discussed quite a lot in the earlier sessions, about then look at alternative uses around that retail core. how they can embrace that and see it as something What we do not advocate is a complete free-for-all. positive that can enhance their business, rather than This is where it is important for communities and something that is scary and is going to be a detriment local government to get their policy approach to this to them. conversion from retail to residential right. Our view is that the local authority should work out the retail core Q233 Chair: Do you think all of that renders the that their population needs and can support and should Town Centre First approach irrelevant? draw a line around that. It should not allow easy David Owen: No, I do not think it does. Town centres change of use within that, but there should then be are absolutely vital to our local communities, because easy change of use—permitted development, as it is a dead town centre creates an atmosphere, termed—for the rest. As I say, we do not want a environment and culture in an area that becomes complete free-for-all but much greater flexibility for increasingly challenging. People do not see those sorts of places that clearly do not have a sensible opportunity; they do not feel good about the place in retail future. which they live or work or play. I think Town Centre Professor Bamfield: It is absolutely right that the high First is absolutely the right approach. street and town centres need a clear strategy. We feel it would be great to get families and real people back Liz Peace: I agree with you on that, but it does require into living in the high street—as opposed to the high a different way of thinking about a town centre. This streets that, in some night-time economies, are is where you need very strong leadership from those disaster areas. bodies who can exercise leadership. This is not We have spoken to 60 people who are involved with necessarily the local authority; it might be a business managing town centres or are key people in their improvement district, a business forum and, maybe, a Portas or Portas-plus groups. What I should say—and LEP. They have to have a plan and a strategy for what one thing they say, as well—is that we have to run the that town centre should be. It is no good trying to high street like a business. We need to communicate say, “We will stop all out-of-town supermarkets.” Big with our local shoppers. Totally Locally was an supermarkets do not want to come into town centres, example. Landlords have to be more flexible and but smaller shops do. Service industries want to come reduce their rates. Business rates are horrific in some into town centres. You cannot get your hair cut areas. We should consider financial incentives for new online—yet—or your nails painted or whatever else. entrants, i.e. new people who want to practise retailing There are a lot of other things you can encourage into and perhaps will be the Tesco or Sainsbury’s in 20 town centres, plus cultural and entertainment uses. years’ time. It is not much use just going on about Town Centre David Owen: I would agree with both of the last First unless you have a strategy and a plan for how comments. Setting a vision and a strategy for a town you are actually going to implement that to create centre is absolutely crucial. The work we did—with something out of your town centre, which might be the support of BIS and a number of private-sector very different to what it was 30 or 40 years ago. partners—to develop a successful high-street toolkit Chair: I am intrigued by your comment about online demonstrates that a lot of places need to wake up and hairdressers. Could we have pick and crop or realise what kind of town centre they are and what something? kind of opportunities they have or do not have. Not Liz Peace: I shall continue to prefer to get mine done every town centre or high street can be Oxford street, by a real person in a real shop, but then I am old and but they can all be successful in their own right. old-fashioned. Mixed-use development can add real vibrancy to a Chair: I was going to say you have rather more town centre. Our challenge, as the local enterprise beautiful hair than I have. partnership, is to get the other local enterprise Business, Innovation and Skills Committee: Evidence Ev 59
2 July 2013 David Owen, Professor Joshua Bamfield, Alexandra Birtles and Liz Peace partnerships waking up to the opportunity that retail it for storing boxes in, because boxes do not complain in town centres offers, as was said in the previous when there is noise or a problem. session, but also to get more places using the toolkit and understanding what their opportunities are and Q236 Chair: Could I ask about the Portas review? what the key tools are that they could be using to What progress do you think has been made on the improve their position—not to try to compete with implementations of the recommendations? Who other areas that are not like them, but to maximise the would like to lead on that? I was going to say they potential they have as places. It can be really difficult are all looking at you, Professor Bamfield. for some town centres to realise that they are not Professor Bamfield: In this report, we have a chapter competing with the people they once thought they on the high street and Portas. There are two ways of were. looking at it. One is that what Portas has done is Liz Peace: Very quickly, on this point about actually used her celebrity glitter in order to make residential and retail, I take the point about not everybody talk and think about the high street. She wanting a residential desert at night, when the has generated lots of ideas. The report that came out night-time economy takes over. However, of course, at the same time as Portas is excellent. There are a lot one way of getting integration of residential and retail of ideas around and many people have been enthused. is to allow the retailers to have the ground floor and We have talked to some of the people who run some use the space above the shops for residential. We of the schemes—not the Portas schemes, but the actually produced a report—I think it was back in Portas-plus schemes—and they were thrilled that 2006 or something—under the previous somebody was thinking about them now, that people Administration looking at LOTS, as we called it, or actually did love them, and that town councils that, 20 living over the shop. We would be very happy to send years ago, saw the high street as a creator of traffic the Committee a copy of that report, because we congestion—and, perhaps, car park revenues—were recently found it again. The current Administration actually saying, “There is a problem; we want to said they were very interested in this. We said, “Here help you.” is one we prepared earlier.” There are a number of One question is whether things would have been barriers to making it happen. There is a lot of wasted worse without Portas. No, things have been brought space above shops, and that is a good way of doing together and people are thinking about this area. this: retail on the bottom, residential on the top, with However, the weakness is in the administration of the lots of other uses around that residential core. policies. It is much too early to judge whether or not it has been successful. After all, you could have lots Q235 Mr Walker: It would be very interesting to see of brilliant retailers entering a town centre at the same that report and I encourage you to send it in. However, time as some not very good multiple retailers closing you mentioned a range of other barriers. It strikes me down. To look only at whether there are more shops that this has been an issue for a long time. We have or whether there are more voids or fewer voids, at this had high streets with space above them that is very, time, is just wrong. very underutilised. Partly, the current structure of the The issue, however, is that the high street, as we have business-rates system almost encourages that by been discussing, is not just a matter of, “Let us having different rates set for different levels of retail improve communications, let us tart it up; let us do space. What other barriers do you think we should this and put flowers in”—and so on and so forth. If be looking to remove to make sure that it is worth the high street was brilliant, communication would be commercial property owners’ while to convert some of their property into residential if they can? all that was required, but it is not. It is a structural Liz Peace: As you rightly say, there are some practical issue; a property issue; a legal issue; an economic problems with that. A lot of retailers have been very issue; and a technological issue, as well as a celebrity nervous about tying themselves into the and communication issue. inconvenience and administrative burden of having There is nothing wrong with what Portas has done, people living above their shops. There is then the except that we now are in a situation, as people who possibility of complaints: early morning deliveries etc. advise people who are involved in the high streets, There are practical problems, but there are also some where it really is a much bigger problem and we have interesting financing problems with this. From to work together in order to do it. It cannot just be personal experience, having looked at trying to help done by the Government. my son buy a flat, when times are tough, mortgage providers are very nervous about giving mortgages to Q237 Mr Binley: Can I just follow that up with residential property over retail premises. I took this up Professor Bamfield? He will know Northampton just with a number of people, and one of the big property as well as I do. The remarks he makes fit owners I know who buys residential property said that Northampton’s sizable town centre absolutely they would not normally, out of choice, buy superbly: this is a holistic problem. For instance, residential property above a shop unit. They tend to without really thinking about it we have put a ring get some, because it comes in portfolios. road around the town centre, which makes access very This is something to look at, because there is a lot of much more difficult than it might have been. We have reasonably priced accommodation above these retail more traffic lights and coloured lights than Blackpool units that could be brought into use. However, I do has in illumination week. It is this sort of thinking not underestimate the practical problems. A lot of that opposes increased use of the town centre as the retailers do get quite nervous; they would rather keep community’s heart. It is a much wider perspective Ev 60 Business, Innovation and Skills Committee: Evidence
2 July 2013 David Owen, Professor Joshua Bamfield, Alexandra Birtles and Liz Peace than we are considering, isn’t it, Professor Bamfield? They have started to think about strategy and vision. Is that what you are saying? I totally agree with your comments earlier: what Professor Bamfield: Absolutely. One of the things Portas did was put retail, the town centre and the high that people do not talk about very much is car parking. street back on the map again, which has then led to Obviously, in some areas, car parking has been used places thinking in a more strategic way about how as one of the few ways of local authorities getting they can develop. That has been fantastic news for money, but even in areas where the car-park charge is us. We have very active Town Teams in Cheltenham, low, often it is a psychological barrier to somebody. Stroud, Cirencester and in small towns in the Forest They might well prefer to drive more miles and spend of Dean, who are really starting to think about what £5, instead of spending £1 in a machine in their local the future holds for their place in terms of retail and car park. One has to accept that, whilst the customer high street and the experience. is always right, you need to provide some voucher or The glaring gap in Portas was the lack of reference some sort of ticket so that it is less of a problem. to the night-time economy and the importance of the Every local authority—we have said that every high night-time economy and how it fits with town centres. street is different and probably needs a different You actually need to think about not just a 9 to 5 or policy—has to think about what is required in order an 8 to 6 economy but a 24-hour economy. So many to bring people back and, once they have come back, town centres that we see are either dead or are places to keep them coming back, so that it then becomes an that you would not want to go to in the evening, economic proposition to open more and more shops because of the kinds of services that are offered. That on the high street. was the gap, for us. There was no real mention of the Liz Peace: I would not disagree with any of that. We night-time economy and how important it is in the got to know Mary very well when she was doing the 24-hour economy that so many of us now live by. report and I ended up having a lot of respect for what Chair: As a native of Cheltenham, I welcome your she came up with. In a couple of her reference to the work being done there. recommendations, she alluded to the fundamental Mr Binley: I want to think about the daytime issue, which is that the solution for the high street is economy too, and the lunch-time economy, especially. not about retail, necessarily. There are a lot of other You only have to look at where the county council things you need to bring into the ambit of a town have put their big offices; they are out of the town. centre. The borough council shoved their people out of town This requires a huge degree of co-ordination, because and they are now bringing them back, because they if, for example, you want the local doctors to move recognise that the heartbeat of the community hub is their surgery into the town centre, how do you absolutely vital. There are things we can do in that persuade them to do that? What is the role of the local respect. health authority, the local clinical commissioning group or the health trust? I do not know what the Q239 Mr Binley: I thought you might guide me, structure is; I am not an expert on health structures. Chair, and I am grateful. I want to talk about the It seems to me, however, that it is a wonderful way of LEPs, because I do think that business is missing a bringing footfall and life into a town centre. In my sizable opportunity. I know that their induction has particular town in rural Hampshire, they stuck the been patchy over the country, but I do think business surgery a mile out of town. People who do not drive has not taken up the challenge in the way it ought to cannot get there very easily. There all the attendant do. I wonder whether, David, I can direct this at you things that go with something like that: people need a initially. Could you describe how the Gloucestershire chemist for their prescription; they want to have a cup LEP is doing, in that respect? I repeat: if it is all of coffee to relax afterwards. The holistic plan that local government or quasi-Government, it will fail. goes beyond retail is hugely important. How are we doing in terms of getting private business I would be slightly worried that the Town Teams that into LEP work? the Portas pilots gave rise to have been very focused David Owen: I should only really talk about my own on just bringing in retail solutions. LEP. Mr Binley: Yes, I have asked you to talk about Q238 Chair: You have mentioned the Portas pilots. Gloucestershire. It is fair to say there has been some variability in their David Owen: The real treat for us was getting the delivery. I am not going to mention the town publicly, right person to chair the local enterprise partnership. but I know one town that has been beset by political Diane Savory is our chair; she was at SuperGroup for arguments about the allocation of the money. Do you 22 years, which founded the Superdry clothing brand. have any particular perspective on those? She was with them from market stall through to David Owen: The biggest impact we have seen at a float—they floated on the stock market three years local level—we did not have a successful Portas pilot ago—as Chief Operating Officer. She is a true in Gloucestershire—is actually the galvanising of entrepreneur. That was the trick for me, and I count Town Teams that did put bids together but then were my blessings every time I meet some other LEP not successful. They have come out of the other end chairs, who are less entrepreneurial and less of a bidding process with a strategy and a vision for business-focused. Without that entrepreneurial flair, their towns and they have recognised that, actually, that spirit of innovation and genuine business focus as maybe it was the best thing that they were not a chair of an LEP, you do start to see more influence successful, having seen how some of the towns that from local government, the public sector and others, were successful have suffered. who have a slightly different slant on the direction Business, Innovation and Skills Committee: Evidence Ev 61
2 July 2013 David Owen, Professor Joshua Bamfield, Alexandra Birtles and Liz Peace that LEPs should be going in. The trick, for us, was or that their demise is inevitable, because we will all getting in the right person as chair. Diane has an buy more online. We do not believe that; we believe absolute passion for retail, as you might expect. there is a role—and there will be, certainly for the rest We set up a very strong retail-sector group alongside of my lifetime—for high streets and town centres to nine other sector groups, which cover our key sectors play, so long as the focus is on the theatre and the in Gloucestershire. They are purely businesspeople: experience of retail. they are genuine businesspeople running businesses right across the county. That is at the very heart of Q242 Mr Binley: I am going to be immensely what we consider our role as a local enterprise provocative: I was disappointed with the response I partnership to be. We have strong leadership from a got from our business leaders in terms of LEPs and chair with a very credible business background who the opportunities they provide. Am I being mean or is well known locally; we have very strong are my comments fair? relationships with the local authorities, because we Liz Peace: Perhaps I could chip in on the part of the cannot deliver, as local enterprise partnerships, property industry. You would imagine that people who without a genuine partnership with our local own real estate would be very interested in getting authorities; and we make sure that the LEP is seen by involved in the LEPs, because their stuff is local businesses as being led by business for business, immovable; it is in a particular area. to grow the economy. First of all, most of the LEPs started off in an That is why we have been reasonably successful, I extremely difficult position with very limited would say, in Gloucestershire at driving the LEP resources and, frankly, very little power. That is why agenda forward and engaging a very wide community the progress of some—yours sounds terrific; I do not of business people in it. actually know the Gloucestershire LEP, but I know a number of the others—has been a lot better than Q240 Mr Binley: You may have heard—I do not others. know if you read the minutes of our last meeting— My industry was very sceptical about engaging with that Martin Blackwell, who is the Chief Executive of LEPs, partly because of the resource involved. If you the Association of Town & City Management, was are going to put senior people on these boards, have quite disparaging about LEPs. He said they do not you got the senior people who can do that? They are even realise town centres exist. Quite frankly, I find supposed to be back in the office or out in the field that remark remarkable. Nobody involved in business actually doing the business, not talking about it in in any given area can actually think that way, but there local talking shops. Frankly, there was a deep is an underlying point there. I wonder if it is just about scepticism that they would be just talking shops. getting a good chairman or whether there is more to Where they have shown they are not, my industry has it than you are telling us. been keen to get involved. David Owen: It is not just about getting a good However, there is still a resource issue, because, from chairman. However, we are fighting against a tide of the perspective of property owners and the big not particularly supportive comments from either property-owning companies, they need to engage with central Government or local government about retail local authorities at the county, district and borough as a sector for a number of decades now. We have felt level. A lot of them have put their weight behind that the commissioning of Portas, the change we have business improvement districts; some of them have seen in attitude and the delivery by BIS of a Retail got involved in business neighbourhoods. There are Strategy has started to shift the tide at a local level. all these different ways of getting involved, and then We are starting to get much more engagement from somebody comes along and says, “Come and sit on a retail businesses locally, who see a purpose in the LEP board.” It is a confused scene out there. LEP. It has been a real struggle for us to engage other LEPs in the importance of the retail sector. Q243 Mr Binley: The LEP has the option to have a much more strategic overview. We are talking about Q241 Mr Binley: Let me widen it out. Of course, really rather small areas. Whilst town centres are very retail is an important sector within our local economy, important, and I have made that point, transportation, but it is not the only sector. How do you balance that? connectivity, roads etc. are vital parts of creating a David Owen: For us, locally, it was about looking at local economy that works. I wonder whether people which sectors were the most significant in terms of like you are selling that opportunity enough. I am employment and value to the economy and which sorry to be so challenging, but I do challenge. sectors were predicted to be the most important to Liz Peace: You are right—and, indeed, I spend a lot our local economy in 10, 15 or 20 years’ time. In of time challenging my membership and saying that Gloucestershire, advanced engineering and they need to get out there and be involved in these manufacturing is our biggest employment sector, bodies. The response I get is, “We try. We do not have which is closely followed by tourism, leisure and the resource to serve all the bodies that we need to retail, followed by the health sector and followed by serve out there. Where we can see a real purpose in the public sector. For us, it was about working through being there, we will be.” what the primary employment sectors were in our For instance, talking to one of our big property location and then setting up a series of sector groups companies that is an extensive landowner in Leeds, I that would address the needs of those sectors. said, “Why aren’t you in the Leeds LEP?” His answer I suspect that retail and high streets are, in some areas, was slightly different. His answer was, “I am a little taken for granted as something that is always there— nervous that, if I am there banging my drum in the Ev 62 Business, Innovation and Skills Committee: Evidence
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LEP, people will think I am doing it for self-serving We do not just see it in retail, however. We see it in purposes—to try to get planning permissions for our some of our global engineering businesses, which in particular property company.” I said I thought that was effect fly in an MD for a three-year period before they daft and he should just get in there, throw in his lot fly them back out to go and run another part of that and put in his tuppence-worth and look at how to business. That is all well and good, and it works very develop the bigger region. well as a business model, but it does make it more The other point is that a lot of business are quite challenging to engage in local issues, as you have localised. If you are a property company and you own described. It is not exclusively retail, I do not think. a shopping centre or a swathe of land in one particular Chair: I want to move on from this subject, because place, you are interested in what that local authority we still have plenty to get through. The next subject can do for you. Therefore, you build relations with may well take a bit of time, as well. Please make it as that particular local authority. Having the time and brief as possible. resource to look more broadly is a luxury a lot of businesses cannot afford; however, I agree they should. Q245 Paul Blomfield: I wanted to return the Professor Bamfield: Fist of all, I agree that it must be discussion, as we did with the earlier panels, to skills. not only businessoriented but businessrun. One of the Earlier we were talking with fairly big retail players. issues with the way in which central Government and You may be able to offer a different perspective on local government interact with retail is the fact that what the skills needs and training needs of the sector the borders or boundaries of local government and are, and whether they are generic or sector specific. central Government do not relate to anything that Professor Bamfield, perhaps we could start with you. retailers do. You may say, “You retailers ought to Professor Bamfield: Retail has done a lot, in change your boundaries,” but nonetheless they have conjunction with the Government, to improve the set these up. If you saw the way Tesco changes its overall level of skills and, obviously, relate this to a boundaries—it is almost every month, because framework. There is a tendency to try to train people so-and-so has been promoted etc.—you would be for particular jobs, with the view that you can add amazed. things to it as part and parcel of the person being The problem with that, as Liz was saying, is that it is promoted. One problem that retailers do have, of very difficult to find enough smart people who you course, is the churn or the turnover you have in retail would be prepared to send off to an organisation for staff, which obviously is less than it was in the middle a couple of mornings a month for two or three years, of the last decade, but is still considerable and is a for example. They are there as the head of a store in problem where people enter a particular profession not Cheltenham, perhaps, and after a couple of years they because they want to be there but because they cannot are off somewhere else. It takes them a year, actually, get a job elsewhere and they are waiting until a better to find out about the road pattern of where they are. opportunity comes. This is not a good way to start They are then ready to sit on this committee or the education. committee that is concerned with crime or another Nonetheless, it is accepted. There are things like committee that is concerned with some other aspect online education; retail is at the forefront of online that retailers are supposed to be consulted about, and learning. I listened very carefully to the people from then they are off. the supermarkets in the last session. I agree very much Retailers always have this problem. Obviously, the with what they were saying, but there is a “but”. The local authority says, “This is our area and we want to “but” is that we are moving from a situation where talk to everybody.” For example, if you are operating we have online retail, of which some is done by store an aluminium works in Bristol, it is relatively easy groups, and then we have store-based retail. We are to ensure that you have continuity there, but because supposed to be moving to multichannel and then, retailers are always being rotated around different obviously, omni-channel, which of course is the regions, it is very difficult to provide that. Hence they latest thing. are always told, “We want your opinions; please get That is where we have a terrible skills gap. We need involved; please help us to run this policy.” This is people who understand business and are going to be great, but it does not relate to anything that retailers can really do. What is amazing is the amount of work able to operate so that, whatever channel the customer that they do, but it is extremely difficult to respond to uses, whether it is standing outside the shop, their all of the requests that are made to them. mobile phone, using their computer at home or simply only through shops, the price, the experience and so Q244 Mr Binley: The answer really is that we have on are the same. In the IT world, people are needed to make them more meaningful to the business sector, who understand the architecture that is required and but the business sector also needs to recognise that who are going to be able to cope with the massive they are an opportunity, too—and they need to rise to changes needed. Another need is for people who that challenge. Is that the answer you would give me? protect retailers and consumers against fraud and David Owen: There is always a challenge with the cyberfraud. We have a terrible hole there, as a engagement of either global or national businesses at nation—because, of course, retail is not the only a local level. We see it in retail. We get far more industry that wants to move very quickly in that way. enthusiastic engagement from locally based retailers, As far as ordinary trends are concerned, we are pretty who have a direct personal interest in the area as well good; as far as this tremendous technological need is as a business interest. concerned, we are weak. Business, Innovation and Skills Committee: Evidence Ev 63
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Q246 Paul Blomfield: In the discussions we were experience and research that businesses are really having earlier with the big players, I was struck by optimistic about the opportunity that technology the fact that, clearly, their organisations had a critical affords, but there is a basic skills gap there. More mass and were able to engage in training in a very businesses should be lending their expertise and holistic way at all sorts of different levels. What is the support to local small businesses. position of training needs in the smaller independents, which are so critical to so many of our town centres Q247 Mike Crockart: The question I was going to and high streets? ask is in the area we have been talking about. David Owen: At the moment, we are doing work with Professor Bamfield, you recently gave a report card the National Skills Academy for Retail, the University for the technology gap for skilled employees; it was a of Gloucestershire and Cheltenham Borough Council, “weak” rating. Whose responsibility is it to tackle which have invested some of their high-street that? Is it Government or is it, as Alexandra has been innovation fund in training and mentoring for outlining, for big companies to step in? Who should independent retailers. We see it as a real opportunity. be leading on it? The challenge for retail in the UK is where the next Professor Bamfield: It is a combination: universities; generation of globally successful retailers is coming the Government, in the sense that it is always the from. The Borough Council decided, with a very Government’s fault; and retailers themselves, who strong base of independent retailers, that they should have to give the message to the marketplace that this be looking at what support could be provided to make is an important area that at the moment is relatively sure that those retailers survive and then grow. That small but is going to be absolutely massive. We need scheme has been extremely successful. Big numbers people there. It is not good enough to say, “Well, there have not gone through it yet; I think eight independent are lots of people in India who can do this; let us bring retailers have been mentored. However, they all now them over.” That can be part of an approach to the have accreditation and they are looking at rolling that problem, but it is not the answer to the problem. out in other towns in Gloucestershire. Alexandra Birtles: If I might add to that, it is a We have put in an Employer Ownership of Skills bid combination of people. You cannot say it is only to try to roll that out with the National Skills Academy Government or only business or only the third sector. for Retail right across the country, because it is a real It is about them working together. There are some challenge for independent retailers to be able to take encouraging signs that Government are taking this the time out to think about how they are running their perhaps more seriously than they have done before. business and the mechanics of it. It is a challenge in As I mentioned, we are going to be working with BIS any business, but it is particularly challenging when on an SME digital capability programme, which was you are customerfacing all of the time that your announced a couple of weeks ago. It is too early to business is open. We are working on ways for them say what the results of that will be. to get that mentoring support and skills development There is much more that we could do and that at the same time as being able to run their business Government could do across existing programmes to and work with their customers. make sure that they are embedding proper digital Alexandra Birtles: I might come in here as well. skills training for all jobseekers and people doing From our perspective, both as TalkTalk and in our role National Citizen Service work programmes. as cofounder of the charity Go On UK, chaired by Government should then be challenging businesses to Martha Lane Fox, which is looking to improve digital do more as well. skills in both consumers and businesses, we see that there is a real opportunity and responsibility for larger Q248 Mike Crockart: I hesitate to use the phrase, businesses to provide support, much as David has just but this is a back-to-basics problem. In one of my been saying. other roles, I sit on the Parliamentary Information and We think that a lot of that focus is on bringing in Communications Technology Forum and meet CEOs national companies, such as us—bigger businesses— from IT companies on a regular basis. They have a and building partnerships with local, on-the-ground common complaint: kids are not interested in IT as a organisations, who have the networks and the reach, potential career. They were put on the spot and asked, while we perhaps have the skills and more of the “What are you doing to go into schools to make them resources. We are going to be launching a pathfinder interested in that career?” There was deafening in the north-east from the autumn, where we are trying silence. There does need to be a pipeline of interested to super charge the region and focus on improving kids coming in to fill these gaps, because tinkering digital skills there. around the edges is not going to fix it. How do we One of the key things we are doing in this space is on get that? the digital skills side, as part of Go On UK; we are Alexandra Birtles: There are two different things we working with BIS on this. There are not many look at here. First, there is still a really big skills gap resources there for SMEs to use to improve their at the basic level. Some 16 million adults in the UK digital skills. There is quite a fundamental resource do not have the skills to use the internet properly and gap, which we are looking to build resources to help safely. Businesses do not know how to set up a fill. We are building an online marketplace of tools, Facebook page and so on. There are some quite basic but there is a real opportunity and responsibility for skills issues. bigger businesses to take their expertise and mentor In terms of the more highly skilled stuff, you are and champion small businesses and teach them to starting to see some brilliant programmes coming overcome the skills gap. We know from our own through. We work with an amazing organisation called Ev 64 Business, Innovation and Skills Committee: Evidence
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Code Club that teaches kids to code in primary Q250 Mr Walker: Can I come in on that? One thing schools. They are doing some fantastic things. People that has been discussed and tried in other markets is are starting to realise there is a gap; there are some linking rents and rates to turnover. That is something more programmes coming through. On how to get that, obviously, the property industry, which you are kids interested in IT, on the girls’ side I would say get representing, would have a role in implementing. them young. We work with Code Club, and they say Liz Peace: A lot of landlords have actually introduced once girls go to secondary school something very turnover-related rates or they have a turnover element strange happens and they stop being interested in IT. to them. In some cases, this works very well. The There is a really important thing about making sure industry is not against that. In a lot of cases, the that, from a young age, we are teaching kids that retailers are often not too keen on that. It also depends digital is a good career path for them. on the place and on having a good open relationship Liz Peace: Can I just add one point? Going back a between the landlord and the occupier, because they little bit, you were talking about skills for the retail need to share data. Fundamentally, however, the industry. A lot of my members have told me that, industry is not opposed to turnover-related rents. when they have gone to local authorities with My next point may sound like a very niggly, small planning applications for retail developments, the issue, but it is actually a very low-cost issue: we local authorities have been quite sniffy about the jobs. should give business improvement districts more teeth They say, “They are just retail jobs.” In fact, we by pushing through legislation that would require the should be talking up the value of retail jobs, because involvement of landlords in them. The framework not only does it teach you about how to deal with legislation—at least for London—has been in place customers and clients, which happens in every for four years. It has still proved impossible, somehow industry, but there is that underlying IT skills base to or other, for Government to lay the secondary a lot of retail, as Alexandra has pointed out. There is legislation to actually make that happen. a role for both local and central Government in talking Good landlords get involved in a business up the value of training in the retail world. It is not improvement district anyway; the landlords who demeaning to go and work in a shop: you can learn cannot be bothered do not. This would ensure that, if an awful lot and it can be a springboard to an awful and when the vote went that particular way, all the lot of other things. landlords would be involved and you would not get David Owen: As well, it has to be a joinedup the freeloading element. It would put more resource approach. There is a part for everybody to play. We into the business improvement district and it would have some very enlightened headteachers in schools; allow for a better, more holistic management of that we have some very unenlightened headteachers in particular area. The business improvement districts schools. We have some schools who are biting our tend, on the whole, to be retail-focused or a group of hand off to get as many businesses as possible to talk streets in a town or city. to their young people at both the primary and Professor Bamfield: As far as rates are concerned, it secondary education level. We have others where the is a problem, but the problem is also about occupancy door is slammed firmly shut and they are not costs, which very much relate to the retail climate of the early 2000s, rather than now. If the rates review interested in engagement with business. had not been postponed, people in most of England How we or the Government encourage schools to would expect to pay about 17% less. People who have have open doors for businesses to come in and talk the benefit of operating out of London would be about careers is a real challenge. That is the only way expecting to pay 22% more. in which many of our young people will have any The answer, of course, is not to say, “Let’s do it,” but understanding at all about a career in retail or to think creatively about people for whom rates are engineering—or whatever it may be. Careers now a real problem, because rates have lost the links education is simply not good enough right now. they used to have to rents. In other areas, rents are massively high. In some of these areas of poor Q249 Mr Walker: You will be aware of the demographics, the problem is that the rents have not BIS Department’s Retail Strategy. Within that, in fallen, even though the commerce has fallen. The rates which areas would you like to see it concentrate its are neither here nor there. We do need an overall resources? Also, we have had the discussion about approach towards this. business rates with other panels; I am sure there will There are bits of legislation. One of the problems here be views on that. However, are there any practical is that most town centres have approximately 200plus suggestions about improvements that could be landlords. Often, the identity of these landlords is delivered without massive cost to the Exchequer and unknown. London has either passed or is trying to get to local authorities? They would be very gladly legislation through so that people can insist on received. knowing who landlords are. This will be helpful in a) Liz Peace: I want to add my support to what the starting communication and b) trying to ensure that, if previous panel said about the need for a fundamental a place has been empty for too long, you are able to rebalancing of business rates between traditional retail do something about it. and the less traditional forms of retail. I know it is not Essentially, the Government do not really have a role easy, but if you were to look at the turnover per pound in this. It is about local retailers and local authorities of business rate paid in a little high-street shop and other stakeholders in the high street. The really compared with an ASOS warehouse or something like important thing is to enable them to have a strategy, that, it would be fundamentally different. so they can manage their own high street. This means Business, Innovation and Skills Committee: Evidence Ev 65
2 July 2013 David Owen, Professor Joshua Bamfield, Alexandra Birtles and Liz Peace that having a high street that is all pay-day lenders, Sometimes, we talk too much about online versus finance and betting shops is as bad as your high street offline; it is actually about bringing the two together. being turned into a range of Selfridges and Prada That message is really important to businesses that shops; it is good for some types of customers, but might be afraid of embracing the internet. We need to not good for everyone. The local community must be speak much more positively about it, and we need to allowed to retain some sort of control over it, ensuring make sure that there is this focus on skills and training that you get variety, which is what is so wonderful for SMEs, so that they have the support to make the about the high street. most of the opportunity that the internet offers. David Owen: I would totally agree with that. We are very supportive of BIS’s Retail Strategy, and the fact Q251 Chair: Thank you very much. That concludes that BIS has a Retail Strategy. We have had great the formal part of the questioning, but before we finish support from what is a very small retail team within I have a question for Professor Bamfield. It is, shall BIS. If we were asking for one thing, it would be to we say, most unfair, slightly mischievous and it will see retail come slightly higher up the pecking order in be totally incomprehensible to most people in this BIS, so that it is given the significance that it deserves room, but I am still going to ask it anyway. I do seem as a sector that employs 3 million people in the UK. to remember that, years ago, there was a reference to The opportunities, as we see them, are very much a former well known Member of Parliament in the about how you can enhance the high-street experience West Midlands. I think the quote was that he was the by using technology, rather than seeing technology worst thing to hit the area since the Black Death. Were simply as a threat and a thing that stops people going you the author of that quote? to the high street. Secondly, we need to do more to Professor Bamfield: No, no. What I said was that he export some of our smaller retail brands was bad news for Wolverhampton. This is so long internationally. The launch of the GREAT campaign ago. We used to get along quite well. in the next week or two weeks is a good start, but Chair: I do seem to remember the quote got there is a huge opportunity for our niche retailers to transcribed. export into emerging markets, because of the value Professor Bamfield: Never believe what you read in that is placed on Western products and the premium the newspapers. value that is placed on products we would not Mr Binley: We never do. necessarily see as premium products. There is much Chair: Again, we may well wish to ask you further more to do around exports of retail brand. questions, to which we would be grateful for a reply. Alexandra Birtles: Finally, to echo that, I would like Similarly, if you feel you would like to make any to see more reference to online and the opportunities further contribution, we would be grateful to receive that it offers, both in terms of giving businesses the it. Thank you. opportunity to grow and bring people back into the high street, and connect and better serve their customers. Ev 66 Business, Innovation and Skills Committee: Evidence
Thursday 12 September 2013
Members present: Mr Adrian Bailey (Chair)
Paul Blomfield Ann McKechin Caroline Dinenage Mr Robin Walker ______
Examination of Witnesses
Witnesses: Mary Monfries, Partner, PricewaterhouseCoopers, and Matthew Tod, Partner, PricewaterhouseCoopers, gave evidence.
Q252 Chair: Good morning, and thank you for Mary Monfries: I am more than happy to. I think it agreeing to answer our questions. I will just give a follows on very well from your point, Chairman, few moments for any members of the public to settle about the multifaceted nature of the industry. It might down. Could you introduce yourself for voice help the Committee if I briefly give the background transcription purposes? to the report that we did and why we did it. Eight Mary Monfries: I am Mary Monfries, partner at PwC. years ago, in 2005, we first did a larger report looking Matthew Tod: I am Matthew Tod, partner at PwC. at the total taxes paid by the Hundred Group companies; so, very broadly, the 100 largest Q253 Chair: Thanks very much. We will be asking UKheaded groups. That was looking at the total taxes you questions. Do not feel that you both have to paid by those businesses together. Very carefully, and answer every question if you have nothing to add to importantly, we distinguished between taxes borne— or subtract from what the other speaker has said, like corporation tax, employers’ NIC, irrecoverable unless we invite both of you to answer. Can I open VAT—and taxes collected on behalf of the with a very general question? The retail sector covers Government, because obviously they are very an enormous variety of businesses, from small different. The reason we looked at that was that we independent shops to multiple chains. What is your felt it was very important for policymakers, when they assessment of how they are coping with, on one hand, are looking either at an industry or at the economy the economic pressures on retailing at the moment, more generally, to look at all the taxes that can flow but also the changes in technology in the digital age from business, not just one. and so on—the so-called multichannel basis? Who What was really interesting, having done this for eight would like to leap in? years, was to start to see the trends. What was very Matthew Tod: I will take that one. It is an interesting clear in this year’s report was the trend of a move time, because clearly we have the economic hardship, away from profits taxes—a more variable cost to coupled with changing consumer behaviour, coupled businesses and a more volatile source of revenues for with the digitisation of many different product governments to fund public services—and towards categories. For books and games, they are moving other taxes. It was away from profits taxes like from being physical to being intangible products that corporation tax to other taxes like employer taxes, you download. At this point, we have three different business rates, etc., which are more of a fixed cost to things converging, and what we have seen is that businesses in nature and, of course, more of a stable retailers are adopting what they refer to as this multi- source of revenue for governments. That trend was channel business model, where they are basically clearly continuing. having different routes to the customer and they What then became interesting to us was to think describe themselves as multi-channel retailers. What about, “Well, how does the burden of that trend play most of the large retailers have done in that case is out in different industries?” That is why we looked at create additional business units, so for each way they this specific one as a start of painting the picture— are going to reach the customer—whether that is and it is only a start of painting the picture, because mobile or tablets or websites—they have created a of course, as you say, retail is multifaceted in itself— different business unit. Interestingly, this has not to look at “What does it look like for the retail enabled them to grow, so what we see in the big sector?” As you have seen from the report, it is not retailers is a top line of sales that is almost always surprising that, if you have a retail sector that is flat; increasing costs, as they bring in these new routes people- and property-intensive, the burden of that to market, and as a result, declining profit. In move towards people and property taxes will be felt answering your question, they have adapted to the in that sector. As I say, to conclude, I think it needs symptoms of “the consumer is changing”, but the to be looked at in terms of “What are the multifacets really hard yards of actually going, “You know what? of retail, what is it going to look like in three, five or We cannot afford to be multi-channel. We are going to 10 years’ time—not just now—and is the way we tax have to be one organisation; we cannot have multiple retail and different parts of retail going to be fit for warehouses and multiple teams,” have yet to be purpose for that future vision?” worked through. There is more restructuring within the industry to come. Q254 Chair: From your respective contributions, it Chair: Right. Mary, do you want to add anything to would seem to me that there are two broad issues here. that? The first is how the industry is responding to the new Business, Innovation and Skills Committee: Evidence Ev 67
12 September 2013 Mary Monfries and Matthew Tod technologies of consumerism, and secondly, how the have got a very different shareholder mechanism. Government taxes retailing in order to reinforce the They are owned by the staff and clearly focused on sector and its survival. Can I just go back to your the longer term and navigating a difficult transition report on the total retail sector? I think you touched for the sector. Other, shorter-term businesses will not on this, Matthew, in your opening remarks. You said have that luxury. that the sector was responding in terms of a multi- channel basis, but that this was a faulty formula. Now, Q257 Mr Walker: I just want to follow up on Paul’s I think you touched on why it is a faulty formula, but point about a false dichotomy. Obviously, you are we go on to total retailing, and I must admit I did look looking at this from the perspective of the biggest at your diagrams and could not make head nor tail of retail businesses, and the ones in the top 100. For them. You were very lucid in your explanation of why many of the smaller, independent retailers, there is not it was faulty; can you just tell us why “total” is the an option to have a separate division dealing with their answer in an equally lucid manner? online presence. They are looking at it from a Matthew Tod: Yes, of course. Forgive me. I think the customer perspective and working to keep up. Would heart of great retailing is about the customer, and you say there is any respect in which they have an having products and things that the customer actually advantage in being able to take a holistic view and a wants. If you set up an organisation that is actually customerfocused view, and how, in this multi-channel looking at channels and routes to market, that is really world, do these small independents, which we all very contrary to what the best practice is in all sorts value very much, compete? of different, other industries. Basing your business on Matthew Tod: It is interesting; I do, in a way. When how you get the product to somebody and saying, you own and run your own business, the notion of “Actually, she is going to buy from me through channel is completely irrelevant. It is just a sale. I met different ways,” rather than basing it on the customer, recently with a beauty business, where talking to the is more towards the future. What happens with owner of this business—which is now significant—he retailers who set themselves up with channels is that had no idea about multi-channel. He could not you have one internal channel competing with understand it. He also thought total retail was another. You have the web team competing with the complete rubbish, because that was exactly what he retail team. It is completely mad to compete internally did. It was one business. He does not understand; it is as to who makes the sale, rather than going, “There is one customer. The independent clearly has an a customer; she wants to spend some money. We had advantage in that space. They also have the advantage better make sure she spends it with us regardless, not in that there are many different routes to getting in with a competitor.” The whole thinking that we have front of a customer. Successful small retailers use is that you need one marketing team, one IT eBay as a route to finding customers; they use the department and one warehouse, rather than the multi- Amazon platform and the Tesco platform. There are channel route, where people tend at the moment to be many places where you can put your product out into setting up all these different teams within the the marketplace and still service that need through organisation. your business. You have got to adapt to that world. It is not just about building your website; it is actually Q255 Chair: So what you are saying is that you about using your specialisation that you have, your should have fewer teams, and that they should be, if service, your skills, your expertise, and then finding a you like, multi-skilled. way to extend your reach. Matthew Tod: Multi-skilled, yes. Q258 Paul Blomfield: This follows directly from Q256 Paul Blomfield: I want to drill down that idea that point, Matthew. What skills do you think are a bit more, and ask whether you are setting up some needed in the sector to support your total retail vision? sort of false dichotomy. There are some very headline- Matthew Tod: We need people who do not think of grabbing phrases in your report, but your point that a themselves as a channel specialists, first of all— successful retailer is customer-focused is a bit of a people who think on a customer basis. For example, nobrainer. Let us apply it to what looks like a when you look at buyers within an organisation, relatively successful retailer in navigating the new historically they have grown up by buying just for the terrain, John Lewis. They are very focused on having store, but I am afraid we now need them to look at an omni-channel strategy, and yet I think they are Twitter and Facebook and Pinterest to really get a feel fairly successfully navigating the terrain and of what is going on out there, as well as looking at absolutely customer-focused, and they are growing just what is going through the store. We need people their business. who have got both the digital nous, coupled with those Matthew Tod: Yes, I would agree with you, and they real product skills: they really understand menswear, have announced even better results this morning, but but they also know how to use digital channels to there are a couple of things. For example—they have make better decisions. I am looking for people who talked about this—the way that they remunerate their have got experience of both sides, and it is developing store managers is not just on store sales but on the those skills. total revenue they generate from an area around the Paul Blomfield: That is one very niche part of the store. The store staff are incentivised to provide great retail workforce. service to everybody in their area, regardless of Matthew Tod: Yes. whether the sale is made through one channel or Paul Blomfield: Can that be applied in terms of the another channel. I think, also, with John Lewis you wider range of people working in the sector? Ev 68 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mary Monfries and Matthew Tod
Matthew Tod: I think it would always be similar, taking on a school leaver, that really boosts the cost because I am always looking for people who will of their wage bill. Are you also suggesting that the understand and know technology, whether they are in educators need to be investing more into training marketing or service. Whatever it is that they are people for a career in retail? At the moment, there is doing, they need to have that understanding of the not a great deal of that sort of education available, digital technology, and how you would use this. In is there? truth, it is often what they do, and they need to say, Matthew Tod: I think there is not a great deal of “Well, how do I then turn that around and use that to education on digital retail. It gets picked up in support logistics or store operations?” and whatever different areas, but the idea of saying, “Are we going else it might be. There quite often seems a disconnect to do more with digital?” will be an interesting area. between what I do personally and what it is the Mary Monfries: Something just strikes me on that, organisation is trained for, and you can say, “Well, Chair, if you do not mind. It is a very interesting area hang on, you do not behave like that. Why do you about the skills. I am quite optimistic about the expect your customers to behave like that?” So it is opportunity that retail gives for people to develop digital skills; knowledge of how the digital world those employability skills. What we are looking for is works; how the technology works; how it can be used somebody who can be very aware of themselves as to differentiate your business; how it can be used to a customer, and translate that into wherever they are improve the experience; and how it can be used to working in a business and ask, “What does that mean improve service. I think that touches all elements of in terms of my interaction, direct or indirect, with the the business. ultimate customers, and how to build value for them and therefore the business I am working for?” That Q259 Paul Blomfield: Do you think the digital mental agility, the ability to do that, I do not think dimension changes the role of high street retail staff necessarily is something to do with academic and their skills needs—the front-line customer achievement, etc. It is a state of mind, and I do think service? that is quite an optimistic play for us. Matthew Tod: Very definitely. They have got people in the store who are using this technology right in Q262 Chair: Do you feel that there is an adequate front of them. They are using it to do research and to training opportunity for owners of small businesses to look. They need to be literate, absolutely, in their upgrade their retailing, digital and IT skills to ability to use technology. We see many retailers maximise the potential of their business? If I were a starting to put these things in-store; you are going to businessman, trying to run a business, and I realised need people who are comfortable with using that I just did not have the knowledge there, how technology in the front office, as well as presenting could I access the training to get that knowledge? that experience and actually making it an interesting Matthew Tod: Certainly, within the digital industry, experience on the high street, as well as being there are a lot of extremely good trade shows with customer service-centric and understanding what they free training sessions that come with them. Because it do. It is a more broadly based role on the high street. is a booming area, there are a lot of places that will offer free training. I was at a trade show recently, Q260 Paul Blomfield: Can I follow up on Robin’s talking to a gentleman who decided his skills were not point about large and small retailers? You talk, in a good enough. He was 84 years old, and decided he sense, about all retailers fitting into your vision needed to upgrade his digital skills to continue because the division that large retailers have is running his business. He had made a trip, actually, meaningless. Does your solution necessarily work for from not far from here—just in Wales—up to London smaller retailers in the way that it can for the larger to deliberately go and do that, and had taken a day players? out to do it. I think it is possible. Maybe it is hard to Matthew Tod: It is an interesting question. I think they access and know where to go, and which are the are almost doing it by default, because they have places to go to. I have never thought about this as greater direct contact. The owner of the business a particular issue, but I can see how that could be typically has far greater contact with the customer. a problem. They may not have the digital skills that a bigger Chair: I do find that, with all the research and business perhaps has, so, again, their digital skills may surveys—the Grimsey, the Portas, and so on and so be weak, but they have got the opportunity. It is not forth—this does not actually seem to have been expensive for many of these to go and list themselves addressed by any of them. Perhaps we have hit on on eBay and set up on eBay, or do their own website. something. Now, I was coming on to a question from It is not an expensive thing to do anymore. I think, in Ann that was basically about the tax contribution. You a way, they have the potential to become total retailers have largely anticipated it, Mary, but I will hand over if they are not already, and the barrier is perhaps their to Ann to see if you want to tease out any more. knowledge, but actually it is not that difficult to use Facebook, Amazon or eBay as a platform to sell their Q263 Ann McKechin: I wonder if I could tease out own product. a couple of facts and figures in this very interesting report. You stated that the profit margins and volume Q261 Caroline Dinenage: What you are suggesting of UK retail sales have stagnated, and you give a chart is that the platform of skills that retailers’ staff need for the retail sales volume from 2003 up to 2013. You has to be really quite extensive. Obviously, for your then state that the overall contribution in taxation has independent trader on the high street who might be increased by 6% more to the UK exchequer for the Business, Innovation and Skills Committee: Evidence Ev 69
12 September 2013 Mary Monfries and Matthew Tod year 2008–09 to 2011–12. I do not think it mentioned that that country is operating in a competitive in the chart what the profit levels were over that environment? You can bring that closer to home with period. Did profit levels increase between 2008 and retail. 2012? Mary Monfries: That is certainly what those figures Q266 Ann McKechin: That is very helpful. A final would suggest. I do not actually have the graph for point. In both your reports, there is no analysis of this the profit levels with me, I am afraid. If that is helpful, issue about the actual land values, because people we can send it back later. have argued in the UK that land values are artificially Ann McKechin: I think that would be helpful, just to high. They are very high in comparison with its see that comparison. comparator countries, and in somewhere like Mary Monfries: That would be the natural assumption America, for example, there has been a huge and from there. sudden decrease in land values. They say that that has actually helped the economy to bounce up much Q264 Ann McKechin: Your fundamental assumption higher. I am sure you might have looked at the within this is that the major problem for retail Grimsey review, but it has got a fascinating figure. companies is the constant increase, year on year, in The number of zombie retailers in this country has business rates and that, actually, the corporation tax is increased by a huge percentage since 2008, and the not the major burden now. Business rates are banks do not have the money to do the administration. becoming a larger part of the tax burden. Would that Do you have any thoughts about the actual land value be correct? being one of the major problems that we have? Mary Monfries: Yes. What this puts out is that, Mary Monfries: I think it is a factor, but of course, actually, you are right. It is the other taxes that are the there are other market forces working there than what larger part of the burden, if you want to put it that we are just looking at here. The question is not way, for retail, and what this shows is that a big part focusing on a particular tax per se, but asking “Is the of that is business rates, as well as employers’ national whole way that we tax retailers dependent on the way insurance. Again, that is looking at that property- and business was done some years ago?” In fact, if you people-intensive piece. Again, what this does not yet look now and forward, rather than looking at business give us visibility on is: “Well, what about the different rates and property taxes alone, what are the different types of retailers within that?” ways that you tax those businesses? Do you need to look at who is bearing the burden now and whether Q265 Ann McKechin: You had quite an interesting that works both for the Government who need the chart about property tax revenues in the UK. The revenues and the different parts of the retail industry figures that we have got on property tax revenue as a going forward and at what the playing field is going percentage of GDP shows that the UK is very much to look like? higher than countries throughout Europe, running around about over 4%, whereas most of the other Q267 Mr Walker: I just wanted to expand on your countries are running at around 1% to 2%. Is this last point, which is keeping a taxation system that because property values in the UK are much higher reflects the retail system of the day. The other section than they are on the continent? of your report makes it clear how the retail system has Mary Monfries: I think it is a combination of things. changed, and how everybody is going multi-channel As you will be aware, business rates in this country and moving towards a total retail model. The shop are a function of the multipliers, the tax rates, and the space is probably less important in the overall picture rateable values. I think I am aware of the OECD of retail than it ever has been. In that context, is the research that you are talking about, which was done fact that we have a business rates system that gives a in 2011. That, as you rightly say, shows that property very high premium to Category A retail shop floor taxes in the UK expressed as a percentage of GDP are space, as against storage and warehousing, not higher than in the other OECD countries. They also something that probably does need looking at and looked at it another way, of which you may be aware, probably does need to be updated for the 21st century? which is property taxes as a percentage of total tax Mary Monfries: I do think the whole thing needs revenues in that country, and the UK is second only looking at. As you rightly say, that physical presence to the US there. So, it is an interesting analysis. I is not the whole thing anymore. When I say it is would express caution before policy decisions are looking at the whole thing—and I am going to made solely on that analysis, because of, number one, apologise, because I will be simplifying what it is a the interaction with other taxes. For example, in complex industry to try to make my point—we have, Europe, I think generally the opinion would be that as we have talked about, got the whole piece around the lower property taxes are offset by the higher online digital business. We have what we call the employer social security costs. I think one has to “experiential” piece of retail: how they are responding look at— to the experience people need, and maybe that is more Ann McKechin: Total tax. physical location. We have new entrants from Mary Monfries: Total tax, and also—and I am a big overseas looking to say, “Well, can we come here and believer in this—what is actually going on in a occupy some of these empty properties?” and particular country. What is the economy going to look critically—and I think this is really important for us, like? What are the activities going to be? How could going forward—we have that piece that is much one tax them? What comes from where, and in what written about, which is UK retail brands and how proportion, to fund public services, still recognising attractive they are becoming overseas. If one believes, Ev 70 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mary Monfries and Matthew Tod of course, that the growth is going to be outside of the Government looking at it, which is a bit of a copout. UK and Europe from a consumer perspective going Yes, they can look at it, but the problem is what do forward, it is not surprising that one would want to you do to actually deal with the problem, having encourage the export of those brands overseas. Now, looked at it? What approach would you recommend if one believes that that is going to be a growing part that would benefit retailers the most, or damage them of retail for the UK, then for example one would want the least, but would still sustain an appropriate level to look at a tax system that values highly and taxes of income for the Government? the profits that are derived from those retail brands. It Mary Monfries: I could not agree with you more. I is quite a complex picture, and it is about how you do not think this is necessarily about how you reduce balance the system so it reflects what retail is going the tax burden on retail. It is about what the to look like. distribution is. We are focusing on retail; I believe that Mr Walker: And also reflects the diversity of needs to be done in terms of the broader economy. retailers, between those very large ones who may be How do you get the same or greater taxes, looking able to export, and perhaps the smaller shops who are at whether the distribution is right between different unlikely to play any role in the export markets unless industries? That is the first point. Secondly, I do think they get their online business particularly well it needs to be looked at in the context of what is organised. changing, and it needs to be looked at with a real, thorough understanding of what that is going to look Q268 Caroline Dinenage: I think largely, Chair, my like. There are a number of things that could be done, questions have been answered. It was particularly and of course there are a number of things that are about what you think the Government should do from already happening on an international basis. I talked a taxation point of view to ensure that the small and about the fact that is important to recognise that a independent businesses survive. country is in an international playing field itself, so Mary Monfries: I would probably just repeat what I the whole question of international taxation—both have just said. I think it needs to be looked at in the digital and non-digital—is a big subject of the OECD round. The survival of the small and independent project planning review at the moment, as the businesses—forget tax for a minute—for some of the Committee will be aware. That is critical, and it is reasons Matthew has just said, is so dependent on critical that the UK stays committed to that in a response to what is happening on technology and to leadership position, because one needs to look at the what the customer is looking for. I look for a very question of “Is the tax system fit for purpose?” more different experience when I go into an attractive broadly, and also look at it in terms of retail. I think shopping centre versus when I am online, so that is some things will come from that, from the broader really critical. We then need to look at whether the tax review, into retail as well. system currently supports the direction of travel, or Clearly, digital business, for example, is a strand of whether it needs to change and be modified. that OECD review, and my own personal view is that Caroline Dinenage: And your thoughts would be that the way of looking at that is “How does one look at it does not? an international and a domestic tax system that works Mary Monfries: If you look at the evidence here, you for the current world, including digital and online would say that there is a large proportion of taxes— business?” rather than saying, “Let’s pick up online/ that is what the empirical evidence is showing, as digital business and tax it differently.” That is my Robin was just saying—relating to physical location personal view, and it is based on a belief that, if you and properties. I personally believe that physical look at one thing individually, what you risk is location and properties are going to continue to be problems of definition: “What do we mean by digital important for some aspects of the retail sector, but it business?” You risk the potential of unintended is not the whole picture, and therefore it needs to be consequences, rather than looking at the whole. I am looked at. Where are the gaps? Is it skewed too much really not trying to avoid your question. I think there towards a property way and an old way of doing are many things that could be done, but it is looking business? The evidence would indicate that. at what the activities are, how the tax system taxes those, and what is going to make sense going forward. Q269 Chair: Can I put you on the spot? You are Chair: I would like to pursue this further, but we are accountants. The Government needs money, and it running out of time. That was very interesting. Thank cannot dramatically alter its taxation regime in a way you very much for your contribution, and please feel that would prejudice the income flow. How would you free to stay as a member of the audience, if you so restructure the approach? You have talked about the wish. Business, Innovation and Skills Committee: Evidence Ev 71
Examination of Witnesses
Witnesses: Mark Walmsley, Chief Executive, ActSmart, Ken Parsons, Chief Executive, Rural Shops Alliance, and Meryl Halls, Head of Membership Services, Booksellers Association, gave evidence.
Q270 Chair: Good morning and welcome. Thank In terms of training, personally, I fundamentally think you for agreeing to give evidence. Starting with you, there is a core issue across the whole independent Mark, could you introduce yourselves? sector of accessing quality training in all areas of Mark Walmsley: Mark Walmsley, from ActSmart. We retail, and the developments in multi-channel just provide support to cycle, outdoor pursuits, and leisure make that more of a challenge. As in everything—this time independents and their supply partners. is the reason we exist as trade bodies—trying to put Ken Parsons: Kenneth Parsons, chief executive of the any service commercially into the independent sector, Rural Shops Alliance: a trade association, as the name including training, is very challenging. It is a very implies, for rural shops. Our interest tends to be in the fragmented audience. It is very hard to hear and it is smaller market towns—that sort of end of the inquiry. very hard to engage; it is very hard, therefore, to Meryl Halls: I am Meryl Halls, from the Booksellers deliver it. It is especially difficult to deliver a sincere Association. We represent all the retail booksellers, service like people development, both ways. I think from large to small, but we have a relatively strong you have got Jane Rexworthy on later, and I am independent sector, which is my responsibility. interested in her views about dealing with independents works, compared with dealing with Q271 Chair: You may, if you were here earlier, have corporates. When you think of these very heard my opening question to the previous panel, and sophisticated challenges, like online—and it is not just this is virtually the same. I just want your different online; it is about digital in-store, and card and mobile perspective. As you demonstrated, you represent a developments are moving very fast—it is a real wide variety of retail businesses. Basically, how do challenge to build a really accessible training process. you see your sectors responding to the omni-channel I think it is a lot more than seeing something at a trade or mixed channel approach, and what is your view on show. It actually needs a continuous support the “total retail” perspective outlined by the previous programme and development to work. panel? We will start with you, Ken. Chair: Meryl, do you wish to add anything from a Ken Parsons: First of all, it is very difficult for bookseller’s perspective? smaller, independent retailers to be effective in the Meryl Halls: Just to reiterate, it is incredibly omni-channel environment. Clearly, it is the future; it challenging for independent retailers to participate in is happening, and it is happening now, but it is a the omni-channel market. In the book trade, what has totally new skill set for people who are very often happened is that providers of white label or e- working very long hours anyway just to keep their commerce services have come on to the scene. Some existing bricks-and-mortar business going. of them are very helpful to independent bookshops, but one of the challenges for bookshops is that a book Q272 Chair: Can I just interrupt you at this point, is the same wherever you buy it, so it makes it very Ken? You would have heard my question to the hard for bookshops to differentiate themselves against previous panel about potential skills training for supermarkets or online. They have been caught in a people in small businesses, for whom this is a real pincer movement between the deep discounting that problem and barrier. What is your perspective on that? comes from supermarkets and online and also the Ken Parsons: I think it is essential, and it is not really digitisation of the product, second only to music. available currently. I think it is a real role for BIS to There is a skills challenge, but there is also the provide structured training for independent retailers: absolute rabbit-in-the-headlights indecision about perhaps not just in the new developments, but also in what to do—whether to embrace that e-reading some of the fundamentals of retailing. Very often, they experience, or to leave it to other people who have come in with a lot of enthusiasm, but not necessarily mopped up. the skills and professionalism that these days the industry requires. I would be 100% behind providing Q273 Chair: I was going to ask a supplementary that. along the lines of how your members ensure that store Chair: Good. That is very helpful. Do either of you shopping complements online shopping, and vice wish to add anything? versa. I am not sure how you can respond to it, but I Mark Walmsley: Within the cycle channel, which is would be very interested to see what your perspective the biggest part of our representation, over 70% of is on that. independent retailers have an online presence. It is the Meryl Halls: I think often what bookshops do is quality, the management, the development and the extend the personality and the culture of the shop on maximisation of that online presence that is their website. Our anecdotal evidence is very much questionable. The two largest online players in the that the bookshops are servicing their local customers cycle trade internationally are independents or ex- with their website, so they have got no global reach. independent businesses. They took an early adaptation It is not that they are reaching new people, lead: Wiggle and Chain Reaction. They invested early particularly; they will maybe do click and collect, and in specialist resource. As early adapters, they have the best bookshop websites from independents are the been very successful, to the degree that they are ones that are quite quirky. They will sell only a limited threatening some of the other independent sectors, too. number of titles. They are not trying to be category There is an opportunity now, but a lot of that came killers, so they are just extending the personality of with the level of investment and resource they made. the shop, which seems to work best for them. Ev 72 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mark Walmsley, Ken Parsons and Meryl Halls
Ken Parsons: A high proportion of our members are Caroline Dinenage: Did you say it was called show- in the food industry, where of course you are up rooming? against some of the most professional players. We as Meryl Halls: Show-rooming, yes. That is one of the a trade association have actually looked into trying to main challenges to retailers: they have got all of the provide a generic platform for individual shops to use, overheads of their premises on the high street, but and, I must admit, we came to the conclusion that unless they are an omnichannel and can think of their although it was possible to set it up, the real dilemma shops as showrooms, they cannot possibly compete. for independent retailers would be to then actually The independents cannot treat their shops as maintain the system. Keeping one of these platforms showrooms because they have not got anything to fall up to date in terms of pricing, ranges, and so on and back on. It is very hard. so forth is one of the key barriers to doing it properly and going into it, which is obviously a very big Q276 Caroline Dinenage: Meryl, continuing on that limitation for smaller retailers who just have not got theme and with that in mind, in the Which? consumer the staff or the capability of doing that. survey that asked consumers to name their preference Mark Walmsley: There is a big part for independents for online and high street stores, three of the top 10 to play, because generally they are specialists, and online shops rated by customers, excluding Amazon, therefore one of the things they are offering is just sold books—were bookshops. I wondered how on specialist product that is not widely available. earth independent bookshops can survive against that Therefore, the internet should be a major solution for backdrop, and also whether you had any evidence of them. That, in itself, creates quite a big product independent bookshops that were thriving against this management job; therefore, what they really do need backdrop and whether they were doing anything is the technical support brought to them. They actually innovative and unusual that led to that success. need a formula or service division that sorts out the Meryl Halls: There are many that are thriving, but I technical side so they can concentrate on product and think it is getting harder to thrive. They are incredibly use it as a retailing platform, rather than having to be innovative. There have been quite a lot of new technologically advanced themselves to maintain the entrants: we lost 60 independents last year, but we whole of that. gained 39, so there are still people coming into the industry, and those people are probably going to be Q274 Mr Walker: I was interested, Meryl, in your stronger in the long term because they have come in point about the pincer movement on the bookstores in in the middle of a recession. The good ones are particular. Do you have any figures for the number of innovating all the time. They are diversifying, and this independent bookshops that there are now, and how is one of the things we really find. We do a that compares with 10 years ago? benchmarking study, and we have discovered the Meryl Halls: Yes, I have got numbers. We have got increasing importance of what we call non-book over 1,000 independents now, as of the end of 2012. product. Booksellers are having to stock and sell other In 1995, we had 1,894 independents; in 2003, we had items in order to sell books; their passion is books, 1,594, so there is a relatively slow but very steady but they will often have a café. That is a very common decline in the sector. We have got a third less than we partnership now. A lot of them are selling art and art had 10 years ago. materials; they will sell children’s toys, they will sell homeware, and they are being very inventive with Mr Walker: I am a big fan of independent how they get to their customers and keep their bookshops, and I have taken part in a “Books Are My customers happy. They will run endless events. The Bag” event this weekend. bar is so high now—the level is so high—that the Meryl Halls: Oh, good. Thank you. customers are expecting a full events programme. They are expecting a loyalty scheme, and they are Q275 Mr Walker: But I think anecdotally you often expecting personal shopping. One of the booksellers hear of people who go browsing, look at the books in we know very well talks about extreme customer the bookshop, and then buy it online; they take their service. They just have to keep delivering extreme mobile device with them, and order it elsewhere. customer service by giving them all these bells and Meryl Halls: Yes. We call it show-rooming, and it whistles. is massive. Mr Walker: How big a problem is that? Q277 Caroline Dinenage: That is very interesting. Meryl Halls: It is a huge and growing problem. Can I ask all of you whether there are any specific Anecdotally, again, bookshops get quite offended. actions that you think the Department for Business, They are less offended now, because it is much more Innovation and Skills could take that would ensure common, but people come in completely bare-faced that smaller, independent retailers can benefit from the about it—as in other retailers—so it is very hard. We electronic forms of shopping? Do you feel the smaller did a consumer survey for Independent Booksellers retailers might miss out on the growth of online Week, and we asked consumers whether they did retailing because they are not necessarily equipped as show-rooming and whether they felt guilty about it. well as some of the bigger players? Young people felt very guilty about the fact that they Ken Parsons: If I can pick up on this, I think there show-roomed, but older people did not care. The age are a couple of pointers already in existence. The split was really interesting. But 64% of book buyers Technology Strategy Board, which is attached to BIS, admit to show-rooming, so it is probably more like as you possibly know, has in the past supported the 84% who really do it. open high street project in Herefordshire, which is Business, Innovation and Skills Committee: Evidence Ev 73
12 September 2013 Mark Walmsley, Ken Parsons and Meryl Halls now fairly moribund but did point a way forwards. It businesses come from independents. It is a really provides a platform for independents to have a sincere, continuous investment that is needed. common electronic platform, marketing directly to customers, with a common delivery system but Q282 Caroline Dinenage: Do any of you have enabling each of the independents to provide their members who are purely online traders? own shop front, their own marketing, and offer local Mark Walmsley: About 4%. produce and their own personality. That model, I Meryl Halls: I have got a tiny percentage–4% or 5%. think—although that particular pilot was not really taken far enough forward—is the right one, and one Q283 Caroline Dinenage: How do you represent that should be developed massively and very quickly their interests as well? Surely, their interests are by the Department to help the independents. I think it quite different. is a real game changer. Mark Walmsley: There are two tiers of them. There are the leading ones that we talked about, and they Q278 Chair: Why is it moribund now, if it had so are interested in going beyond needing me, and then much potential? obviously it increasingly will be an area for new Ken Parsons: If I am being candid, I think it was entrants, because it is a local start-up. Putting away badly managed. A lot of the budget went into the barriers of everyone hating online—we are sort of branding and so on and so forth, without enough of getting over that now—actually, it is a way to it going into the nittygritty of the website—actually introduce more people into the marketplace; hence, reaching out to customers, getting customers to come again, another need for skills or provision to bring on board and to make use of the service. If the lessons people in. Ultimately, especially in service markets were learned from that experiment, then there is real like mine, online sits with bricks and mortar. They run potential for that pilot to be rolled out nationally, with together. It is multi-channel retailing. Actually, it can a lot of benefits to small retailers. For example, in that be an attraction to bring more independents into the one, there was a butcher based in the centre of marketplace; therefore, we need to engage with Hereford; there was a produce stall in the market that having the services and skills again to help educate was actually tied in with it; there was a village shop them back into retail. that was doing all the packets, and so on and so forth. Ken Parsons: Could I perhaps add something on the There was real synergy between the stores involved, rates issue, very quickly? For a lot of people, you look but somehow the project never seemed to take off. at the accounts and the rates bill does not actually seem to be a very big figure, but the key thing is it is Q279 Chair: Has there been any formal assessment a fixed cost. It is there whatever your profit, whatever of it at all? your business, is doing that year. If one were going to Ken Parsons: That, I do not know. You would have revise the system, then I would very much argue for to ask BIS. something that was much more related to the Chair: It might be worth investigating. performance of the business, rather than being a fixed cost year after year after year, irrespective of trading Q280 Caroline Dinenage: Would the other witnesses conditions. care to comment? Meryl Halls: I would just echo the point about Q284 Paul Blomfield: Is that not a problem with business rates. Obviously, that has already been talked rent, too? about. I put charity shops on my list of concerns for Ken Parsons: Yes, it is. bookshops, because Oxfam actually has more outlets selling books than Waterstones, and they are Q285 Paul Blomfield: I mean, this whole debate gets benefiting from a fantastic range of relief. It would be focused on rates, and yet a more significant factor is great to have the business rates system looked at, usually rent. Does that not go back to the point that because often our members are teetering on the edge, Ann was raising about land values? and the rates can make all the difference between Ken Parsons: Yes. I personally would very much tipping them over and not. argue that, certainly historically, the rented property market in this country has been very much ratcheted. Q281 Caroline Dinenage: And, on the skills piece— Rents always go up; they never go down. Often, that which you have already spoken about—do you think is built into upward-only rent reviews. Very often, in that there is more BIS could do? the past anyway, landlords would look for long leases, Mark Walmsley: I think, in terms of technology skill, and one of the things we ought to be looking at is: it is critical. You need commercial partners to provide “What is going to encourage a dynamic young person these services, and if the sector looked more to go into retail?” At the moment, in those attractive, was more skilled and understood what it circumstances, you would tend to probably go online was doing, it would attract more partners to work with and have an online business. The sort of barriers that it. It is not a good or an ideal commercial proposition you would be facing would be this very high fixed for a provider to come to, and it is a continuous, component to your cost: rent and rates, very often. developing programme. It is not one set of skills; it is That immediately discourages you, because you do not a “job done”. It needs to be a continuous not know what your trade is going to be like in your programme to help independent retailers compete, and first couple of years. I would certainly very much it can be made commercial, like the examples I have argue that upward-only rent reviews ought to be already quoted on the cycle side; all the leading banned. Equally, landlords ought to be persuaded to Ev 74 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mark Walmsley, Ken Parsons and Meryl Halls be much more realistic about the rents that they management that can take decisions, cajole, bully, and sometimes charge. A lot of landlords still prefer to beat people into going in one direction. have properties empty rather than reduce the rent to If you look at where retail is working well—if you economic levels. turn it around the other way, and be positive—30 Mark Walmsley: There are a couple of points there. miles or so down the road you have got Bristol, the It is very difficult in our situation, because we are the Cabot centre, which is a fairly modern retail first touch-point for people who want to come into the development. Most of the things that both reports industry. Unfortunately, my standpoint tends to be would ask for are actually in place there, and it is very much a cautious one; it is almost advising them working. You have got the nice atmosphere; you have against it, because the business fallout of locking got the good car parking; you have got the good yourself into a lease, the shop fit-in and shop fit-out access; you have got the good range of different types you take on board, and the stock you need means that of business. You have got a good mix of cafes and all your eggs are in one basket before you open the restaurants and cinemas, and so on and so forth. It is door. You see many businesses fail—often, again, almost a model for what these people are suggesting, because of skills—and not go fully through. I almost and it works, so what more evidence do you need? tend to always try to put them off, which is sad, but at least give them a real warning about what they are Q288 Ann McKechin: Thank you very much. You facing. The other issue in this is that when one does have got a very comprehensive plan. Meryl, did you the review on rents and the rates side, one thing to have any thoughts about the Portas recommendations realise is that a lot of these smaller independents have from your members? been around for many years. Many actually do own Meryl Halls: I am not a technician in the way that the property. They are the landlord. They are also Ken is but, ironically, I think one of the longer term getting older, and because the businesses are not so benefits of Portas will be the fact that town teams attractive to the next generation, they will be sold. I came together in the first place. Many of my members think there is something coming up the line about the have not been affected at all, but if they have been current retail being sold off and there not being affected in a BID or been involved in a BID, the fact continuity in there. This is their pension fund, that the town team came together means that the fundamentally, and there is quite a lot of that in the carburetion has started in that community, and that survey, quite surprisingly. can so often make the difference in a town if the retailers work together to create a message to consumers. Q286 Ann McKechin: Can I ask the panel what progress has been made so far in relation to the Q289 Ann McKechin: Mark, did you have anything recommendations of the Portas review? to add? Ken Parsons: Shall I kick off on that one? I am Mark Walmsley: Only briefly. It is a good thing to personally very disappointed, but not surprised. My raise in the agenda; I think some good things have starting point is that retail is a very fast-moving come from it, but it really needs more action. I industry now, and I suppose any review is almost strongly support what Ken says about managing and going to be out of date fairly quickly, but if you go personalising your town, and setting it up to meet your down the 28 recommendations that Portas came up consumer needs. They are varied. with, yes, there has been a lot of talk and some committees, and so on and so forth. However, I think Q290 Ann McKechin: The Grimsey review, in certainly the results coming out of the Portas towns contrast, was a very centralised approach. Every town and so on are very much ideas, not actual customers centre would be forced to produce a plan and a on the high street, things happening, buzz, and things strategy, with certain dates, but it also mentioned turning around. taking a one-off levy from the larger retailers to produce a fund. Do you have any thoughts about that Q287 Ann McKechin: So you do not think it is particular recommendation or any others in Grimsey going to be used as an example by other towns and that you think are different from Portas and worth shopping areas around the country? evaluating? Ken Parsons: Part of the problem is actually having Ken Parsons: Both of them, obviously, want towns to 28 recommendations. Some of them, I suspect, people be managed as a piece, which is what I would dismiss pretty well straight away; others may be far thoroughly endorse. Probably the slightly more more relevant. I think it would be far better to have autocratic approach from Grimsey would be much honed down to a few key recommendations. Probably more effective but much harder to get buy-in to. I the most important one for me—which is actually would certainly disagree with the thought of trying to quite general, but is in both of the reports—is the key have a 20-year vision; retail and the high street are need to have strong town centre management. Now, moving so fast that that really is trying to look far too the problem—which neither report, I think, far into the future. In terms of the 0.25% levy, my overcomes—is that there are so many different personal feeling is that it would be so hard to get the interests involved, not necessarily all pointing in the multiples to not resist it. I actually think it is never same direction, and some of them institutionally are going to happen. I just cannot see it happening, to not necessarily able to move as fast as others. I really be blunt. do think it should be very much a case of, if necessary, Ann McKechin: Thank you. That is very helpful. pushing very hard indeed for strong town centre Anything else, Mark? Business, Innovation and Skills Committee: Evidence Ev 75
12 September 2013 Mark Walmsley, Ken Parsons and Meryl Halls
Mark Walmsley: I am just concerned that not enough presence, and have a system that encourages that as of the Portas review was bought into, and I think some well? of the hard decisions somewhere down the line were Ken Parsons: That is a very good point. The current fluffed at the end. The Grimsey is even harder, and I proposals out for consultation do have safeguards built just do not believe it is going to be deliverable. I in, we believe, in terms of probably preventing most would rather get on and deliver what is already on rural shops being converted to residential. It is an the table. issue that needs to be very carefully thought about and Meryl Halls: What is really good is that we are all the appropriate safeguards built in, and that does talking about this. The fact that we are talking about imply that retail assets with strong community use do it is very good. need to be protected as far as possible. There is always a balance between interfering with property rights— Q291 Ann McKechin: Finally, one of the the general right to sell to whom you want to—as recommendations was that there was too much retail against the needs of the community, and I think that space in the UK, and that bricks and mortar retailing does need to be very much built into any new could no longer be the anchor to create thriving high legislation that comes forward. streets, so it is a mixture of having community facilities and housing. Do you think it is important to Q293 Paul Blomfield: You talked about the problem retain bricks and mortar shops, and do you think this with Portas being that there were 28 type of new formulation for the high street is a recommendations. Have we got a bit of a problem? sensible way to look at it? Meryl says one of the great things about all of this is Ken Parsons: My personal view on that would be that that we are all talking about retail, but is there a the high street has always been changing. What we danger of initiative-itis blurring the scene? We have think of the high street now developed, very often, in got the Portas pilots, town centre partners, business the 1920s particularly, sometimes before that. I mean, improvement districts, and so on and so on. Are we if you look at where we are today in Gloucester, it is losing focus? essentially a Roman street pattern, for heaven’s sake. Ken Parsons: I agree with that proposition Things are always changing. There is no fixed demand wholeheartedly. We have not even mentioned the for retail square footage, because it does depend to a LEPs, for example, coming into the equation. Clearly, degree on how much it costs. America is the classic county councils will not want to let go of their example, where there is a lot more square footage— responsibilities, either, and I think that is a lot of the for obvious reasons—and pound sales per square foot problem. Nobody is actually solely charged with are that much lower. If high street rents were lower, developing these locations and taking them forwards. if the rates were lower, there would be more demand Again, as I said earlier, where you have got one for retail space. Having said that, Portas gives the developer, as in the Cabot centre, who has almost total proportion of retail sales going through town and city control, then it may be slightly autocratic but you can centres as 40% of the total, and that figure is bound then develop what the customer wants without lots of to decline. In that context, yes, I think we do have vested interests—with valid points of view— more square footage now than we did perhaps 10 nevertheless not necessarily wanting to go with what years ago. In some towns, it is going to be necessary is right for the particular town or city. Knocking heads to manage a decline in the square footage in an orderly together and getting a lot of these people to work as manner, and broadly I would go along with Grimsey one is perhaps the hardest issue we are facing today. in terms of the right approach. It is not rates or anything else: it is actually, “What is Mark Walmsley: We would support the retail to right for this town.” Everybody must point in the same residential proposals, done in consultation, because it direction and meet the customer needs, so I would has got some important caveats in there to protect it. agree with you totally. However, I think greater flexibility is needed. I have a slight concern if that ends up meaning a greater Q294 Paul Blomfield: That is hard to achieve. I centralisation, and what impact that might have on mean, how do you get that transformation? I represent retail levels of the retailers that are left, in terms of Sheffield, which has got retail challenges in the city forcing independents out again. That is a little extra centre with Meadowhall on the outside, and I talk to caveat on there, but I would support those proposals. key players in the sector there. Their frustration is as much with their colleagues, other retailers, as it is with Q292 Mr Walker: I just want to follow up that point anybody else influencing the environment. How do around changing use and encouraging more mixed you drive that working together? use, and that side of things. Around the edge of high Ken Parsons: I suppose it is very much trying to take streets and town centres in particular, I can see how the model from somewhere like Meadowhall, where there is some scope for that, but particularly for the you have got perhaps a more—dare I say it— businesses that you represent, Ken, in rural areas and autocratic style of centre management, because of the smaller villages, there is a real challenge there, is there power structures there. It does require a new structure not? You have got a very limited retail offering to come in, perhaps with legislation behind it, with already; if you are saying, “Manage that down,” you the powers to bring the changes necessary to fruition. are effectively at risk of managing it to zero. How do That is going to be against some people’s interests. It we make sure that we are maintaining what people is not necessarily something that everybody will buy really want, which is the local shop and that local into, but ultimately, if you are going to have city Ev 76 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mark Walmsley, Ken Parsons and Meryl Halls centres competing with out-of-town effectively, it has Meryl Halls: Absolutely. 57% of consumers, who do got to be done. not spend a lot of time thinking about this stuff, said Paul Blomfield: Mark? Meryl? What are your views? in our survey—which was a small survey—that they Mark Walmsley: I can only really reiterate what Ken would like more retail diversity in their high street. said. It is back to actually having a powerful, They want their local government to pay more controlled planning process. attention to their high street. Retail diversity in the Paul Blomfield: Your suggestion, in that case, is that current situation is not going to come on its own, will not happen of its own volition? because the passionate people who care about the Mark Walmsley: No. There are too many interested product—booksellers, wine merchants, cycle parties. enthusiasts—cannot get into the high street. They Paul Blomfield: It needs Government to act? cannot break into the bricks and mortar business, Meryl Halls: Yes. We would concur. because there are too many barriers to it. You have to. Paul Blomfield: Okay. Thanks very much. Ken Parsons: I can go to a strange high street, a place I have never been before, and just by the mix of Q295 Chair: Just concluding on business rates, I businesses there, you can make a very good stab as to think it is Grimsey that makes the suggestions that how healthy that high street is. Sometimes it is the business rate discount for charity shops should be obvious: there are lots of pawnbrokers, charity shops, reduced and the savings made by that recycled for or whatever else. It is not that hard, but I think it other community ventures there. Now, I would does highlight that getting this mix right is absolutely welcome your opinion on this, but do you think there crucial. Ten or 20 years ago, too many building is a case for the business rate being used to shape societies was indicative; that period has now perhaps what you might consider more worthy retail offers moved on. In principle, I would be in favour of than others—if you like, a higher business rate levied actively trying to get the mix right. Bookshops, cycle on betting shops and payday lenders in the high street, shops, and whatever else add to the variety and the and lower on retailers offering more conventional ambience of a high street. The problem, I think, is retail items? What is your view on that? trying to define too closely who are the goodies and Meryl Halls: I think you have to be careful of social who are the baddies. Once you start with betting engineering there, don’t you? Often, our booksellers shops, do you then go on to pawnbrokers? Charity hold France up as an example, because their local shops, obviously, are a very hot political potato, but a governance allows for them to control the types of surfeit of charity shops really is not a good sign for a retailer, so only certain types of retailers can be in high street. It is a sign of a high street in decline. certain shops and, I think, even specific properties. Meryl Halls: Not least for rental values. However, they are making sure that there is a balance Ken Parsons: Not least for rental values. in each arrondissement in Paris or whatever, and Chair: What I should have said to the previous panel bookshops get tax breaks for being cultural spaces. To but will say to you, is that on looking at your some extent, it is an attractive and proper thing to do, evidence, we might think of further questions we but as a Government you would have to take great would like to ask you, and we may write to you. We care not to be seen to be socially engineering the would welcome a response. Similarly, of course, if situation. you feel that on reflection there is something you should have told us but did not, feel free to write to Q296 Chair: You say socially engineering; there is a us with that evidence. Thank you very much. case, if you like, for localising the business rate in order to realise the objectives of a town centre management scheme.
Examination of Witnesses
Witnesses: Jane Rexworthy, Director of Skills Solutions and Head of National Skills Academy for Retail, National Skills Academy, and Martin-Christian Kent, Research and Policy Director, People 1st, National Skills Academy, gave evidence.
Q297 Chair: Good morning, and thank you for question, unless you have something to add to or agreeing to answer our questions. Could I just ask subtract from what the other speaker has said. you, for voice transcription purposes, to introduce Yesterday, we heard from David Owen, chief yourselves, starting with you, Jane? executive of GFirst LEP, about the training and Jane Rexworthy: Jane Rexworthy, head of the mentoring work you have been involved with in National Skills Academy for Retail, and exec director Gloucester. Could you just give us a brief outline of of People 1st. this work? Martin-Christian Kent: Good morning. I am Martin- Jane Rexworthy: Yes, of course. I run the National Christian Kent, and I am research and policy director Skills Academy for Retail. It has a network of 53 skill at People 1st. shops across the UK that are one-stop shops that provide skills solutions to businesses of all sizes. We Q298 Chair: I will say what I have said to the other work very, very closely with agencies like the panels: do not feel that you both have to answer every Association of Town & City Management and the Business, Innovation and Skills Committee: Evidence Ev 77
12 September 2013 Jane Rexworthy and Martin-Christian Kent partners that work in those local towns. We work very the demise of Train to Gain, in a broader variety of closely, also, with our skill shops and with capacities. That has taken away very much from their organisations like GFirst, the local enterprise core purpose, which is very much to develop the skills partnership that is based here, and the providers, of individuals who want to develop careers. I think Jobcentre Plus. we have an opportunity to work with employers to set We have been working very closely in the professional standards, which raises further Gloucestershire region for some time. We have aspirational levels and really reinforces the career provision that is available to support small businesses, opportunities, and therefore set apprenticeships and in talking to the town centre partnership in around those professional standards. I think it is a sea Cheltenham, working with Cheltenham Borough change from where we are currently, but obviously Council, we brought together a package of support that will be part of the broader changes that are for small businesses across Cheltenham town centre, being introduced. specifically looking at the different streets and the high streets, looking at the types of intervention that Q300 Paul Blomfield: You are certainly right to would really make a difference to those businesses. allude to some retail apprenticeships having We pulled together a package of support, and what is discredited the brand, almost. It is positive to see that very interesting for us is that the initial support changing. Do you think we are sufficiently ambitious mentoring was so well received. That was bringing in for apprenticeships in this country? My perception is some excellence from the retail sector, led by they tend to be very much focused on light-touch, Rowland Gee formerly of Moss Bros, Roland Gee’s generic customer service and at Level Two, whereas family business. When he retired, he pulled together if you look at Germany, you are talking about Level a group of like-minded industry specialists to come Three being the norm and much higher expectations. together and provide a service specifically for small Martin-Christian Kent: It is about looking at the businesses that we worked very closely with. labour market. What we are increasingly seeing is, on We provided a service to small business owner- one side, very transient, lower-skilled roles that are managers in mentoring, and in getting to understand filled a lot by students, which is great for investment some of the barriers they had to growing their in terms of giving them the employability skills from business in this difficult time. That project has been which other sectors will benefit—but, obviously, it has running for about 18 months now. We have also added high labour turnover. Also, you have got much more into that some skill support for the people that they permanent and stable staff looking more into careers, employ, so we run an industry-recognised programme and that raises questions around some of the skill that we have called WorldHost. It is a customer shortages. Now, if we are looking at the service programme; it was used for the volunteers at apprenticeship to deal with the latter and actually have the Olympics. It is about really raising the game and a very clear role within that, then I think that provides getting the people who are working in the business to huge opportunities. What we are trying to do in terms really be able to sell the products and understand the of working with the employers currently is reposition customer’s needs and requirements—so, again, a very the professional standards as a different way of successful programme. We also have introduced our looking at this. Rather than saying, “Okay, there is in- guide to successful retailing, which looks at very house training, qualifications, and apprenticeships,” it specific areas of business, like business marketing. We is saying, “Well, okay, what are the aspirations around know how important digitalisation is and within this some of the occupations?” and actually stretching programme have looked at how businesses can professional standards for those roles, and then perhaps support themselves in this very new world of effectively hanging off them the inhouse training, omni-channel, and that programme, as I say, has been qualifications and apprenticeships. They have all got running for 18 months. We have extended it, and we the same parity—we are not trying to create loads of are now looking to take this programme into other qualifications when there is not any need to—but it town centres within the Gloucestershire region; so really reinforces the particular role for Tewkesbury and Winchcombe are some of those, and apprenticeships. Ultimately, if somebody is starting in we are also working with some of the other town the sector, then they have got a longer journey to reach centres at the moment. that professional standard, and that is what the apprenticeship is for. In other instances, inhouse Q299 Paul Blomfield: Can I ask very specifically training and qualifications have a different role. They about your views on the role of apprenticeships in the have got the same parity, but the critical thing is sector and what involvement you have with raising the aspirations and looking at these apprenticeship schemes? professional standards. Martin-Christian Kent: Yes. If I could provide a bit of background in terms of my role, People 1st took Q301 Mr Walker: How are the movements in over the standard-setting body role from Skillsmart, technology, which we have all heard a lot about today, who were the former Sector Skills Council for retail, affecting the attitude of the sector to skills and its in October last year, so we are now responsible for approach to skilling people up? Also, you mentioned overseeing the frameworks. The apprenticeship has a that a significant body of students are people who strong role to play, but I think it is a transitional role, might be working in the sector part-time, as their first in terms of where they are going obviously with the job. Traditionally, retail has been a huge employer of broader changes. What we have seen historically is people going into the workspace. Do you think, with that apprenticeships have been used, particularly since all the changes that are taking place and the changes Ev 78 Business, Innovation and Skills Committee: Evidence
12 September 2013 Jane Rexworthy and Martin-Christian Kent in focus of what people actually need to be doing in Q303 Ann McKechin: When you were talking about retail, that is sustainable, and how can we make sure different levels of training, Martin, are there any real we are providing the skill support to allow it to play differences between larger town stores when you train that role? the staff and those smaller ones on the high street? Are Jane Rexworthy: I think there is a real role for us to there more people in the out-of-town centres actually play in that, and part of our work as People 1st is to training their staff together? ensure that we have the right provision at an early Martin-Christian Kent: On the top level, the stage to prepare people for the place of work, which significant difference, obviously, is size of business. is quite different from what it was 10 or 20 years ago. Obviously, the larger you are, the more likely you are With omni-channel, the skills that are needed now are to invest in training, and I think that is probably about understanding the different channels that their standard across many sectors. I think it is also about particular business that they are coming into trades by. the nature of the training that is required, and as Jane There may be eight or nine different ways to go to alluded to, the breadth of skill requirements for an market, and individuals—whether they are the sales owneroperator is much greater than if you can depend floor or back of house—need to understand the on support as part of a chain. That is a really critical different transactions that must take place. To prepare area, but the mix within a town centre is probably people for that, colleges, schools, education colleges very different than it was previously, and very and universities have a role to provide some of that different from out-of-town. Again, the product skill base to support us in getting people ready for the knowledge and the skill requirements are very workplace. We also have to acknowledge that many different. Jane could probably answer more on the of our managers within the industry have come into specifics, in terms of what has been done about that. the industry before the onset of multi-channel and Jane Rexworthy: Through our network of skill shops, omni-channel, and so therefore leadership and we have an ability to go into out-of-town, into management is a key area of skills need for our sector shopping centres and into high streets to offer delivery at this moment. Many of our national businesses are according to the needs and requirements, and I think really recognising that as they move into this new it is very important for partnerships to recognise that world of global retailing and not just local retailing. retail is pretty much 24/7 for many of the nationals Martin-Christian Kent: On a practical level, at the and that small businesses are being pushed to open moment, we are working with the employers to embed more and more hours. Therefore, providing training multichannel retailing skills within the current and delivery at the right time for them to accept that, apprenticeships. It is part and parcel of what their staff and in a way that they can access easily in those short, are required to do, but also those units will be bite-sized programmes, is really important. We have available standalone—so either built into inhouse certainly discovered that in the project that we have provision or qualifications. been working on in Cheltenham, and we see it across the country. You do need to respond to the business’s Q302 Mr Walker: Your point about training pressure points, which is very much around trading managers for the multichannel world, I think, is very hours. important. We heard some evidence earlier, obviously, that managers are busy running their businesses and it Q304 Ann McKechin: Do you think that the partners is very, very difficult for them to take out the time to you work with in colleges are responding to that access that sort of training. What do you think can be difference in the way in which they present courses done to make it more accessible and to get that and offers? message across, particularly to people who are Jane Rexworthy: Yes. We work with over 80 running the smaller, independent retailers? providers within our network of skill shops, and they Jane Rexworthy: For us, it has been a really are retail specialists, so they acknowledge the needs interesting campaign, and certainly the work that we and requirements of the industry. I cannot answer for have done in local towns across the country has all provision, but what I can say is that for the highlighted this real need to be able to market provision that we work with, we look to accredit them themselves and to become online businesses in some with the knowledge that they are satisfying the way. We are working very closely with the employers and engaging with the employers in the Association of Town & City Management at the most appropriate way for them. For retail businesses, moment to develop a digitalisation training much of it is around work-based learning, and much programme toolkit to support businesses, and it will of it is providing short, bite-sized training and be an industry standard programme that we will be development at places that suit them at the right time. taking out through that partnership across the country That is our response. in the coming six months. We have been able to Martin-Christian Kent: The one thing I would add in develop that programme through Employer terms of the skill set is that we talk about the skill set Ownership, round one, and we believe that is enabling of the industry itself, but—given the two reviews and us to start targeting those businesses that want to the emphasis on local authorities and town centre know how to go about it. It is a very complex world regeneration—it is also a matter of the skills within for them. They do not necessarily know where to go, local offices, and the extent to which they are aware where to get the best information, and so by providing of some of these things and have got the skills to be this toolkit, we hope to negate some of those mistakes able to help manage and lead the industry and the that some businesses have made in investing, perhaps, local community. We see the same in tourist in the wrong system or website, etc., for themselves. destination officials, as well. It is a very similar issue, Business, Innovation and Skills Committee: Evidence Ev 79
12 September 2013 Jane Rexworthy and Martin-Christian Kent particularly given all the changes within local understanding that environment of serving a customer government. and the breadth of customer base that that individual will have, and the response that they have to have with Q305 Caroline Dinenage: How sector-specific does them. That particular programme would also include your training have to be, or is it largely generic? presentation skills, the ability to turn up and work on Jane Rexworthy: That is a really good point. The first time, so that is where the generic part comes in: those thing to say is that, from a sector-body point of view, employability, workreadiness skills that sit alongside when we assessed the qualifications and programmes the more sector-specific areas. some 10 years ago and started looking at what was Martin-Christian Kent: If we are looking at the being offered to the sector, primarily generic customer current top skill requirements within the existing service was the one offer, whether it was workforce, 55% of employers are reporting that their apprenticeships or qualifications. Only 3% of our staff need customer service and 55% job-specific workforce do pure, generic customer service, and so skills. It really is that amalgamation of product it is very important that our qualifications really reflect knowledge and the customer service. the job role that an individual does. Therefore, generic qualifications and programmes can play a part, but Q307 Caroline Dinenage: You already mentioned they are only a part of what the offer needs to be. We that in your most recent recruitment, John Lewis said have spent some time, certainly in our review of the that, three months later, most of the staff were all apprenticeship framework now, looking at the still there. different job roles, the different pathways, and making Jane Rexworthy: 100%. sure that they are very relevant to the industry. We do Caroline Dinenage: Is that the sort of feedback that have generic programmes, and an example of that you are getting—that after the training, their retention would be our WorldHost programme that we run levels and the quality of their staff is significantly across the service industries, but we have retailspecific better? units within that to make sure that any individual that Jane Rexworthy: Yes. This programme has been is going through that programme is really able to running for five years, so it is tested and it has been respond to their customer appropriately back in store. adapted. In fact, we are adapting it now to support Martin-Christian Kent: It is also just differentiating governments new traineeships that start this autumn. between the qualification and the training. The Martin-Christian Kent: Looking at a bigger picture, qualification can be fairly generic, but as long as the while that has been really successful, the attrition rates training is contextualised for the individuals doing the in the sector are pretty eye-watering, and certainly training, that is the most important thing. We have labour turnover rates are high. Therefore, the biggest seen that a lot within preemployment training, where reason we have a skills gap is because staff are not in a lot of the provision is fairly generic, but what we post long enough and not as proficient. Clearly, one have found is that the more specific the provision— of our aspirations looking at careers at the moment is and we have developed a sector-specific pre- really taking the journey to look at a better way of employment programme through Retail Works—the doing it, where you can have flexibility but with a more the employers can guarantee that those skills more stable workforce, rather than being dependent on they are particularly looking for are embedded in the the transient workforce that we have historically had. programme. Sometimes, it is fine to have the generic qualification as it is delivered. In other instances, it is Q308 Caroline Dinenage: Whose role is it to really important that there is a sectorspecific provide the training? Is it the Government, the provision available. employers, the unions? Who takes responsibility for Jane Rexworthy: Can I add to that? Just to give an it? example of that, when Westfield Stratford shopping Martin-Christian Kent: It is a combination of centre opened, we ran our Retail Works everybody. Everybody has a role in this. The preemployment programme to support the recruitment employer is obviously critical, because they need to of local people into those stores. The success rate was ensure that they are getting the skills they require. As that over 50% achieved a job at the end of it, and John I alluded to earlier, at the moment this sector is Lewis Partnership, as one of those businesses, three facilitating a broader role. It is attracting a lot of months later had a 100% retention rate from their transient workers who might not necessarily want to recruitment. It is evidence that the right programmes pursue a career in the sector; some will, but actually make a difference in terms of sustainability and it is therefore providing a lot of employability skills individuals’ attrition rates, and ensuring that we do that are benefiting society generally. I think it is about keep people in our industry who have been successful that combination of what the industry could do and through the programmes. also how it can work with government to achieve that broader picture as well. Q306 Caroline Dinenage: So what are the specific skills that you found the retail sector was most Q309 Caroline Dinenage: How far are all of the lacking, and that have made the most positive parties concerned rising to the challenge? How improvement in your programmes? successful are each of them at stepping up to the Jane Rexworthy: For us, if we take the Retail Works plate? programme, then that looks at customer service being Jane Rexworthy: It has been a complex time. One of very important: the whole nature of being on a shop the things that I need to point out is that the change floor and working in a team; product knowledge; from Train to Gain a few years ago, then moving to Ev 80 Business, Innovation and Skills Committee: Evidence
12 September 2013 Jane Rexworthy and Martin-Christian Kent apprenticeships, is very confusing for employers. that transition, particularly looking at things like Whilst certainly the national employers do a huge apprenticeships. amount of training and development behind the scenes Jane Rexworthy: I echo what Martin said there, but for their employees, to align that and ensure that they would add that what is really important for are actually enabling people to pick up the right, government to hear now is that many employers have appropriate qualifications is very confusing. We are been disenfranchised with the changes that have no longer hiding the wiring; we are making it very happened within the skills funding system, through difficult for our employers to really engage as fluidly Train to Gain, apprenticeships, and now through the as they might with the different funding streams and new funding routes. These are competitive funding mechanisms, and as to the recent Employer routes, and they are competing against sectors that are Ownership pilot, we have not at this point got an seen to be top of government’s agenda. Whilst we are industry partnership for retail. So, therefore, looking not there, as Martin has alluded to, we actually to the future, ensuring that our 10% of the workforce employ across the service industries 21% of the is enabled to access funding appropriately will be one workforce. It is a really important workforce; it of our challenges, and one of the challenges for provides some of those early starting roles for people industry and also government. We will have to look to get into work. It also provides a fabulous career at how we respond to that. trajectory, and so therefore it is really important for Martin-Christian Kent: That clearly poses a government to think about how we make sure that challenge, because obviously there is the demise of those disenfranchised businesses that have not been Skillsmart as the Sector Skills Council, and the successful in some of these funding rounds are changes generally with sector skills councils. Really, supported and are seen to be recognised as important we are in a no-man’s land since last April when the to the overall GVA of this country. core funding went from sector skills councils to the vision for industrial partnerships and the roll-out of Q311 Chair: You said that the current funding industry partnerships. We really are in a sort of no- regime is working against the development of the man’s land as to what happens. We rallied the appropriate skills needed to boost the retail industry, industry; a tourism and visitor economy industrial and you also mentioned tourism and other industries. partnership bid was put into the recent EOP funding Jane Rexworthy: It is not supporting it. Certainly, pilots, led by Merlin Entertainments. That was unsuccessful, but it would have really enabled the with not getting an industry partnership for our sector to put into some of these things that we have sectors, it is not supporting the sector over the next been talking about. The professional standards are year or two years in its development of the new skills really helping that transition, because there are clearly that are needed and the ability to put those skills in going to be a lot of changes over the next 12 or 18 place to provide the facilitative body—the sector skills months with changes to apprenticeships, for instance, body—to enable that to continue and happen. That is funding, and everything else. It is really a critical time not in place, and therefore we are working with our for the industry, as for others, but given the size of it employers to bring them together and work with them and its dependence on things like apprenticeships, I on what we can do, but actually it is perhaps taking really do think it is going to be quite critical. Having us back, or not giving us the same advantages as some not been successful with that bid and not having an of the other industry partnerships that have been industrial partnership, it is going to be a challenging approved recently. time. Martin-Christian Kent: The current emphasis on employers doing it on their own is a challenge for our Q310 Caroline Dinenage: So if you had one sector. Given the number of businesses in the sector, message for the Government on what more it could and the high percentage of small businesses, it is be doing to assist you, what would it be? much harder to rally around that, and it is really Martin-Christian Kent: The EOP was largely dependent on a support body doing the things that positioned around the industrial strategy, which was they need to happen. I think it is, then, about a sea understandable. A lot of industry is slightly change in why they are less dependent on some dumbfounded by the fact that, given the size of the funding. No doubt, within these changes, we will see tourism and visitor economy—with hospitality, retail, a huge drop in the number of apprenticeships, for and passenger transport—it is not part of that instance. If it repositions apprenticeships’ ability to industrial strategy, given it employs one in five address the skills shortages, which are getting more people. I think they feel, at one extreme, disappointed, acute around more skilled areas and management and dumbfounded and highly frustrated. I think it is time leadership, but also then acknowledges the investment to say, “Well, what is the consequence of not being employers are already making in terms of their in- part of that industrial strategy, and what extra support house training, then I think it would be less of an from the skills angle do we need?” Having an automatic focus on public funding in that sense. It industrial partnership in place would have been a would be more about making sure that we have got healthy thing to have at the moment, and clearly we the infrastructure as a sector that reflects the needs of are all disappointed that that is not the case. There is the sector, rather than having to compete with other a funding round coming up with the employer sectors to make sure we have got X or Y, which I innovation fund. That is going to be critical in terms think has been the general culture over the last 10 of our ability to be able to support employers through years. Business, Innovation and Skills Committee: Evidence Ev 81
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Q312 Ann McKechin: Can I just ask a quick Jane Rexworthy: It is a really valid point. The way question? You mentioned the fact that you represent that we work is that we work with trade one in five of the workforce. Of those that have associations—so, obviously, you have heard the trade industry partnerships, what sort of share, are you associations speak before, and we work closely aware, do they represent of the workforce? through that route. One of the key areas for us is Martin-Christian Kent: I am not sure. To my working with local towns and high streets through the knowledge, there are eight that have been approved as Association of Town Centre Management, and also pilots, but I am not sure what they would cover. working with shopping centres. Some shopping Clearly, I do not think they would be the size of— centres will have that mix of independent as well, and so for us, it is about working with business through Q313 Ann McKechin: Of yours. And am I right in the right method. For us, the town centre partnerships considering that in your particular share of the are absolutely crucial to how you work and enable workforce, there is a very heavy female bias? small businesses to inform the types of skills needs Jane Rexworthy: 58%, actually. they are requiring at that point, but also then be able Martin-Christian Kent: That is interesting, because to deliver it. that is one of the areas that we have focused on, Local intervention has to happen. We have seen a lot particularly in hospitality. That is where we have been of changes in that landscape for our small businesses, for so long, but obviously we are trying to introduce with the demise of the regional development agencies it to hospitality, which is the disparity in saying, and the growth of the local enterprise partnerships. “Operationally, a majority of our workforce are What we know is that, out of the 39 local enterprise female, but actually from a managerial perspective, partnerships, only 11 have retail or the tourism and they are not.” If we are able to help support and visitor economy as a priority. Therefore, there is a develop more female talent into management huge amount of work for us to do to make sure that positions, I think it addresses the reliance on transient local and regional stakeholders are brought into labour and provides that stable workforce, but also it supporting small businesses, along with the national is a much more balanced business model. organisations, obviously. We have a method of doing that through our network of skill shops. The skill Q314 Ann McKechin: Do you know roughly what shops are made up of local partners. The business will the split is in gender for the management cadre? not know that; they will not know that Jobcentre Plus Martin-Christian Kent: I do not, but we can provide is involved in a Skill Shop, and they will not know you with that. particularly which college is delivering the training provision. They will not necessarily know that the Q315 Chair: That would be helpful. I have just a local authority is part of that partnership. What they couple of general questions to conclude with. You will know is that, when they walk through those doors may have been listening earlier when I asked the and they ask for a particular training programme, representatives of independent retailers about the skills or intervention, they are told exactly how that barriers to developing the skills needed in order to might happen for them and where it could be improve their offer. You have outlined all sorts of delivered, and whether there is a cost element to it. highly entrepreneurial activities that you are assisting, We are working on a local level, but I think there is a but there does seem to be a lack of awareness of the higher agenda to say that for retail—which is such a potential that engaging with you could actually big part of our country—there is a need to have it realise. I suppose, in essence, if you are doing so recognised at that local level. much, why is it that the sector itself does not seem to understand? Q317 Chair: Correct me if I am wrong: what you are Martin-Christian Kent: There are a number of saying is—and to a certain degree, I think I agree with answers to that. First, things keep changing every two you—there has to be a local organisation that will minutes. Like any brand, you need to be clear about make that assessment, provide the engagement, and what you are offering and what you are there to do. you can work through them. However, the fact that From a retail perspective, Skillsmart have gone; the there seems to be such a lack of awareness would offer from the Sector Skills Council has changed seem to indicate that the quality of that intermediate remarkably over the last nine years. We are now going engagement is not there, either through town centre to employers with a very different proposition, in management teams or LEPs or whatever. Is that a terms of an industrial partnership, so that is fair comment? introducing a new concept and the new opportunities Jane Rexworthy: I would be interested in where you that are there. At the same time, we are making are getting that information from. I suppose the headway, particularly on the levels of things they question is where you are— understand—so it would be apprenticeships, in terms Chair: I am making the observation that, if so few of the work there. small businessmen know of what you are offering and you are saying that it is a duty of town centre Q316 Chair: I am talking about the small, managers and LEPs to raise their awareness of the independent retailer who is finding a lack of IT or potential of retail and bring these people in so that digital awareness a barrier to developing his or her you can engage with them, there must be deficiencies. business. What can you offer them, and how can you Martin-Christian Kent: There are much more engage with them? opportunities. Ev 82 Business, Innovation and Skills Committee: Evidence
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Jane Rexworthy: Yes, there are, and I think some of upskilling the people who work in the businesses that that has come about from a change of sector skills you have seen on her TV programmes, etc. So, for us, body; with the demise of Skillsmart Retail last year, skills has to play a very big part in how we improve we work and continue to work closely with the trade our businesses in our local areas. associations, but there have been different brands that those businesses have had to try to understand in that Q320 Chair: Moving on to Grimsey, there is not a mix of change.1 lot, but it is implicit in at least some of the Martin-Christian Kent: Currently, we are working recommendations. Amongst them is: “Establish a with the LEPs to establish, one, if it is on their agenda, Town Centre Commission for each town with a how we can work together, and two, if it is not on defined skill base and structure to build a 20-year their agenda, how we can get it on their agenda so vision for each town supported by a broad business they realise the importance of the sector. So, again, it plan in five-year chunks.” It goes on to say: “Prepare is working with all of those changes as well. I think for a ‘wired town’ vision or ‘networked high streets’ there are opportunities, clearly. that puts libraries and other public spaces at the centre of each community based on the technology that Q318 Mr Walker: On the LEP front, you mentioned exists today and will develop in the future,” and then, that there were 11 that have either retail or the broader “Establish a ‘Digital Maturity Demographic Profile’ service and tourist economy as part of their aim. I for each town to prepare for ‘networked high streets’ represent Worcester. Worcestershire does have the and tailor connection and communication strategies tourist element on but, so far as I understand it, has accordingly.” not to date had much involvement from the retail side. Now, for somebody of my generation and limited Jane Rexworthy: That is right. comprehension of this area, that all strikes me as Mr Walker: That is something I am encouraging being a load of guff, but it does seem to be that, in them to step up. Given the huge amount of amongst the guff, there is an implicit recognition that employment that the retail sector represents, it seems raising the skills level, particularly modern a surprising lacuna in many of the LEPs. Obviously, communication and technologies and so on, is you have done quite a lot of work with essential for the survival of the high street. I would Gloucestershire’s LEP. Are there any others that stand welcome your comments on where you think you can out as being particularly focused on the retail sector, engage with that, if indeed you feel it is a valid set of and doing as much as you would like to see? recommendations. Do not feel put off by my Jane Rexworthy: Yes, there certainly are. I heard scathing observations. Sheffield being mentioned earlier and, in fact, in Martin-Christian Kent: If that means—presumably it Sheffield, we have one of our largest skill shops based does—that we need to, as I say, equip our current and just outside of Meadowhall. They provide a service future staff with the technology skills to compete, I through the whole of South Yorkshire, but are very, think that is admirable and it is exactly where we need very much invested in Sheffield; in fact, they have to be. I think the fact we are attracting so many young retail as a priority and it is vice-chaired by our skill people means a lot of those people are coming with shop director. Therefore, we have made sure that, the ability to understand new technology. The critical regarding the information, research, skills, needs and thing is around the managers being able to harness requirements, we are able to inform the LEP on those that knowledge, but also the broader co-ordination requirements. That has been a really useful way of that both reviews talk about in terms of how a co- working and making sure that retail is seen to be really ordinated effort can do that. Because what it also important in the economy within that LEP region. reinforces is the huge investment that needs to be taken with technology as a whole, and that is clearly Q319 Chair: Can I just go on to some beyond the scope of one individual business. So, it recommendations from Portas and Grimsey in the raises quite a lot of issues: firstly, businesses clearly context of your particular offer? First of all, need to be more technologically aware and embrace amazingly, Portas did not mention training at all. the internet, and how they can embed that, and clearly What is your view of that? the focus on multi-channel retail is important in that. Jane Rexworthy: Well, I suppose surprised, because Then there is a broader thing around investment in when I sit on the High Street Forum, and certainly in new technology and how a local community and the task and finish group I sit on, skills makes up a individual businesses can benefit and harness that as third of what we have been reviewing and looking at well. in terms of the Portas review and what is happening in the Portas towns—so, surprised. Sometimes skills Q321 Chair: I can certainly see your point. It says, gets missed but the terms are used around making sure “Establish a Town Centre Commission”—the town businesses are “equipped” to grow their business, and centre management partnership or whatever we want therefore it might not be that they use the term to call it. There is a case for assessing, if you like, the “skilled”. However, it is an interesting point and existing skills base and what is needed to develop that. disappointing that it is not mentioned, certainly when Do you think that is a way forward that you could a lot of work that Mary Portas does is around adequately engage with? Jane Rexworthy: I think we have to, and certainly 1 Note by witness: I missed saying but would like included that the skills shop network delivered over 50k skills / IAG speaking to a lot of our national businesses, no longer interventions to employers and employees and those seeking is it just the town space. It is not just the local market; work in the industry last year. it is about global opportunities as well. Whilst it is Business, Innovation and Skills Committee: Evidence Ev 83
12 September 2013 Jane Rexworthy and Martin-Christian Kent about providing a place for the community to come sit and access Wi-Fi to browse online or compare together and have their whole experience—including prices with the offer of the shops in the immediate the whole of the visitor economy, so retail, the café, neighbourhood. Is that a realistic vision? the leisure—our customers are much more discerning Jane Rexworthy: There is an element of that, but I about why they would want to walk into our high think it goes further than that. One of our national streets and towns. It is recognising that we can all go businesses gave me a really interesting story. They and buy online and, in fact, in this country, the have recently opened a department store in a town. customer base skill in purchasing online is top of the They were expecting to see a drop in online sales western world, and yet our businesses, at the moment, when that store opened, and they were interested in are not top of the western world in selling on-line. what that reaction would be. Actually, they saw an Therefore, that is our real opportunity, and to do that, increase in sales. The reason, they felt, is that there is then there is a skill base. As Martin talks about, it is brand awareness. There is a real importance for our about our leaders and managers who have not stores in our town centres to demonstrate the brand necessarily grown up with that embracing what is and to provide technology to enable the customer to happening within education and young people coming have the right experience. One of their descriptions in with some of that skill set. However, we need to was around the click and collect, and the skill set of make sure that we do invest properly in that the people who are in that department providing and technology, because it gives us a huge advantage for passing over a parcel. How do they get the our high streets for the future, but also globally as adjacency—the add-on sales? How do they encourage UK plc. the customer to come back into that store Martin-Christian Kent: What we do have in place environment? It is more about how stores reinvent currently is a model called the “location model”, themselves to enable the customer to have the which we use in local areas to look at: what are the absolute best experience and go out spending a little consumers looking for; what are the current skill bit more as well. I think it is a mixture. We will see requirements; what is the current skills base of the the cafés with that, but it is broader than that. existing staff; and what do we need to do in terms of Chair: Thank you. As I say, we may well think of the intervention to get them up to a point where it can questions that we should have asked but did not. We meet customer needs? There is a base model that can would still like you to respond and we will write to be adapted and embraced to deal with that. you to do so. Similarly, if you feel that, on reflection, you would either like to add to or modify any of the Q322 Chair: I have a sort of vision of a town centre responses you gave today, feel free to write to us. high street with a network of cafés, where people can Thank you very much. That was very helpful indeed.
Examination of Witnesses
Witnesses: Mike Davidson, Head of Retail Operations, Land Securities, and Peter White, Executive Director, Marketing and Customer Services, Gloucestershire College, gave evidence.
Q323 Chair: Good morning and thank you for Mike Davidson: I do not know if I would necessarily agreeing to answer our questions today. We are go as far as to say they are fighting each other. There slightly early, but we might as well kick off. Can you is a structural change taking place in the retail just introduce yourself for voice transcription environment, and it is consumer led. Retailers will purposes? We will start with you, Mike. respond to what consumers want to do, and where Mike Davidson: I am Mike Davidson. I am head of consumers want to go. That is what will influence the retail operations at Land Securities. restructure of whether development is in town, out of Peter White: I am Peter White. I am Vice-Principal at town, edge of town, the size of units that retailers will a local FE College—Gloucestershire College. require, and the type of retailing that they can do Chair: I understand you have had an association with from them. Cheltenham Town Football Club. Chair: Regarding online trading, what are the Peter White: We have had the association for quite implications? How do you think they can adapt and some time. We are actually the back-of-shirt sponsor. survive? Mike Davidson: It has been with us for quite a while Q324 Chair: Yes, I am aware of that. As a season now, and it is just another aspect of the changing retail ticket holder with the same club, can I thank and environment. Many retailers, as I know you have welcome you? My opening question is very similar to heard explained by previous witnesses who have come what I have asked the previous panels: given the wide before you, are, by utilising the internet and omni- variety of businesses now involved in retailing—from channel, improving their offer to their customers and the small independent retailer to major chains, retail the ways that they can engage with their customers. parks, shopping centres—all in competition with each So, clearly, it is a change that has already happened, other, how do you see the challenges facing them? but it does have implications for the high street, as we They are fighting each other and they are fighting, know. Probably one of the biggest implications is that shall we say, the economic situation and the changes retailers are now looking at what physical presence in shopping habits in the digital age. How do you they need, and clearly they do not need as much see this? physical presence in a lot of towns as they may have Ev 84 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mike Davidson and Peter White had historically. They may rationalise their portfolios. our agenda now as well. It is about knowing how to That is probably the biggest implication that has come do these things and how to turn up. from the online retailing element, as I would see it. Just giving the opportunities for young people as a Chair: Do you have anything you wish to add, Peter? part of their learning programme to be studying in You do not have to. college but also working in a real live environment Peter White: I was just going to comment on the can open their eyes to opportunities and also give offline trading as opposed to the online trading. I am them very good transferable skills they can take on to not qualified to comment on the retail market wherever they go. But I think, largely, the people that anymore—I might have been at one time—but it is are giving the work opportunities are going to be the mostly the skills for me, and the skills that are net beneficiaries of those young people. For retailers, required offline and the vacancies that exist. One of there is a good opportunity in lots of different the things I wanted to talk about today, or to bring to departments in large retail to do this. They can look the Committee’s attention, was the lack of really good at opportunities in various things, like buying or careers information, advice and guidance in the logistics or marketing and so on. I think we have a country, and in schools particularly. I think Ofsted just big job to do. Providing work placements—real life recently released a report. work placements—with big retailers, if big retailers Chair: I was about to say that that is reflected by the could be encouraged to do that and to talk to colleges, Ofsted report this week. would be very good thing. Peter White: That was some good evidence to say Mike Davidson: Our industry has a part to play in that, I think, one in five schools were found to be that as well. As a landlord in a number of city centre giving sufficient advice only amongst year 9s, 10s and schemes, we work with organisations like the National 11s to assist sufficient career choice. We find that all Skills Academy to find space—an opportunity—to the time: careers are choosing individuals, rather than provide places where that sort of educational activity individuals choosing careers. Retail comes off very can take place. I think we also need to try to talk up badly in this because schools generally, and maybe retail as a profession, and one of the saddest things in careers professionals generally, are pushing young all of this is that retail is still perceived by a significant people towards careers that are more attractive in their number of people as a career of maybe not last resort, view or would benefit the school maybe a little bit but certainly not first choice. That is sad, because I more, as opposed to looking at the local market and agree with you: I think there are some amazing skills trading environments and saying, “What is there you pick up in retail that can stand you in good stead available?” and pointing out some pretty exciting in lots of other career choices later in life. If one of opportunities in the retail arena. That is something that the things that comes out of this is that retail is put on needs to be addressed. the map as a career choice with future potential, that would be hugely advantageous in the process. Q325 Caroline Dinenage: Do you think then, Peter, that the retailers have more of a job to do engaging Q326 Caroline Dinenage: You will be delighted to with educators? For example, one of my children know that one of my biggest local shopping centres is thinks the coolest thing in the world at the moment Gunwharf Quays in Portsmouth. would be to work in the Apple Store, because for him Mike Davidson: I thought it might be. it is actually a very exciting retail environment. Equally, some people might think that about one of Q327 Caroline Dinenage: So I am very familiar with these very high-end high street fashion stores, where that particular retail environment, and have seen it presumably one of the qualifying characteristics of evolve since the early days. One thing I do notice working there seems to be looking very good in a bikini. about Gunwharf—and it has very many great aspects to it—is that there are no small independent retailers Peter White: That rules me out. there at all; they are all big, massive chains. Caroline Dinenage: And me, I’m afraid—back to the two children. Do you think there is more that retailers Mike Davidson: There is a small independent retailer can do to communicate with schools and talk about there—the newsagent is, in fact, a local—but I take the options that are available? your point; that is true. I think the nature of the Peter White: Yes, I certainly do. There is a distance environment there—the retail format there—is factory between large retailers particularly, and colleges. I outlet and is off-price. By definition, it is multiple know they do work with other providers of training retailers that are using the opportunity of an outlet and education, and colleges need to try harder as well. centre to sell the stock that they possibly have not Thankfully and luckily, we have got a LEP here that been able to sell on the high street or whatever, has got a retail sector. We work closely with them and although some obviously do manufacture for outlet as the university, too. There seems to be this distance, well. It is a different type of retail environment that and I do not know why, but most certainly it would does not sit particularly well with people from the be really good to have some input into careers advice independent sector, if you like. and information. What we are trying to do in all of our programmes now is build real work experience. I Q328 Caroline Dinenage: There are restaurants think this was touched on earlier: it is not just about there, aren’t there? the specific skills to do a job, but also the ethos about Mike Davidson: There are restaurants there. work—being able to get there, knowing how to speak Caroline Dinenage: And they tend to be all the big to people, English and maths—which is very much on chains as well. Business, Innovation and Skills Committee: Evidence Ev 85
12 September 2013 Mike Davidson and Peter White
Mike Davidson: That is true. In the past, we have had counterproductive, because developing a major local restaurants. In fact, back in the early days, I shopping centre is an exercise that takes place over a think we had two. Unfortunately, they did not manage considerable period of time and has a huge amount of to survive. investment up front before you ever start seeing any rent coming in for a return on that. It is difficult to get Q329 Caroline Dinenage: Is it because the the relevant return in the current environment anyway, overheads are very expensive? The bigger companies so to limit the developers’ ability to get the rents that have a way of absorbing that sort of thing, whereas make the whole thing stack is actually pretty the smaller ones find it harder. counterproductive, because that could result in Mike Davidson: I think it is a tremendously developments that might have happened subsequently successful centre, and therefore the market dictates the not taking place. rents that can be gained from there, and it is a factor of its success that maybe it is only the major multiples Q334 Mr Walker: Can I just follow up on that point? that are able to invest and sustain their business in We saw yesterday a very impressive development that environment. right here in Gloucester Quays and some of the work they are doing there. They were talking about the fact Q330 Caroline Dinenage: There is not really a great that, through these difficult trading conditions, they incentive for them as landlords to be propping up have had to use reverse premiums in some cases to businesses for which the overheads might be too high. bring in people. Is that something that you see widely Mike Davidson: The overheads are not all generated as Land Securities, with your portfolio as well? by the landlord, obviously. You have had numerous Mike Davidson: Regarding reverse premiums, capital discussions about the business rates at previous incentives are something that happens within the meetings, and that is a significant factor as well. But, industry generally, and it is a way of getting the equally, you are quite right: we are a business too. We retailers or catering outlets into a centre to assist them have a responsibility to our shareholders to maximise to be able to afford to do it, because there is a the return for their investment. significant investment up front. That could be some form of cash incentive or it could be a contribution Q331 Caroline Dinenage: With that in mind, do you towards their shop fitting costs. There is a variety of think it is inevitable that what we might call mega- ways it can take place. However, as ever, it is a malls—these big shopping centres—are going to commercial negotiation between what the retailer can squeeze small independents out of business? afford in that location and what still works for the Mike Davidson: No, I do not think they are squeezing landlord in terms of giving them the long-term income out, because independents absolutely have their place. to make the investment stack. It is a commercial I will use Portsmouth as an example. Southsea has a decision that would be taken on an individual basis. It significant number of small independents and, when is not something for which you could say, in every clustered together, they create an offer that is quite case, you would do or you would not do. compelling in its own right. There is most certainly a place for independents, but it has got to be a place Q335 Mr Walker: Is part of the nature of those where they can afford to trade profitably. In many commercial decisions—the structure within which cases, that is not always going to be in the mega malls, you work—driven by the business rates system? as you describe it. Mike Davidson: It probably is because, at the end of the day, retailers look at total occupancy costs, and Q332 Caroline Dinenage: Do you think that there is their costs in a shopping centre will be rent, service a role for the Government to play in balancing the charge and business rates. In many cases, the business sector and supporting small businesses? rates will be a very large percentage of that cost. They Mike Davidson: Obviously I would like to see the then look at the sales that they think they can generate Government support small businesses, and rates is from that unit, and they have their margins and their possibly one of the best ways that they could do that. costs, and so what profit they can make. The rent they What else did you have in mind? can pay is dependent on the profit they can make from retailing in that location. Clearly, if you have a very Q333 Caroline Dinenage: I am just wondering strong trading location, the ability to pay more rent is whether there are any incentives or pressures that the a possibility and, for a very weak trading location, the Government can put on big developers such as you to ability to get a better rent is harder. contribute more in a way that will benefit small businesses. Q336 Ann McKechin: Could we turn to the Portas Mike Davidson: We do always try to have an element and the Grimsey reviews, which we spoke about of independents in any development that we do. For earlier this morning? Could I ask both of you what example, have not quite finished but we are working progress you think has been made in regard to the on the last parts of the Trinity development in Leeds. Portas review recommendations? We have heard a There are a number of local, small independents in number of criticisms this morning. Would you agree there. We like that; it does add a little bit of variety. with those or do you have a different opinion? But, inevitably, if there were some sort of regulation Mike Davidson: The Portas review has done a very that said a certain percentage had to be, which I know good thing in so much as it is putting this issue on the has been suggested in some of the Portas and agenda, which is tremendous. There are some very Grimsey-type reports, that would be good suggestions in the review, but equally there are Ev 86 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mike Davidson and Peter White some things that we would not necessarily agree with to stay empty rather than lower their rents—just sort or that potentially might be missing. The fact that it of sitting on it? is raising it up the agenda and maybe actions will Mike Davidson: I am sure there are some, and happen, or actions are happening as a result of that— obviously I cannot speak for those landlords. One of anything that helps is an improvement—is good. I the points there is that having shop units vacant, and think it is much the same for the Grimsey review. the suggestion that landlords as a general principle are There are aspects of that that we would agree with. happy to have them vacant, is a fallacy because a Again, an example that we would not agree with is vacant unit is costing you money and loss of something like the quota system that we were just opportunity obviously, but equally it is costing you talking about, which could stifle development. It is the business rates that otherwise a tenant would be probably better for a retailer to answer, but, on the paying. I would suggest that most landlords would levy that he was proposing, I would be surprised if desire to have their units let if they possibly could. many retailers would feel that that was particularly Peter White: Yes, I have a couple of perspectives. fair, particularly as it is based on sales rather than Grimsey talks about as well the importance of profit. education as a part of redevelopment of city centres, town centres, and what are the component parts Q337 Ann McKechin: But his point is that the state anyway of what a future high street should look like. of many high streets is becoming much more difficult In Gloucester, at the Quays—I think where you were and there is a lack of capital investment. If you want yesterday; you might have seen the campus—we have to start to change the mix—less retail space—you are got over 6,000 people at the campus in any given year actually going to require quite a lot of capital who, generally speaking, walk through the town. That investment if you are going to keep these areas has been a major boost, and I would certainly support vibrant. I suppose the question back to you in the that. I think that has happened in Middlesbrough and industry is: “Who is going to pay for it?” maybe other places around the country when we have Mike Davidson: You are absolutely right: he is correct looked at regeneration. in that premise, and “Who is going to pay for it?” is When regeneration happens, then the partners that always going to be the big challenge with these things. form the core are incredibly important and, yes, the We are very supportive of BIDs, and are working with various economies are as well—the evening them in a number of locations. We think that that is a economies, the restaurants and the cinemas. But very good way forward, albeit not on the same scale certainly education has got a major part to play in all as is being proposed. Ultimately, a town centre will of that. So that is certainly one thing I would say. only survive if the people that are trading there are I will take a slightly different angle, because I do not trading profitably. What would probably be required think I can add anything more to what has been said is a consolidation back to a core retail offer and then today about the Portas and Grimsey reviews: one some diversity of offer: some services and things that thing Mary Portas has done, which television does for maybe are not represented there now changed to other education generally speaking, is raise the awareness. uses—residential. That is more beneficial than trying I have got to say that that has been quite beneficial, to create an environment where retailers are because it starts to put it in the mainstream. encouraged to try to come in but actually they cannot Ann McKechin: People talk about it endlessly. trade profitably from that location, whether they are a Peter White: People start to talk about it. Maybe it multiple retailer or an independent. has been referred to as a bit of a beauty show and that it is, sort of, a makeover show. I do not mind that. Q338 Ann McKechin: One of the clear That is fine for me. It is interesting as well, at a slight recommendations of both these reports is the issue tangent, that “Mr Selfridge” created quite a lot of about management, and obviously your company runs interest in window dressing and retail too. When you a number of shopping centres and you have to control have things like this that are popular on the television, the whole domain. But if you take the average high the knock-on effect is actually back through to street around here in Gloucester, there will be multiple education, or it can be if you want to capitalise on landlords. I think it was presented in the other that. Those things never do any harm in my opinion, evidence too that actually if you have fewer landlords like “The Great British Bake Off”—one of my in total, it is much easier to try to negotiate new favourites. investment. Where you have a very fragmented Ann McKechin: There are a lot of cake tin shops ownership pattern, that becomes much more doing very well. problematic. Would you concur with that? Peter White: Absolutely. So, for me, Mary Portas, Mike Davidson: Yes. It is an obvious fact that it is yes, tremendous, in that it has raised it. Once it goes easier to deal with fewer entities. We have the back to—and I bring it back to this all the time— advantage that when we have a major shopping centre, good careers guidance, I do not really mind where the we are controlling what happens within it, to an inspiration comes from. If it gets people thinking and extent. Equally, where we have a shopping centre, no talking about it and exploring opportunities, then that matter how successful it is, it is going to be more is a very good thing. successful if it is trading in a town that, overall, is vibrant. Q340 Paul Blomfield: Just following on from that point and returning to what I raised earlier, although Q339 Ann McKechin: Do you think that some not with the previous panel, while the clamour of landlords are not yet engaging and are allowing a shop interest in retail is positive, are we suffering from Business, Innovation and Skills Committee: Evidence Ev 87
12 September 2013 Mike Davidson and Peter White initiative-itis? There are all the different things that pilot cities. I and a number of individuals gave up are happening on the high street—Portas pilots, town significant time to try to look at a strategy for the team pilots and so on. Is there sufficient focus, or are city there and, indeed, the Government provided some we creating a confusing environment? money to do research. But the pilots happened, there Peter White: On the high street, a confusing were a few more and then the money dried up. The environment? I do not necessarily think so. On the committee moved on and somebody else invented a focus on the high street, I would go back to what I new strategic partnership. It is a shame that so much said before: any discussions around the high street and time and effort can ultimately end in things that do what it should be are a good thing. I am on the board not get progressed. That is a disincentive for people of Marketing Gloucester as well, and one of the things getting involved in the first place, if they think that we discuss quite regularly is how you get people into potentially can happen. the town centres. We have various initiatives. Parking is a big issue for traders in the city and how much Q341 Paul Blomfield: Certainly that strikes a chord people have to pay for parking, which affects footfall with the conversations I have had with retailers in and whether the money that is taken for parking Sheffield. Where do you devote the time that you have should be directly reinvested back into the city centre. away from the business most effectively? Coming Those sorts of things need to be carefully looked at. I back to, Peter, your answer: do you think a number of know that if a friend and colleague of mine from the these different initiatives are pointing us in different board were here today, he would simply bang on about directions? Isn’t that causing confusion? that, because it is seen as, kind of, unfair. I do not Peter White: It probably is. I think Mike makes a very think there is confusion. The high street has almost good point: it is whom you talk to. In Gloucestershire, turned into a food service high street. Again, in terms the LEP having a retail sector group is helpful, of training, a lot of our students see opportunities— because people do come together to talk. From my whether they do catering, whether they do business perspective, that group is a very good group, because studies or something else—to join the retail sector but you have got all these various interests brought are not necessarily and directly doing a retail course. together around one table. We do tend to use the high street as evidence that actually there is quite a wide variety of things that can Q342 Paul Blomfield: Can I just ask you a very be done. I do not see it as confusing, necessarily. specific question about the work that you have been Mike Davidson: I suppose I do see it as slightly doing on pop-up shops? Could you tell us a little bit confusing, but maybe in a slightly different context. more about that? Our local centre managers and centre directors are Peter White: It has been fascinating. We have been absolutely wanting to engage with the local playing around with this idea for quite some time. communities, the business community and the local Also, we regard our business as, first and foremost, authority and do as much as they can to be a force for education and making people successful in achieving good in the communities in which we are investing. whatever goals they have in educational terms. But However, quite often they have a limited amount of time and resource to be able to give to those things, also we realise that education—post-19 education—is because ultimately they are still running a business, becoming increasingly privatised, and it is very and quite often, therefore, it is difficult to know where competitive, and the other bit of it is this whole to invest that time. Is it the LEP? Is it the BID? Is it careers information, advice and guidance, because it the local strategy partnership, of which many towns I is lacking. have worked in have a plethora of groups that are We were considering for quite some time whether we meeting to talk about? Is it the retail community? Is should move out of our campuses, where we have it the leisure and tourism community? There are very low footfall coming in to ask questions. Most of dozens of these, and cutting through all of that to get our traffic is online, in terms of asking questions, or to the point where you can spend your time most on the telephones. I know my world in the college, productively doing things that are going to develop student services department, is fielding those some sort of strategic change, rather than sitting in questions. We thought we would just experiment with numerous talking shops, is what we would like to be pop-up shops. We are part of the Gazelle Group of able to do. Colleges, which is very entrepreneurial. I do not know Sometimes it is very difficult to know which of those whether you know about this, but they are looking, groups is going to be the most effective. If there was and we are looking, to develop much more some way that a communication could be made that entrepreneurial models of teaching. This goes back, outlines exactly what each group does—what its again, to this spending time in business in the responsibilities are, what it is focused on—then workplace alongside a study programme. businesses in the community would be able to look at Emma Jones, one of the founding members of StartUp that and say, “Actually, that is the area where I want Britain and of the Gazelle Group as well has got to be, because that can make the most difference and PopUp Britain. We were looking at that and we I can give the most help in that particular situation.” thought, “This is quite interesting.” What pop-ups do, I do think that is a challenge. if they are done well, is give you the opportunity to I am sure Caroline knows from Portsmouth that there try something out. Pop-ups by their very nature and have been numerous initiatives, and when I was based implication are not as quick as here today, gone in Portsmouth, one of the things I was involved in was tomorrow; you can try things. We thought, “Well, we called City Growth, a Government initiative with 10 will try this.” Ev 88 Business, Innovation and Skills Committee: Evidence
12 September 2013 Mike Davidson and Peter White
As we came into the enrolment period this year—into places around here and full-time courses and sixth- the recruitment period at the beginning of the forms. All I can say is that, for one thing, we gave out summer—we thought we would give it a try. We a lot of careers information. Even if someone went talked about it for quite some time; we thought we somewhere else and benefited as a result of the would give it a go. We came out to Gloucester and guidance we gave them, that has to be a good thing. I Cheltenham to ask whether we could look at having am happy with that, first and foremost. If they came reduced rates in trying this out. Gloucester absolutely to us, that is even better. I would say that there has to bit our hand off; they were fantastic. They took us be some degree of “People would have come into Bell Walk, which you probably know; you anyway”, and I cannot really say what that is. All I walked through it yesterday. The traffic flow and the can say is that it was busy all the time, and it is demographics were incredibly interesting and something now we are looking at as being a absolutely what we were looking for. They gave us continuing feature of our recruitment activity. We are the right deal on a shop that was very low-rent for an going to do this more. eight-week period for us to try, and we moved into it. Chair: You are looking very agitated, Caroline. Caroline mentioned the Apple Store. I have got a very young team who were working with me on this and Q344 Caroline Dinenage: I just wanted to ask a they wanted to mimic that. They did not want couple of questions before I forget them. Who staffed something that would just look awful, because the it? Did you have any staff that were people who would danger is that is can look awful and that is not good. otherwise been doing the back-room role? Of course, we have got a brand and a reputation to Peter White: Absolutely. I have got two schools keep up in the local area as well. So, we moved in. I liaison people who work for me who are IAG have got some photographs. I got some for you. I was trained—so they are careers trained. At that time of told that it would be okay to pass them around, as you year, it goes a bit quieter for them, and they both were not able to see it. Is that okay if I pass them absolutely willingly really enjoyed being the shop around, just to show you some of the before and after managers. They shared the responsibility. It was a and some of the things that happened? really good exercise for us. We had to set up start-up and close-down procedures and everything else. They The pop-up was very much linked to social media as were the people who were on the spot, pretty much all well. We have got 3,000 Facebook and Twitter the time looking after things. Also our student services followers, and the local MP, Richard Graham, got teams came across as well. In Gloucester, we were involved and the local newspapers. They were only a short walk away from the campus. Again, that tweeting about what we were doing each day. We just demonstrates that we probably have 10 people a opened up this shop. It was very clean lines; the week—probably not even that: three or four people a colour schemes were bright and vibrant. The staffing week—walking in off the street, and we are talking costs were pretty much a sunk cost because my staff here about probably 250. It was pretty damn good and were doing that somewhere else anyway, so there was successful. It was a sunk cost, so there was no extra not much of a cost involved in doing it, and we moved cost on staffing in that sense. in. We prepared the place within a week and we were moved in and operating within two. We had a bank of Q345 Caroline Dinenage: What was the cost of the Apple Macs in there. It was a very attractive shop fitting? environment, and it attracted people in. We got some Peter White: The shop itself? The actual painting and fantastic results. We also advertised demonstrations decorating was done by our estates team, so there going on. So we had hairdressing teams, beauty would have been a cost, but it would have been therapy—all sorts of things that were going on negligible. The equipment was—because we were outside. The local shopping centre management were pretty much going into a holiday period—seconded fantastic. They really helped us enormously. I have from the college, so the Apple Macs did not cost us got a few numbers, as you are looking at the slides. anything and then they were recycled. The actual rent The footfall over the eight-week period was over of the property was £1,500 for the 8-week period. 1,600 people. We actually took 169 applications for That is probably half a page’s advertising for one courses, so pretty much one in five people who came night in the papers, to put it in some kind of context. in applied for something; 83 of those applications were for full-time courses at the college, and on our Q346 Paul Blomfield: It looks very impressive. So, conversion ratio—we convert at around 65%—you you will be doing it not only again there but looking are talking about £189,000, so £23,000 a week. at doing it elsewhere? Peter White: We are looking at doing it in Q343 Paul Blomfield: Is that net additional Cheltenham and in the Forest of Dean. recruitment or is this displacement? Peter White: Well, I was just about to say: it is very Q347 Mr Walker: Sticking on the skills front, what hard to say. All I can say is—I cannot answer that you were saying about careers services chimes with question absolutely—that when we asked everybody me certainly. I think most people on the Committee we could who came into the shop why they came in, recognise the challenges in that respect. As they said that they came in just because they saw it technology moves on and as the retail sector changes and they dropped in. Those people then who applied in its nature, how much is the skills base changing? Is could have applied somewhere else. That is all I can it moving to be less of a generic customer service say. We have got a lot of competition for apprentice skills base and more specific? You mentioned, Business, Innovation and Skills Committee: Evidence Ev 89
12 September 2013 Mike Davidson and Peter White obviously, that people take a range of courses that a point I made earlier on—if we give people really might lead them into retail. Certainly, looking at my good advice about something and they decide to go local college, they have catering, hair and beauty— somewhere else to do it, and they pursue a career in they have lots of aspects. They do not have a retail retail because we gave them the opportunity but they course per se. Is that something you see potentially take an apprenticeship with another training provider, changing over the years to come? it is a result for us. It is a successful outcome. If they Peter White: Yes. We have 1,000 apprentices at the come to us, that is better, but that is not the end of college. We have only got 10 retail apprenticeships. it all. That is more to do with careers advice and guidance We do tend to work quite collaboratively together. In than it is to do with anything else, quite honestly. We the county, we have got a very good apprenticeship have tried to get retail courses going, but again I come group that meets, and it comprises business, industry, back to the point that nobody seems to apply for retail the local media. We get together very regularly to run courses. It has been very difficult. We have talked campaigns and the 100 in 100 Apprenticeships about, with David Owen, a retail academy to try to campaign started with us here and it has gone bring these skills together. The other thing we are national. That was just a result of people coming doing it, interestingly, is we are looking at retail around who are competitive in one sense, but who all aspects of other courses. So, for example, with bakery had the same interest. Too many times, separate or catering, we are looking at setting up shops and interest groups splinter because they are not co- running shops and doing it that way, so you get a ordinated in that way. We do not have any problems sense of that customer interaction. in talking to people who are competitors, because we We are starting a fashion academy in Cheltenham this all have a common aim. year as well, which is going to be launched at the literature festival. Part of that will involve taking a Q349 Mr Walker: Just a broader question for both of shop. Building in retail into other vocational areas is you: we have heard a lot about regulations and costs probably one of the ways of doing it. As maybe affecting the retail sector, and both Portas and Caroline said, working with big retailers, getting them Grimsey have views on what can be done about that. involved and trying to work some sort of scheme, Obviously, we have discussed business rates quite a whether it is the John Lewis apprenticeship or the lot, but in terms of the other costs affecting the sector, John Lewis retail academy to try to lever their brand is there anything the Government could be doing? awareness, is the way forward. However, colleges on Mike Davidson: In fairness, I think business rates is their own find it very difficult to recruit. probably the biggest single one. If we could rebalance that rates burden, that would be a heck of an Q348 Mr Walker: Obviously you have heard the achievement. evidence from the previous panel—the People 1st Peter White: I would say exactly the same. group. In terms of bringing in all the different Chair: If there are no further questions, we will finish organisations that are involved in training—the on that note. Can I thank you very much for agreeing Government, the unions, organisations like theirs and to talk to us today? I repeat what I said to the other colleges—would you see them as competition or are panels: if you feel that you would like to add to or they someone who you can work collaboratively with? modify anything you have told us today, please feel How does it all fit together? free to contact us. Equally, of course, we might look Peter White: It is a bit messy. I would always say at your evidence and decide that there are further that, in true entrepreneurial terms, if you get your questions that we would like to ask you and we will product right and you get the good advice, you will write to you. We would be grateful for a reply. Thank get the benefit of the income. Taking that kind of you very much. model, I would say that, first of all—this goes back to Ev 90 Business, Innovation and Skills Committee: Evidence
Tuesday 29 October 2013
Members present: Mr Adrian Bailey (Chair)
Mr Brian Binley Ann McKechin Katy Clark Mr Robin Walker Caroline Dinenage Nadhim Zahawi Rebecca Harris ______
Examination of Witness
Witness: Bill Grimsey, businessman and author of Sold Out: Who Killed the High Street? and The Grimsey Review: an alternative future for the high street, gave evidence.
Q350 Chair: Good morning and welcome, Mr Q352 Chair: Often the debate about the high street Grimsey. I do appreciate you devoting your time to is framed as high street versus out-of-town shopping answering our questions today. Before we start, we centres, or high street versus the so-called know who you are but, for voice transcription omni-channel approach. Do you think the whole purposes, could you just introduce yourself? debate is strategically mis-focussed? Bill Grimsey: Good morning. My name is Bill Bill Grimsey: Strategically, consumers and their drive Grimsey. I am a retailer of some 45 years’ experience. for the convenience of online shopping, mobile I think I am managing the transition between working devices, big mall visits and entertainment during the life and eventual retirement and, as a consequence of day have overrun the traditional town centre. If town that, I wrote a book called Sold Out: Who Killed the centres are going to be the focal point of our High Street? which then morphed into The Grimsey communities in future, they have to change and, in Review, which is an alternative review of the high order to do that, they need a plan. street, which was compiled by a team of nine of us; it When we did our review, we issued a freedom of information request to local authorities and, of the is not just my work. These other eight people are circa 50 we got back, less than half of them actually experts from the industry and we published that in have a plan as to what to do with that town, so they September. My activities today are voluntary, and I are open to developers coming along and saying, am campaigning for better towns. “There’s a brownfield site here. We’ve got Retailer X lined up. We can put in a few more shopping units. Q351 Chair: Thank you. That is a very helpful Hey, we can create some jobs.” Councils under introduction. Can I open with a pretty general pressure for action tend to react to that kind of stuff, question? British retailing is a success story. Our retail and that is not going to be good enough in the 21st brands are renowned throughout the world and there century. You have to define what you need for that is huge interest from consumers in other parts of the town and then, once you have that plan together, you world. Our supermarkets are reckoned to be incredibly can go about implementing it. Without a plan or a efficient and our prices are lower in this country than roadmap, you are not going to get there. corresponding prices in other countries, and yet, somehow, the high street, which should be carrying Q353 Chair: Do you think it would be a fair this forward, has missed out. Roughly how important summary to say that basically the high street is not do you think the high street is to retailing? responding flexibly enough to changing patterns of Bill Grimsey: The high street of the 21st century consumer demand? needs to adapt to the consumer of the 21st century. Bill Grimsey: That has been true since I was a lad. The consumer of the 21st century is going to be When I grew up, supermarkets were in the high street influenced enormously by the developments of and it was a hustle-bustle place. Within my career, technology, particularly mobile devices today. I that is now no longer the case. I have lived through the fresh food revolution, which took place in the predict that, shortly, you will not carry a wallet, a card, 1980s, which took all of the seasonality out of our a driving licence or anything like that. It will all be lives. My granddaughter believes that strawberries electronic and on a mobile device. The high street has grow all year round. She does not have the thrill every to accept that tomorrow’s world is about having a spring of those new potatoes after a winter of mash. community hub in the middle of a town centre that is That has all gone, and that has been done by the not reliant solely on retailing. That has gone. excellent retailers that we have in this country and the Online shopping is growing at an alarming rate and, supply chains that we have developed. as far as the futures of the town centres of the 21st As a consequence, society has changed dramatically. century are concerned, for the sake of their economic If you do not actually take your town centre and adapt wellbeing, they have to embrace housing, education, to that new world, it is going to perpetuate a decline. leisure, entertainment and some shops, and develop a Our review calls for a town centre commission that is strategy that embraces technology and enables them properly constituted and properly managed, with to compete with other towns, as to why people go defined terms of reference; not a town team that is not there to live, work and play, or even visit. properly constituted and is often full of volunteers— Business, Innovation and Skills Committee: Evidence Ev 91
29 October 2013 Bill Grimsey very enthusiastic locals who will do tactical things must be reinstated. It is causing no end of distress out that will show some short-term gain but miss the there, and the beneficiaries of this move are the large strategic option of providing a town centre that is supermarkets, so we are perpetuating a consumer drift embracing technology. to out of town and to different models, away from the For example—I will just finish on this—our libraries independents, by economically favouring the are in decline and they are being closed. In Sheffield supermarkets, which will benefit to the tune of alone, they are going to close something like nine £1.3 billion over two years by the delay of this libraries shortly. Our contention is that libraries ought revaluation. to be the centrepiece of towns and they ought to be technically competent now, not with books, but they Q355 Chair: Again, you said the supermarkets, ought to be the focal point where people can actually largely out of town, will be the main beneficiaries and go, and it works. We all try Wi-Fi in places and it of course the online retailers also, because they do not often does not work. We need wired high streets. We pay business rates. Would it be a fair reflection to say need no blackspots and we need the people in those that, in effect, the high street has not responded to towns to be able to use their mobile technology to changing consumer demand but, equally, the business interface with one another, and we need the libraries taxation system has not done so and that is reinforcing at the heart of it. the problem? That is the vision that came out of The Grimsey Bill Grimsey: There is some merit in what you say. Review, from the people with whom we developed it. First, the online retailers do pay business rates; they I believe firmly that, if you did these trials of five just do not pay the same rates, because they are not towns, with town centre commissions, you would get in the high street. We need to be aware of that. Just a blueprint of what we should look like in 20 years’ because one business model has different taxation time and how we should get there. That is a far better because it uses different properties is no reason to try way than a lot of enthusiastic locals doing stuff that to level the playing field, so I have no sympathy with is short term. the supermarkets and the large retailers out there that are calling for that. They certainly did not have any Q354 Chair: Before I bring in Brian Binley, I would concern about the small retailers when they moved just like to bring up a point. You have talked very out of town and, in effect, busted them. They just have strategically. The feedback that we are getting from to react to the competition that is coming. retailers and so on is that one of the big problems is The most important issue that we face is not the fact the level of business rates in particular, but also high that this system is necessarily wrong; it is just not rents. If you were to apportion responsibility for the being applied properly at the moment. Why did this decline in the high street to the changes that you have delay take place from 2015 until 2017? That valuation just outlined or business rates, how do you think they is important, because the last time this was done was would balance? in 2008 at the height of the market, so all of these Bill Grimsey: It is fair to say that, as retailers, if you small independents, particularly in the north of do not adapt to the environment that you are operating England—I can tell you now that, in Stockport and in, predict what your consumer or customer wants in Rochdale, rental values have fallen some 40%—are future, and make sure your product is right for them, still paying their rates based on rentals that were you are not going to succeed anyway. The high street higher. In the bigger supermarkets, where their values as we know it and retailing in the UK in the last four have gone up, they are benefiting from it. years have seen the demise of several retailers, many I have an example of a store in Regent Street— of whom have failed to do that. Hackett—which took over the Ferrari shop and has The classic is HMV. In 1990, if they had sat in their paid a record rent for it: £1.57 million a year, and it boardroom and looked forward 23 years and said, “Do is a 15-year lease. Were they to pay their business you know what? We’re going to go bust because rates in 2015 based on the 2013 valuation, which technology is going to overtake our product,” they should be done, their rates would be, in that year, may have done something different back then and they £757,000. At the moment, it is based on 2008, when may have been a brand today, surviving and the rent was only £548,000, so they are only going to prospering. That is my contention about the town pay £285,000 of rates. Why should an upmarket shop centres and the retailers. in Regent Street be subsidised by a poor fish and chip However, unless we do something right now about shop in Rochdale that is struggling to stay as an the business rates issue, which is causing many of the independent? It is fundamentally wrong and it needs independent retailers in this country to undergo to change. financial pressures, which they will not survive—it does not matter how good their product is. There are Q356 Mr Binley: Can I say how much I welcome 20,000 retailers out there that are poised to fail as a you today, Mr Grimsey? I headed up a commission consequence of business rates. Our review had several that produced a report in 2008 called Community concrete recommendations. Hubs. You look at town centres; I wonder if you read There are two I would like to place in front of you that. I would be delighted if you did, because many right now. One, the rise that is now going to be of the things that you were talking about were in our implemented in the spring as a result of the RPI mind then, so I really do welcome you. measure in September should be frozen and should You describe the need for high streets to become not be put in. Two, the 2015 revaluation of properties, “complete community hubs” in your report, which which was delayed by this Government until 2017, means we have to look at the whole thing holistically. Ev 92 Business, Innovation and Skills Committee: Evidence
29 October 2013 Bill Grimsey
We have always looked at it purely from a retail understanding its heritage, its history or its industry. perspective in many areas, and it misses the point. My Consequently, our town centre has become a concern is about the role of local government, because mishmash, based on poor planning officers who often they have been perhaps the major killer of our town have much more power than the councillors who sit centres, in terms of parking, in terms of ring roads on the planning committees. The councillors are encircling towns and making it difficult for people to frightened of planning officers because of the powers get across; high rents and rates, as you say; piecemeal that they try to project they have. There is a real planning; no small retail units; no chances for new problem there. Would you accept that particular view entrepreneurial young retailers to start a business, as too: that our planning is too short-term and planning you and I had. I am not a retailer, but I started a officers, who know little about the area, are too business when I was younger—two businesses powerful in many respects? actually. There is no chance for young retailers to do Bill Grimsey: I would be fully supportive of that view, that now, because the rent situation or the rate in the sense that our review revealed that there are situation is simply too high and there are no small no strategic plans out there—or really good ones—for units. Do you believe, as I do, that local government towns. What should they stand for? What should they needs to change its attitude—seriously change its look like in 20 years’ time and how are you going to attitude—in relation to town centres? They talk the migrate to them? That would then provide guidance talk, but they do not walk the walk. to planning officers. Bill Grimsey: It is easy to be critical of local I will give you an example. We evidenced something government. that happened in Bicester, to come back to the parking Mr Binley: I do it all the time. issue, which I am afraid this Government, in particular Bill Grimsey: I do agree with a large part of what you Eric Pickles, is messing about with the edges of. It is said, but may I first of all say that I endorse Roger headline-grabbing stuff and it should not be allowed. Wade of pop-ups? He is not giving evidence today, but The fact is that parking should be seen by local I fully support what they are doing with their pop-up authorities as a commercial asset and not a revenue campaign for business rates and for the relief to get generator. Since they have been squeezed through the young retailers working. That needs to be said. austerity programmes, I feel some sympathy for them. Going back to the local authority, I believe that the In Bicester, because Sainsbury’s moved into the town way forward is a properly constituted town centre centre with a large store, they brought with them free commission that has the right skills on it and is not parking and they subsidised it. They proved that it reliant on being elected every five years, but has to generated more traffic into the town centre and, as report to a council and provide its plan there and to a consequence, the independent retailers roundabout have a public meeting once a year to demonstrate that prospered. I have to say it was only those that did not its plans are absolutely accurate and on track. compete with Sainsbury’s that prospered, so the poor If we rely on the electoral way of doing things in these little butcher and baker still had a bit of a tough time towns, you are going to get what has happened, for but, nevertheless, they prospered. example, in Macclesfield. There is a wonderful silk What happened just recently is that the planning heritage in Macclesfield. It is a town, if you are not department gave permission to a competitor out of aware of it, that has a great heritage and it should be town to extend their store, without any real knowledge protected, in its architecture and its town centre, yet as to whether or not the population needed more they are about to put up a huge development, with a grocery space. There is the whole point of a town Debenhams as the anchor, with 20 retail outlets, which centre commission. There is a science here that could none of the locals wanted. Cheshire East council has help the strategy, which could be coupled with vision 12 on the council. Nine voted for it; three against. The and imagination from the town team-type people, and three who voted against it live in Macclesfield; the you could produce something groundbreaking to nine who voted for it do not live in Macclesfield. As develop our towns for the 21st century and make them a consequence, it is going to go through and we are good places for my grandchildren to populate. going to destroy that town centre. The last thing this country needs is more retail space. Q358 Mr Binley: This is music to my ears. You It needs less retail space and it needs public spaces could have written the report I wrote. I am really used for community wellbeing. We are all living delighted with that. One final point, if you will allow longer. I am entering my fourth 20 years on this me: the one-size-fits-all answer to this is not an planet, and I would like to think I am going to achieve answer actually, particularly for our smaller towns and as much in that 20 years as I did in the previous 60 large villages, which perhaps just have a high street but, in order to do that, I have to embrace community, and a small high street. If we are not careful, we shall embrace technology and be able to live in a vibrant be driving retail totally out of those small towns and environment. Unfortunately, a lot of our towns do not creating just a dormitory village, in many respects. reflect that, because the councils clearly just do not Would you agree with me that the voice of the local have that vision. need is paramount and that we ought to be thinking of ways of giving that power to that voice, rather than Q357 Mr Binley: May I take you back to that to planning officers? It is not only about planning; it particular example in Macclesfield and point you to is a much more holistic problem. Frightening planning Northampton? For 50 years, we have had a new officers nullify any local thought that a local planning officer every four or five years. He or she councillor might bring to it, and you made that point has their own particular view of Northampton, without about Macclesfield. Business, Innovation and Skills Committee: Evidence Ev 93
29 October 2013 Bill Grimsey
Bill Grimsey: The small towns out there and the Q360 Caroline Dinenage: In addition, one of your one-size-fits-all reference that you made are other recommendations is for a dedicated Minister for absolutely right. It is not one size fits all. What you retail, dedicated to high street rejuvenation. Can you can argue is that the methodology to understand what talk us through that in a little bit more depth? How do you need to do with a small town and a big town is you envisage that working? Which Government the same. The output would be totally different. I do Department would they sit in, for example? think there is a need for that methodology to be Bill Grimsey: I will just refer to something here. If developed, which is what we called for in our review. you look at the economic condition of our country, the We need to do that and then roll it out across the high street is a mirror image of the UK economy. We country. really have to take that on board. If you look at the In the meantime, however, these small towns, assets employed on the high street, you will see that particularly those in more deprived and northern there is £326 billion of gross assets on the high street, areas, are suffering because of the business rates issue. which is retail in general, and 95,000 companies, If I might say, section 69 is available, and provides which are borrowing £65 billion a year and they have the power to discount rates. The evidence is that none a total net worth of £135 billion. If you compare that of the councils are doing this. Of 326 councils out to other sectors, the education budget is only there, only 18 in England used it. I have been £53 billion, the defence budget is £24 billion, and contacted, since I did this review, by independent even the health budget is only £110 billion. My retailers across the country, and one such is a florist contention is that town centres, the high street and the in Witney, which happens to be the constituency of UK economy are so inextricably linked that there is a the Prime Minister. She is right behind our e-petition, need for a Cabinet Minister just for town centres to which is trying to get Government to re-debate this sit around that table and ensure that the plans I talked 2015 revaluation. She has written to her council about about through the town centre commissions are rate relief. That council does not employ section 69. produced, and that there is a co-ordinated approach to The new Minister responsible, who has high streets in prosperity for our local communities and community his portfolio, Brandon Lewis, who is on after me, has hubs in the future. Great Yarmouth as his constituency. His council is not However, since we produced this report, we sent it to employing section 69. There has been a 33% fall in Downing Street and I received a response on rental values in Great Yarmouth since 2008 so, quite 19 September. It said, “Thank you for your letter of bluntly, there is a mixture of getting right today the the 8th and the report. We will get back to you.” I environment for people to survive and building a have heard nothing since, so the pace of activity is strategic plan, through a methodology that will kind of frustrating to a retailer of my background. If produce a different and unique plan for every town you miss the sale today, you do not get it tomorrow. My plea to this Committee is that we make it quite and small village throughout this country, and enable clear that, if we are going to have a prosperous Britain them to get themselves into shape with an economic going forward, as a nation of shopkeepers, we need to blueprint that fits the 21st century and embraces wake up to what needs to be done for our town technology. centres, to embrace all the things that I have Mr Binley: Mr Grimsey, you are music to my ears, mentioned—make them community hubs with unique and I hope you have a fifth 20 years. selling propositions for each town—to attract visitors and to make Britain successful. The only way to do Q359 Caroline Dinenage: Mr Grimsey, in the report that is with a Minister sitting round the table, so I do you recommend a more flexible approach to use class not think it should be in any Department at all. It orders, in order to bring properties back into should be a Minister responsible for towns. occupation and build these complete community hubs that you refer to. The Government have stated that Q361 Caroline Dinenage: To play devil’s advocate they have already made it easier to build more homes for a moment, one of the complaints that we hear, on the high street, making it easier for landlords to as MPs who are interested in business issues, is that convert offices into housing and change other sometimes it is difficult to get buy-in from different buildings into shops and so on. What more do you Government Departments on business issues. How do think needs to be done on that issue? you feel that one dedicated Minister would succeed, Bill Grimsey: The most important thing is for it to be where lots of Ministers getting involved in this from co-ordinated. The last thing we want to see is a house, across Government Departments and getting that a shop, two shops, three houses, a shop, house, shop, cross-Government buy-in have failed? house. That is not going to work and it is going to Bill Grimsey: You know more about your cause mayhem, so you need a town plan that will then environment than I do, and all I can tell you is that, say, “This sub-high street over here needs to be all the time you have that going on, you are not going converted to housing going forward. In that sub-high to make steps forward. I am talking about somebody street, there are one or two very good retailers.” You co-ordinating what needs to be done to address the need a plan to migrate them to the main thoroughfare, dilemma facing our decaying towns. then you need to go to the landlords and get them to Let us not lose sight of some of the dramatic facts. In convert that sub-high street to a complete residential Morecambe, one in three shops have closed, and there high street, and for that to be part of that plan. That is is no plan as to what to do for Morecambe. I believe the step that has to take place, so it is co-ordinated that somebody should be sitting around the table, at and joined up, otherwise it is just not going to work. the very highest level, fighting for what needs to be Ev 94 Business, Innovation and Skills Committee: Evidence
29 October 2013 Bill Grimsey done to make Morecambe a successful place for the report have brought the retail sector into a much 21st century. That is clearly not the case. In fact, what higher profile this year, but you have also been very has happened is it has been demoted since I did the critical of the approach taken by Mary Portas. You review. It has gone to a junior Minister now. The high have stated, I think on the record, that it “promised street is being passed around; it is pass the parcel. the earth, but delivered little”. Could you clarify what On this note, I must give a commendation to the the key differences are in your two approaches? Portas review, in the sense that it raised the profile of Bill Grimsey: First of all, my review, as I refer to it, the high street. I am very critical of its content in the because it has got my name on it, is not my review. sense that I think it missed all of the things that we The fundamental difference between the two reviews now put in this one, which I have pulled together is that mine is littered with “us” and “we”, and Mary’s voluntarily, because I said you have to put your money is littered with “I, I, I”. This is not a personal issue where your mouth is and stop criticising. for Bill Grimsey. This is a team effort that brought Chair: We are about to move on to Portas. together the skills of eight other qualified Bill Grimsey: The fact is that we need a high street professionals to produce this review. Minister whom I can take this to. I am not saying that Secondly, it was not me who went on television our review is the review of all reviews but, if this is following the review and said, “Hi, I’m Mary Portas. going to wind up like all the other reviews—on a I was commissioned by Government to produce a shelf—we are going to continue to see the decline of review. Now come and see me in operation at the high street. Margate.” Now, I think the absolute blatant commercialism that surrounded that review was Q362 Chair: Before I move on to bring in Ann wrong, and I do not think there is any place for it. McKechin on Portas, this idea that we should have a That is why this review has been fully funded by me. Minister for this and a Minister for that, in my view, I had lots of offers for sponsorship for it and I is often actually a sort of proxy for getting over or completely rejected them. It has been totally voluntary dealing with the real problem about inter-departmental from my perspective, although the other eight people working or cross-departmental working. It is no good on this review have day jobs. They have given up just having a Minister; you have to have some sort of their time freely. The difference is that this is a department to back up that Minister, which involves non-commercial piece of work that is not just there changing our existing departmental structure. I think for headline-grabbing. It is there to say, “Here are the the chances of getting any Government to just set up structural changes that you are facing in the industry.” a Minister for the high street are pretty negligible, but When Mary published her review in December 2011, do you think that there is, within the scope of the she failed to point out that the industry was going to existing Government departmental structure, a way in undergo major structural changes, in my opinion. That which more focussed cross-departmental working is evidenced by the fact that, within 18 months, eight could deliver on the same objective? major retailers went bust. That was obvious to anyone Bill Grimsey: I do not know enough about the who knew anything about retailing, and that should workings of the Government Departments to give a have been brought to the Government’s awareness. constructive reply to that question, but I would like to That is the difference: this is a retailer’s report based just make the point that, when you are running a retail on what is happening out there. It is evidence-based business, which is rather like running a country in with lots of facts in it, and the conclusions that we some respects, you have various people sitting around have reached and the recommendations that we have a boardroom. You will have a guy who is responsible applied are all measurable and weighty. They are not for operations, which is stores, a guy responsible for motherhood and apple pie. If we can get the attention marketing, a guy responsible for logistics, for of the relevant powers to implement many of these personnel and for sourcing products. The fact is that, things, I firmly believe that there will be benefits for if you do not have somebody who is responsible for independent retailers, as well as communities those shops able to have a voice at that table that says, throughout the country. “You, Mr Buyer, are buying the wrong product for my guys to sell out there,” that retail company will Q364 Ann McKechin: Were you surprised that there not survive. was no mention of skills in the Portas review, because You need to be able to have people sitting round the a number of witnesses have explained to us that, table where you are able to say, “Unless you do because of the changes in the industry—an increasing something from your Department for town centres, technological base behind it—that actually skills this is the consequence,” and I do not see a voice shortages are an issue for them? Would you concur? doing that. I do not see that in Government. You may Bill Grimsey: Yes, I would concur with that, but I know more about this than I do, but I do not see any would not be over-critical of her at the time she did joined-up thinking coming out of central Government the review. What I would say is that you could argue or local government when it comes to a co-ordinated the same about our review, in terms of what is plan for what to do with our town centres. happening. What I would like to emphasise is that the Chair: That gives us an additional argument to put to pace of change, because of technology, is going to the Ministers in a few moments. Can I bring in Ann accelerate. The skills that are required out there are McKechin now? going to be very different. I am not sure we are preparing ourselves as a country for that. Q363 Ann McKechin: Good morning, Mr Grimsey. The first store in America without anybody working As you rightly said, your report and Mary Portas’s in it is already on the ground. There are no cashiers; Business, Innovation and Skills Committee: Evidence Ev 95
29 October 2013 Bill Grimsey it is filled by robots. You interface with the product some of this issue. We were party to it. My book yourself as a person. There are cameras. There are makes it clear that it is the customer who destroyed 3 million people employed in retailing out there today, the high street, not the retailer, but we were part of it. just in the shops. What are we going to do in years to I just think, “What is wrong with a 0.25% of sales come when these things change? How are we for one year to create a pot, which would be about planning for that, or are we just bumbling along? My £550 million odd, to facilitate producing those plans appeal through this review is that we have to that we need to produce, across the country, without strategically take account of all those changes and put putting pressure on Government to provide the funds in place actions today to accommodate them. to do it?” What is wrong with that? It is called payback time. Q365 Ann McKechin: When we asked about the I am not in the retail club, by the way. I have always difference between your report and Mary Portas’s, in been a bit on the outside of it, but I did not go to any relation to the future of the retail sector, Ken Parsons, of them and ask them what they thought, because it is who is the chief executive of the Rural Shops a bit like going to turkeys and asking them to vote for Alliance, said, “Probably the slightly more autocratic Christmas, is it not? I put it in the review quite approach from Grimsey would be much more brazenly to say, “It’s time for you to pay back.” Would effective but much harder to get buy-in.” Brian Binley it not be good if a Phil Clarke at Tesco stood up and has also mentioned today the fact that, when we have said, “Do you know what? 0.25% of our turnover is asked people in the industry, they have just said they X; we will put it in that trust and we will help control did not think the industry would actually respond that trust, and we will help put our towns back on favourably to this type of approach. their feet and we will help the country get back into Bill Grimsey: I think “autocratic” is the wrong word. economic health”? That would be something good for What we are trying to recommend with the town his brand, so why not? centre commission is that they follow a methodology Ann McKechin: Thanks very much. You are to produce a unique plan for them. There is no obviously a very strong advocate. autocratic approach to that. The fact is they do not Chair: Can I bring in Robin Walker, back to have a plan today. What is wrong with having a plan? business rates? The one thing I would say about our review versus the Portas review is that ours is just plain common Q367 Mr Walker: Thank you very much for your sense. It is as simple as that. I just believe that, if you evidence so far. It has been a pleasure to hear all your do not have a vision of where you need to be and if passion for helping small retail businesses in you do not have a plan for how to get there, you are particular. I guess my first question is: we have never going to get there. That is fundamentally what addressed some of the issues already in terms of this review is saying. business rates. Fundamentally, where do you think the system needs to go in order to best support small and Q366 Ann McKechin: In the industry, the bottom independent retailers? line sometimes comes down to the cash. Obviously, Bill Grimsey: The BRC announced recently that they you made a proposal about a levy, which I think it is were going to commission E&Y to produce a fair to say others in the industry were not very keen root-and-branch review, a reform, to put to about, which is probably not very surprising. You Government. I spoke to the BRC about this yesterday, advocated a fixed levy paid by retailers. One of the and I did make it clear to the chief executive that, disadvantages could be for independent retailers with fundamentally, I agreed with the motive; I just think lower profit levels—for example, furniture stores have it is the wrong thing. I think Government should be much lower profit levels or margins than people doing this. I do not think the BRC should be doing it. perhaps in the food or luxury goods end. It is just this The BRC is an industry body and, like any other issue about an additional cost on business. Given all industry body, it has paymasters, and the paymasters we have just said about rates, it is inherently are the size of the company. Guess what? The biggest unpopular, so is there an alternative way in which paymaster into the BRC would be Tesco. Do you think people should consider trying to put the pot of money the output is necessarily going to be independent and into the economy? aimed at solving the problem for the independent Bill Grimsey: Let us just clarify the levy, first of all. retailers? I am afraid I am a bit old in the tooth and a It was a levy that was 0.25% of sales on all businesses little sceptical of that, and I just think that is with a turnover of more than £10 million a year, and fundamentally wrong. they had to be profitable, so it is not going to capture I think the Government should be saying that there is your independents. enough noise out there for them to do a Secondly, I do believe that my industry, in which I root-and-branch review and to look for reform of have enjoyed a wonderful career, internationally as business rates, which will help and sit alongside town well—I managed a business in Hong Kong for five centre plans of the future and help the economic years, so I have had a great life—as a consequence of wellbeing of the small independent retailer. It is this the consumer boom through the 1990s and the 2000s Government that said it was a champion of SMEs, and has put down lots of space, which is now coming yet it has just said it; its actions have been completely home to roost for many retailers. They have found to the contrary. There is no question that there are they have too much space today, because the parts of this country where small businesses are going consumer is changing. We dragged the consumer, to go bust, because nobody is listening to the because they wanted it, out of town, and we did cause pressures that they are under. Ev 96 Business, Innovation and Skills Committee: Evidence
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Q368 Mr Walker: This Select Committee, under this bit of tough love. These guys have to realise that it is Government and previous Governments, has done a time to shape up or ship out. It is time to take the lot of work on things like small business rate relief, situation very seriously, and we cannot go on with which has been extended and supported. I think this business rates the way they are structured. is something that obviously Government is keen to engage with. The challenge that Government has, and Q370 Mr Walker: I just want to come back on what particularly local government has, is the fact that it we can do to help small businesses. You have picked has always been seen that businesses rates should be up on the section 69 powers and the fact that they are overall fiscally neutral. Is that something that you not being used nearly as widely. Is that something that think needs to be taken on now? Actually, we should you are monitoring on an ongoing basis or was that be looking to relieve the overall burden of business just a snapshot at one particular moment in time? rates. Bill Grimsey: I mentioned that there is a team of us, Bill Grimsey: If we look at the issue of business rates and one of the team members is a guy called Paul and the reliability that Government has on this tax, it Turner-Mitchell, who is an independent retailer in the is quite frightening. It is the only tax that does not flex Manchester area. He lives this, day in and day out. In with economic conditions and, therefore, it is fact, he moved his store from Rochdale to another part relentlessly going upwards and onwards. It is of Manchester, purely because of the economics that £26 billion this year, as a total number. It is going to he was facing. He does all of this work and he is the break through the £30 billion mark in the next couple expert on business rates. All of the numbers that I of years under the current methodology, but it is not have been quoting to you are done by him. He does a likely to get changed very quickly. I know enough lot of it by freedom of information requests, and I about this place to know that the wheels do not turn have to take my hat off to him in what he does. It is that quickly and, therefore, a reform of business rates just a shame that we are reliant on individuals is not likely to get done in the life of this Government. highlighting something that is so plainly unfair. Therefore, it is likely to form part of an election manifesto from the parties, and then they have to get Q371 Mr Walker: In the current environment, of in and then they have to get the change happening. course, all our local councils are pressed for cash. It Meanwhile, the current methodology is in place, with is very difficult for them, out of their own resources, the delay of the 2015 revaluation and, as a to offer these discounts. I am always encouraging consequence, small retailers up and down the country mine to do what it can to help local businesses but, are paying disproportionately more for rates than the fundamentally, I do understand the budget constraints large retailers are today. I have evidenced that earlier that they are under. Do you think that is something in my presentation. It is really a question of what we that Government needs to be looking at—how it can do right now, and that is why we must freeze it and incentivise them, how it can support them to do that? we must bring back the 2015 revaluation. What do we Bill Grimsey: It is absolutely something that central do going forward? Government needs to commission Government should to be doing, because there is a lot a root-and-branch review to get reform that will of this going on, by saying, “Look, we’ve got a accommodate all the things we have talked about. clause 69. They’ve got the option. They can deal with Mr Walker: I know my colleague Brian wants to it. It’s not my problem.” The reply from the Prime come in, and I agree that Government should be Minister to this florist was exactly that, and yet the looking at this and should be looking at a councils are not invoking clause 69 and doing it. You root-and-branch review. It is very important, though, are getting Brandon Lewis in here; I have already said that we do focus that on how to help the small his local authority is not doing it either. It is no good businesses on our high streets and, as you say, not just using that as a reason; it does not work. hand a cheque to some of the biggest retail businesses There should be some empathy with the plight of the out there, which probably do not need the help. That local authority, which has been squeezed and needs to be at the heart of it. squeezed and squeezed by central government, and now we are expecting them to give rate relief. In fact, Q369 Mr Binley: Thank you for that, because I just what they are tending to do is the opposite. One in want to make a point to you that you missed out in seven businesses out there has been subjected to some your view of how this might proceed: that it will be sort of legal process to recover rates. Bailiffs are going in the manifesto; a Government will be elected, and in on a regular basis. If you take the they will create the policy and attempt to put it into one-in-seven-figure and then take out all the Tesco effect. The bit you missed out is overcoming the Expresses and the Sainsbury’s Locals, on the indies, reaction of civil servants. One of the things I have that is more than one in seven. I do not have those learned in this place is that the biggest hurdle to numbers, but it is telling you that these people are overcome is exactly that. It happens again and again, under enormous pressure. I cannot solve their retailing and I wondered if you would take that into account, problems; that is up to them. They have to have the because you have a lot to advocate, but you have to right proposition at the right place, right time and right recognise the import of the civil servant. We battle price, with the right service, but we can help them with it all the time. with their cost pressures now. I come back to it: we Bill Grimsey: Again, I am not speaking from must freeze these business rates and we must bring experience, but I do have a lifetime of experience of back this 2015 revaluation, because the only dealing with employees and motivating people to get beneficiaries out of this delay are the big retailers. The things done. There is a time when you have to have a small ones in the north of England are suffering. Business, Innovation and Skills Committee: Evidence Ev 97
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Chair: I am conscious of the fact that we have the need to get into that rates system and find ways of Ministers coming in, in seven minutes’ time, so I am freeing up funds to encourage entrepreneurship, just going to bring in Rebecca Harris now with a particularly in the way that technology is moving. The couple of questions. leisure industry will change completely. Technology will change. Q372 Rebecca Harris: Just to finish off a bit on I was in an airport where there was a new McDonald’s business rates, let us assume the most pessimistic and—do you know?—all the tabletops are now possible outcome, which is that the Chancellor of the touchscreens. You know when you used to take your Exchequer has no room to manoeuvre on business kids and they would get colouring books? Forget it; rates and we do not get the freeze for which you in the future, they are just going to play with the advocate very clearly, and so have many of my tables. The world is changing, and we need to give businesses. We do not get the revaluation, but there our young people the spirit and the motivation to be might be other aspects to the business rates regime entrepreneurs, and yet we burden them with tax. It has that need changing in any case, as well. You spoke to be wrong. earlier about Roger Wade from Boxpark’s idea that, if he gave three months’ free rent, in return the Q373 Rebecca Harris: Do you have any specific Government should give rate relief. I just wondered thoughts about empty property rates? They were whether there were any other ways we could look at intended, I believe, when they were brought in, to try some of the perverse effects of business rates, which to encourage landlords to rent their empty properties are actually stopping start-ups in the high street. Do cheaper. I have heard some people say that actually it you think, for example, Roger Wade’s model could is having some quite perverse effects, which is when work in all high streets? shops go bankrupt they stay in receivership for ages Bill Grimsey: I think Roger Wade’s model could work so they do not come on the market, or that landlords in many high streets, and it is a way of getting youth are actually taking empty places out of use. Have you inspired to become entrepreneurs. The Philip Greens had any evidence of that? of this world, in 50 years’ time, are going to come Bill Grimsey: Do you know, I have been party to it from young entrepreneurs, and we need to foster that. myself? I did CVA on Focus DIY to keep it alive for That is important. I do think that that needs to happen. the four years after we saved it from administration. In our review, we did mention that there are other Eventually, we did not overcome the current economic aspects of business rates that need to be looked at. For conditions, regrettably. During that time, we had example, we have turned our high streets into betting empty units and we went to a thing called Computers shops, payday loans and charity shops. The charity 4 Africa, which is a charity. All we had to do is, for situation needs an examination, and we were brave two weeks out of every six months, open the doors enough to look at it in our review. What we said was, and bring computers in. They get shipped to Africa, “Charities are charities and they should not be close them down, and you did not pay any rates. retailers.” What has happened is Oxfam, for example, My obligations at that time were to my shareholders. has morphed into a chain retailer. In my experience, I Guess what? That is not illegal. It is exploiting the have seen clothing items in those shops that are really situation, but it does not necessarily make it right or good and they are next door to a clothing retailer who deter situations that should not otherwise exist. There is paying full rates, and they are getting 80% rate are loopholes out there and the charity one needs relief. That has to be wrong. Now, I am not buttoning up a bit, because it has allowed charities to anti-charity; in fact, quite the contrary. I give my time morph into retail chains and it has allowed landlords and some of my money to charity. Our review just to exploit other charities to get rate relief, and that said, “Reduce that from 80% to 70%.” It is just 10%. should stop. That will create some money, about £15 million to Chair: I suspect your review demonstrates a level of £20 million a year. What could you use that for? political courage that you will not find amongst any We want to avoid just having more charity shops, political party in this place, but we will see. Can I more payday loan shops, more betting shops, all of thank you for that? That has really been very which are preying on the poor in our society—because stimulating indeed and just what we needed, I think, what is a payday loan shop? A place to get access to before we have the Ministers in. We need now to have funds. What is a betting shop? It is a place to live them in, so can I conclude by thanking you, Bill? That your dream in hope. What is a charity shop? It is a was very interesting indeed. Believe you me; I am place to get cheap items. Are we really satisfied that sure that some of your sentiments will resurface again that is the legacy that we are producing for our in our recommendations to the Government. Thank grandchildren, up and down the country? I am you very much. certainly not and I think it needs to change, and so we Ev 98 Business, Innovation and Skills Committee: Evidence
Examination of Witnesses
Witnesses: Rt Hon Michael Fallon MP, Minister of State, Department for Business, Innovation and Skills, and Brandon Lewis MP, Parliamentary Under-Secretary of State, Department for Communities and Local Government, gave evidence.
Q374 Chair: Good morning, and can I thank you for that. They have that power there. Some local agreeing to answer the Committee’s questions on this authorities are using it. They can use it in a really issue? Obviously, we know who you are but, if you targeted way that is appropriate to their local area, can, just for voice transcription purposes introduce because they will know best—they will know what yourselves, starting with Michael? high street, what part of business in their area, needs Michael Fallon: Certainly. It is Michael Fallon, that extra bit of boost that that kind of discount can Minister of State at the Department for Business, give. Innovation and Skills. It is important to put this in context. As part of the Brandon Lewis: Brandon Lewis, Minister for local new system, it also fits in with the changeover this government and high streets. year to the business rates retention scheme for local authorities. 70% of their funding now is derived Q375 Chair: Thanks very much. It will be no locally and the business rates retention is where local surprise to you that a recurring theme of our inquiry councils can see growth in their income. Apart from has been the issue of business rates, so I will start by the new homes bonus, it is business rates retention so, just outlining some of the issues there, as they have as they grow business, they benefit from the growth been presented to us. That is, of course, lowering of in those business rates. To see that, councils need to corporation tax has been offset by an increase in other be looking quite commercially, for two reasons. taxes, particularly property taxes like the business Chair: Can I just say we want to deal with councils rate. Do you think this is the fairest way or do you and business rates as a separate block of questions? think there is a better way that this could be done? Brandon Lewis: What I will say to you is that is quite Brandon Lewis: Like anything with taxes generally, an important part in terms of what discounts a you have to look at the whole picture. As you rightly business can get. A council has the power to give say, corporation tax has fallen and will continue to fall them substantial discounts, beyond what are to make us the most competitive. We also have the nationally available to everybody, so it is locally drop in NI for employers coming in, which makes driven. quite a big difference, particularly to small employers. Chair: Robin Walker is going to ask a few questions Even with business rates of course, there has been no on this. Michael, you look as if you wanted to add real-term increase. The increase has been the inflation something. Do you want, at this stage, to say anything increase, so we have managed to hold that down as on that? far as we can, for now. On top of that, of course, Michael Fallon: No. we have over 900,000 businesses now—it has roughly trebled since 2010—benefiting from small business Q377 Chair: The British Retail Consortium has rate relief. We think, as a whole picture, that makes it recently appointed Ernst & Young to carry out a much better position for our companies to be in, and research into the business rates system. What is the they are the employers that create jobs and growth Government’s reaction to that? Will the Government for everybody. be engaging with this? Brandon Lewis: I met the British Retail Consortium Q376 Chair: One of the issues that has been put to last week. They outlined to us what they are doing, me is that, if you like, the concessions on business and I said to them I would be very interested to look rates apply to small businesses across the board. How at whatever they bring forward. The Treasury, as you do you think this affects the retail sector? What will know, Chairman, always keep all taxes under proportion of the total small business numbers review, but business rates are an important part of the comprises small retailers? tax regime in this country, and we have a fiscal deficit Brandon Lewis: What I can say to you is about 25% we need to deal with as well, so we have to look at of all business rates is retail. I cannot give you a everything as a whole. As I said earlier, it mixes in as precise breakdown of what the percentage that benefit well with the corporation tax changes and the national from small business rate relief is, but of course insurance change, all of which benefit businesses and, business rates—Chairman, as you imply in your therefore, retail as well. When anybody comes question—go across a whole range of business forward with any research, it is always interesting to sectors. It is not just retail. As I say, retail is just 25% have a look at it. of it. When we look at anything to do with business rates, we cannot look in isolation at retail. Anything Q378 Chair: Do you not really think the Government there has an impact right across the board. It is why, should be doing it, given the fact that the British actually, we think the small business rate relief is so Retail Consortium inevitably will reflect the balance important. of its members? If you like, the big supermarket It is why it is also really important for local authorities chains may well have disproportionate influence on it. to be looking at the powers they have. I know Bill Would it not be better carried out by the Government? Grimsey makes the point about how many local Brandon Lewis: As I say, the Government and the authorities are using the powers they have to discount Treasury always keep taxes under review. You are business rates. We have been quite open about this: quite right; as I said earlier, anything the British Retail local authorities should be looking very carefully at Consortium does is likely to be retail focussed. That Business, Innovation and Skills Committee: Evidence Ev 99
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP is understandable; that is their remit. As it happens, as I come back to the point I made right at the beginning. I said, of business rates 25% is retail, so there is Corporations in this country, small, medium or large, actually a much bigger picture. The Treasury does are not just paying business rates. It is the picture as keep all taxes under review. a whole. They will be paying VAT, so those companies that have got more trade will actually be paying more Q379 Chair: You say they keep it under review, but tax through VAT, obviously through their corporation keeping it under review and carrying out proactive tax directly and other taxes that way, so there is a research are slightly different. That was the thrust of balance across different areas in that way anyway. my question. Do you not think the Government should be doing that? Q382 Chair: I believe all the research done to date Brandon Lewis: It is right the Government keep it demonstrates that retailers are paying a under review. As I say, the Treasury is looking at these disproportionately high level. things—they look at taxes every year. We have a Brandon Lewis: The independent research that we Budget and an autumn statement. I am sure the looked at when we took the decision on the business Chancellor’s team will be looking at this. rates revaluation showed that retail is actually one of the sectors that would have lost out. Q380 Chair: With respect, Mr Lewis, that sounds a bit like a stuck gramophone record. Some of us are Q383 Mr Walker: I just wanted to reinforce that old enough to remember the gramophone records that point from the Chairman. I think the very fact that get stuck. One of the problems is, and this applies not you are saying 25% of business rates are paid by the just to shops but would apply to other business as retail sector, which represents 5% of GDP, does rather well, that the calculation of business rates is linked to illustrate the fact that it appears to be bearing a the asset—the property. It is a property-based tax, disproportionate chunk of the tax burden there. I think rather than linked to the level of trading. Do you not there is a real concern that actually it is the traditional think that there is an argument for doing research to retail, which we all value in our high streets and in change the business rate taxation system to reflect our communities, that is bearing that even more. As trading rather than property? you say, the change in the nature of retail concentrates Brandon Lewis: That is where there is a huge that tax burden on perhaps the shops and the retailers that might be doing the greatest social good. I do think complication. There are some people who have made this is something that we need to keep a pretty serious that argument. Not all business rates are entirely focus on. property-based. Pubs have an element of turnover Brandon Lewis: Actually, it is one of the reasons why, within theirs as well. One retailer made the point to in the last couple of weeks, in the speeches and the me that the turnover tax would be great for them, conferences I have been at, I have been stressing the because they have at least one retail outlet on every point that local authorities, which have the power to high street. That is their aim and sometimes more than go even further with this, should be looking really that, but most of their transactions involve no cash carefully at what is right for their communities. If they whatsoever. Their customer relations work is 80% of have that kind of independent niche retailers that are their transactions in store. The beauty of a property important to their high street or their town centre, they tax for the Government is it is straightforward; it is should be looking to do what they can. There are some simple to assess, in the same way council tax is. good examples around the country where this is Again, we come back to the big complication if you happening, but there is a lot more. Councils could go make a change, particularly on retail. I do accept the a lot further in this. It is not just business rates; there premise of the question, which is retail is changing. are other things retailers have as an issue. That and It is changing to be not necessarily a property-based parking tend to be numbers one and two. business. It is moving with online, particularly. We are Local authorities know their area best, rather than up at 15% in this country, which is, I think, the highest having something one size fits all, because what in the world now, but whatever we do with business would be right in Bond Street is not necessarily going rates goes right across all the different sectors. It is to be right, and certainly would not be right, for Great not just a retail-based tax. Yarmouth town centre. It is right that we have that ability for people to look at what works for them Q381 Chair: Have you ever looked to change that? locally. I would say again, if we had gone ahead with Is there a God-given reason why business rates have the revaluation, the only overarching full independent to be taken across the board and you cannot have a review shows retail would have actually had an separate approach to retailers? increase. It is London office space that would have Brandon Lewis: You do in the sense that there is a had the benefit—and obviously the surveyors who get multiplier. That is the issue that, no doubt, somebody paid for doing these kinds of evaluations. will want to touch on, in terms of the revaluation and how different parts, different sectors, will effectively Q384 Caroline Dinenage: Can I have a brief be paying different levels and have a different level supplementary, Chair? With the greatest possible of multiplier. If we had gone ahead with the respect for the Minister, can I briefly take issue with revaluation, for example, certain sectors would have the statement that, if the business rate revaluation was had much bigger rises in business rates than other going to go ahead, it would actually increase the cost? sectors, because of how that works through the That may be true across the board, but the people who multiplier. are going to bear the brunt of it are going to be the Ev 100 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP massive retailers, to the tune of £1.3 billion over two high street is that hub and heartbeat of a local years. At the moment, they benefit from not having community, and the local authority is best placed to this business rate revaluation. It is the smaller look at what the community needs and wants. It has independent traders still sitting in properties that were to do its homework around that and put in place the valued in 2008 that would benefit. These are the type of schemes, including business rate discount people we need to be, or the Government need to be, schemes, that help that vitality come back or remain supporting—the people who are going to be the big and grow and prosper, in the future. employers, the entrepreneurs of the future—not In the long run, the council benefits as well through necessarily propping up the big multinational the business rates retention scheme. If it gets that supermarket chains to the tune of £1.3 billion over vibrancy back and those businesses get themselves two years. Can you not understand that that is the key into a really good vibrant place, then the council to this? It is supporting the small retailers over and benefits in the long run. More importantly, the above the big players that have undue influence over community benefits from having that real buzz in its Government policy. high street. Brandon Lewis: That comes back to the point I have been making. There are a couple of things to this. One Q385 Ann McKechin: I have listened with great of the things that was really clear from the work that interest to your justification of why a revaluation was done—the only independent work that has been would be bad news for many retailers. Actually, I done—on whether we did the revaluation or not, think you have articulated the argument of why showed that the biggest beneficiary would have been business tax, in its current format, is not fit for London office space. Everybody else effectively purpose. We have, on the one hand, the particular and would have been paying for that. Retail would have exceptional dynamic of a world economy around the gone up. It would have actually hit independent City of London, and we then have the rest of the retailers as well, potentially, because the way the country, where quite different parameters exist. Can I multiplier works is that for any area to say they would ask you, Mr Fallon, when you last discussed with have been better off, they would have had to have Treasury Ministers whether or not business rates and seen their rentable value not just drop but drop the way in which valuations are carried out are equivalent to or by more than the national average. currently fit for purpose? Because of the scale and size of London office space, Michael Fallon: As you know, we discussed business in most areas that actually would not be the case. They rates extensively during the passage of the Growth could have had a drop in their rentable value but still and Infrastructure Bill, which Parliament assented to actually have had an increase in business rates, let back in April. This whole issue was debated quite alone the volatility it would have created. The big thoroughly on all sides. What was transparent there winners would have been London office space and was, as my colleague has said, that the winners and the surveyors, who actually earn a lot of money from losers were not nearly as clear-cut as is sometimes companies that look at these revaluations when they portrayed, between types of business, suburban and happen. We took the view that the stability going inner-city centre, and large and small. Overall, there forward was hugely important, and the fact that we would have been more losers than winners. So far as did not have that volatility and, potentially, increases. your question is concerned, of course the Department Small independent retailers have two opportunities for Business has an input to the Treasury, as you come particularly that the Government has put in place. One up to each of the fiscal events, as you would expect, is obviously the small business rate relief, which has the autumn statement and to the annual Budget trebled from around £300 million to over £900 million process. a year under this Government. We have extended that. I think that is hugely important. Potentially more Q386 Ann McKechin: It is the Treasury ultimately important is the flexibility that we have given to local that sets the business rates level and the increase, for authorities, which know their towns best and know example, that is coming in next spring. That is a what kind of retail works, to go even further and give Treasury responsibility at the end of the day, or are the business rate discount that they think is you and Mr Lewis’s Department inputting in what you appropriate to work in their local area. They can target think should happen? that, and that is probably more powerful, because then Michael Fallon: Absolutely. We make representations the Government is not just doing one size fits all, on behalf of the sectors for which we have ministerial which would potentially benefit retailers and other responsibility, and that of course includes the working businesses, which do not necessarily need it, some of the small business rate relief in my Department and would argue. no doubt other aspects in Brandon’s. The local authority can target it in a way, as at least one Portas pilot has done and just under 20 others Q387 Ann McKechin: The point that has been made have done, to help particular types of business that repeatedly this morning is that the current valuations they think are important to their town centre. It is not of properties, in many, many cases, do not bear any just to keep the business going. I have to say I do not comparison to what the position is now. Particularly, think it is right for government of any description, we have gone through an economic recession. It has local or large, to be subsidising failing businesses, but been put to us that, for example, outlying areas in it is right for local government to look at what helps perhaps Essex are actually, in effect, subsidising shops their community. This comes back to Mr Binley’s in Regent Street, which actually should have a much report on community hubs. The town centre and the higher valuation. I put to you again that there is a Business, Innovation and Skills Committee: Evidence Ev 101
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP completely different dynamic, in terms of property Ann McKechin: I do not know that I am not prices at the moment, occurring in London, as very necessarily convinced by that. often has been the case. Have you looked at all at Brandon Lewis: I have to say that we have also whether or not we actually need to have a different said—we have been very clear about this—you do tax system that suits the fact that we have a world need regular revaluation. Once we get to that 2017 city, on the one hand, and the rest of the country has revaluation, there will then be a five-yearly got a very different dynamic and very different values revaluation, so that there is some stability in that on property? The property market is acting in a very period in between. Obviously, there is an issue for different way. the cost to the taxpayer as well, every time there is a Brandon Lewis: I have to say I think there is a revaluation, but it does mean companies get that misconception; that is probably the wrong word, but five-year planning period as well. actually the way the system works does recognise that. The reason that the Government decided to postpone Q389 Ann McKechin: It is so easy, because of the revaluation was to avoid the volatility that would political pressures, so we end up with political have happened for a lot of businesses. They had that pressures always topping revaluations. I might say this certainty of planning through, as you said quite is the same argument, but a different scenario has been rightly, the very volatile economic period that we have presented in Scotland about why they have not also been through. Hopefully, we are now coming out the increased business rates, and they do not have a other side of that, but it meant that there was that London situation to deal with either. The same stability for companies to be able to plan and look at happens with council tax. We put off valuations and their plans, going forward, without the concern about we end up with a grossly distorted reality. That does what might happen in 18 months’ time. not help business in the long run, because there are a Ann McKechin: Right across the board, businesses lot of losers, where their individual circumstances are are saying to us that the actual failure to revalue is not properly taken into account. It is a question about actually causing them real pain. the fairness, is it not, at the end of day, that should be Brandon Lewis: A lot of those businesses would have at the heart of the system? been within these 800,000 losers, as opposed to Michael Fallon: When we debated this during the 300,000 winners, because of the scale and size of the passage of the Bill, it was very clear to me, as the change in the property value and the rentable value, Minister in charge of the Bill, from the only hard particularly for London office space. This is where evidence we had, which was the analysis done by the there is simply no basis for the argument around the Valuation Office Agency, that the biggest winners of north-south divide. Actually, it is London that all would have been in London. They would have probably would have benefited, particularly London been Canary Wharf offices and, indeed, Oxford Street office space. premises. It is really not clear to me why we should Ann McKechin: That is what my argument is: that have given them the benefit and penalised, for we actually need different systems of tax. example, petrol stations or premises in suburban areas Brandon Lewis: If there was a revaluation, London or on outer ring roads of town centres right across would have benefited, so it was important that we the country. paused there to make sure that we do not suddenly have 800,000 losers at a time when there is an Q390 Ann McKechin: Would their value not go economic difficulty anyway. All parts of the retail down as well? sector are valued in the same way. Brandon Lewis: No. Ann McKechin: You do not think their value would Q388 Ann McKechin: Mr Lewis, can I just stop you have gone down. there? Property prices at the moment in London are Brandon Lewis: No; because of the way the rocketing, at a factor of four times the rate of increase multiplier works, that cannot happen. in other parts of the United Kingdom, so why do you think that, by 2017, we will have got to a position Q391 Ann McKechin: That would suggest we might where we will actually reconfigure ourselves, we can need to change the multiplier. go ahead with the revaluation and everything will just Brandon Lewis: No, because the business rate levels be absolutely fine across the country? All the factors overall stay the same. If one sector or one geographic point to the fact that the distortion might get worse, area drops, everything else is covering the cost of that, not better. so the multiplier has that impact. Brandon Lewis: The argument is the other way round, because the problem is that the valuation of London Q392 Ann McKechin: I appreciate what the current office space at the point we were looking at this last system is, but I was just saying that the current system year, had gone down, so that London would have perhaps needs to be altered, because it is not fair to benefited from a revaluation. The argument you are individual premises. This should be at the heart of putting is that London will lose out from a revaluation helping businesses. The rate should be a recognition in a few years’ time, which is backing up the of the actual property they occupy, but it is not. argument we are making that, actually, we needed to Brandon Lewis: The problem with that is you are then pause, because the businesses outside London could also altering the overall tax take, which means you have found themselves having a business rate are dealing with the problem than this Government is increase, because of the way the multiplier works. having to deal with: the deficit that it inherited and Ev 102 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP the debt we inherited. There is a fiscal consolidation the footfall. They have some great brands, some great we have to take into account as well. stores; they just wanted to increase the footfall. They Ann McKechin: Okay, now we get to the rub of it. have done something that somebody more centrally Chair: You are trying to tempt us into a much wider would never necessarily think of doing. They realise debate. In another context, I am sure we would be that on their doorstep is the Knole estate, which gets happy to participate but, given time constraints and hundreds of thousands of visitors a year, who go there the subject matter, we will not go there. and then leave. How do they benefit from that? The town team, local people, has got together with the Q393 Mr Walker: We have heard a lot of evidence town council and, for a very small amount of money, that business rates, as they stand—as the system has gone and got a vintage bus. People at Knole can works currently—are a major disincentive to people try out a British vintage bus that takes them to the actually starting up in retail and going into retail town centre and then back again. They got people on businesses. We all know that there are problems the bus who wanted to try the bus out, but it also got around the country with empty premises. There is a them into the town centre. They are seeing a real whole debate around empty rates for a start but, benefit from that, and they are making things in the without looking at the formula—without making it town centre more accessible, using electronic pads so more responsive to what is happening in the market— that people can look at what is there and make do you not think there is a real challenge here with bookings. That is a very local thing. the amount of retail space that we have in the UK? For the future of our town centres, we have to We have heard a lot of evidence that that is likely to understand it is changing. We have to be honest about need to reduce over the coming years. Is there not, that. It is not just about business rates; there is the therefore, a risk that you are concentrating a bigger whole remit of things the Government is doing. We and bigger tax burden on a smaller and smaller space have touched on the tax side of it today, but there are retail space? What can be done about that? also changes we are consulting on at the moment Brandon Lewis: If you will bear with me, I think around planning. There are flexibilities around there are two levels to this. The first point is that it is permissions and shops being able to open just for two fair to say that we are seeing a huge change in the years—pop-up shops and things like that. Again, local nature of our high streets and our town centres. They councils and local communities have to look at are going to be less retail-based. That is something making those town centres that vibrant hub. I have no else in Bill Grimsey’s report and one of the points of doubt that they are going to get somewhat smaller in Mary Portas as well, who has done some great work— some places, because retail is changing. I have to give huge credit to Mary Portas and her team Actually, the hospitality industry and the leisure for the time they have put in working with industry are playing a bigger and bigger part. Towns communities around the country on this. that are doing really well are where the local They are changing, and they are changing for a couple authorities and local teams have realised that and are of reasons. Primarily, our shopping habits are capitalising on that. They are providing a town that is changing. I doubt there is anybody in the room today vibrant around that, whether it is museums, artwork who has not shopped online at some stage. As I have or events. That kind of thing is becoming more said, when we have about 15% of our population important. The whole structure is changing, and we shopping online, that is going to change high street have to be quite grown up and understand the fact that retail. You will have to excuse my colloquial way of it is changing, and we as consumers are the ones who describing this, but as I described at Bill Grimsey’s are changing it. report launch, we used to go out to our town centre or high street to do our shopping. We do not anymore. Q394 Mr Walker: I agree with a huge amount of We will generally go out to see something, to have what you have just said. It is right that we need that something to eat, to have a drink or just for a day out locally tailored approach. Obviously, with Small and, while we are there, we will do some shopping. Business Saturday coming up, there is a real High streets are changing. That is why I think it is opportunity for local councils to get involved in hugely important that communities have that ability to supporting their local small businesses and doing look at what is right for their town centre, whether it special promotions around that. I have certainly is a very small village town centre, if you qualify that written to my local council urging them to look at as well, or a big town centre or a long high street that what they can do on parking for small business is already vibrant, full of brand names; or whether it Saturday and support small businesses on the high is a high street that has a value and a vitality because street. I would hope other people are doing the same it is full of very local, independent, potentially niche, thing. While you are visiting people’s constituencies, retailers that serve that community, actually, we will you would always be very welcome to come to see variations around the country. That is quite right. Worcester and see the vibrant high street that we We want to see that. Part of the beauty of our country have there. is that every town you go to is slightly different. It is In terms of supporting SMEs and in terms of having that local power to look at it. supporting the growth and the jobs that they can bring, Let me just give a really clear example about this. I retail still plays an enormous role in giving people will pick on my colleague’s own constituency. I jobs. It is more a question for the Minister from BIS: visited Sevenoaks a few months ago, and the town we have flexibilities for councils at the moment to team there has done a great job. What they realise is give people a discount on their business rates. We they have this lovely town and they wanted to increase heard a lot of evidence that they do not feel currently Business, Innovation and Skills Committee: Evidence Ev 103
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP able to use those. Is there something that the Government can do more about footfall. We talk about Government can be doing, particularly to support cutting business rates, which is very important, but businesses that are creating new jobs and employment increasing footfall is very important in our town in this space, to give some extra skin in the game to centres too. All too often, local government and big those councils to create a pot of money or some business have gone to the edge of town, just as system of funding that councils can go after, in order supermarkets have. I know in Northampton—and if to offer a discount to their small businesses and the you would like to come and see Northampton Alive, independents that create so much employment? which you know about, we would be delighted—we Michael Fallon: That is probably more a question for are bringing back local authority workers, partly to Brandon, in terms of creating a special fund for local help the daytime economy. We believe that authorities. What we do as a Government, of course, community hubs are the very heart of our is encourage small businesses of all kinds and make communities, and I just wonder whether the it easier for them to take on more staff. We do that Government could do more in that respect. It is not all through reducing the red tape—the burden of about out-of-town retail development; it is also about regulation that applies to the very smallest businesses out-of-town development of office buildings. We do in particular. Of course, we are introducing the need to keep quite a lot of that in our town centres to employment allowance from next April, which will make them viable. Could you do more to encourage make it much easier for the very smallest businesses that? to employ more staff, because it will be cheaper for Brandon Lewis: One of the key things we are them to do so. Brandon may want to say something consulting on at the moment, which could have a big, about creating a local authority pool of money. big beneficial impact if local authorities use it Brandon Lewis: This plays into the comments I was properly, is the power to convert some old retail making a short while ago, in that it is part of the whole establishments into residential. The reason for that has picture. There is the national insurance reduction. to be based on the vitality and vibrancy of the town There is the corporation tax reduction, which will centre, which is absolutely paramount, but if you have benefit all businesses. Small business rate relief is a a town square or high street that then has areas just hugely important part of that, but I would come back off the back of it that are struggling, allowing some to that the onus has to be on those local authorities to of that to go back to residential has two benefits. understand that their long-term benefit, as a One is it means it refocuses your retail offer in that community and as a financial institution as a council, core area, which is where it is probably going to be relies on the business rates retention scheme. If they moving back to anyway, but it also puts directly more want to see that grow, they have to encourage footfall right on top of that high street or town centre. businesses to grow. If the business rates in their local Having businesses close to and around town centres area are the hindrance, rather than rent or anything and high streets as well, as you say, Mr Binley, quite else, then they should be looking at what they can do rightly, brings people in at lunchtime and after work. locally, now they have this power to discount, in any format they think is appropriate, so local businesses I have the pleasure also of having responsibility for get that advantage. community pubs. I make the point they are an I would also say that I do not think we should important part of the high street, but also a community underestimate the power of being on a high street. I pub is not just the little village pub. It could be in the have met some retailers recently, in my own heart of a high street or a town centre, because that is constituency as well, who have built up, in about 18 where people, either at lunchtime or after work, come months, a really successful multi-million pound together as a community. Local authorities can help business in retail, starting through eBay and now encourage in businesses near a high street or a town online. They are desperate to get a high street centre. They can help spread that message, and town presence. What they cannot do online, which you can teams, Portas pilots and some of these organisations— only do on the high street with brand recognition, is the Association of Town and City Management—do build that brand recognition. That is why a lot of the some great work around this. big brand names, no matter how much business they Equally, what I have seen is that some people make do online, always want to have that high street the argument that, if you get some out-of-town presence in the right place, because that is a hugely developments, some of the bigger stores—and we important part of their brand building and their brand have got a new Sainsbury’s coming to Great recognition. A lot of retailers that are currently Yarmouth—if it is done appropriately and in the right working online from an office or wholesaler, which way, it can actually increase footfall. We benefit by the way still pay business rates when they do that, because we have a Sainsbury’s in our town centre, and want eventually, at some stage, to have that high street we have a Morrisons in one of our town centres. That presence. Even the Amazons of this world and eBays brings more footfall. It does come down to—and I are now looking at what they can do in our high know this is something you feel very strongly about, streets and our town centres in having those pickup and I share your view on this, Mr Binley—councils points, which also helps them build their brand using their powers, particularly their planning powers, further. The high street still has a massive value to understanding that with that power comes, to quote companies, which we should not underestimate. Spiderman, great responsibility. They have to use it. They have to look at the impact of the decisions they Q395 Mr Binley: I am delighted you talked about are making and how they can use them in a beneficial that particular movement, but I am concerned that the way for their town centre, which is ultimately good Ev 104 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP for their long-term viability financially, but it is good a real cliff edge with business rates. It is suddenly for their community as well. going from a very low cost, because of our good policies on small business rate relief, to a very much Q396 Mr Binley: I admire your enthusiasm, Mr higher one. Is that something that you can take away Lewis, for some of my beliefs. I am delighted, but and look at? I am not asking for a definitive answer, you did not answer my question. The question was: “Yes, we will do something about that right now.” can you do more? What are you doing to promote this With the work that the BRC is doing, which is very particular movement back into our community hubs? welcome, with all the thought that is going into this Brandon Lewis: I am sorry I did not answer. “Yes” is in the long run, with the fact that we are now going the answer, and there are a number of ways in which to be looking at a business rate revaluation a few years we can do that. One is through the consultations we away, is that something we can have a look at to see are doing at the moment on planning, which I think if we can make that work better for the businesses that have a really big beneficial impact. I am sorry I did are actually wanting to expand and take on new jobs? not make that clear, but that is a potentially quite Brandon Lewis: I do appreciate the point you are important thing. making. I can certainly say that. What I would say, The other thing is, actually, all of us have this great though, is, even for that business, both that business power from the fact that we get a microphone and we and people who are working for that business should get to speak at conferences, in the Chamber and here, be lobbying. If there is an issue in a particular area at a Committee like this, to keep reminding local where businesses want to grow and they have reached authorities that we have given them a lot of power to this point where they have just moved out of small deal with these issues in a way that is appropriate for business rate relief or they want to move to premises their local community. It is not one size fits all, “We that have a high rentable value, and therefore its rates know best in Whitehall,” but actually it is your town would be higher, there are two points. One is they centre. It is your community. You have the power to have to do it when it is commercially right for them do something with it. We have to cajole, encourage, and that company is commercially viable enough to nudge and motivate all our local authorities to look be able to afford its cost base, whatever that may be. really carefully at what they can be doing with the We have to be careful that, as a Government, we are powers that we have given them. I do not think we not going out of our way to subsidise businesses that, should underestimate the amount of power we have actually, are not as viable as they should be in the devolved that does allow councils particularly to do first place and are overreaching. We have to be careful this. about that. Equally, what we can now see happening through Equally, again I come back to the fact that, in the town teams, the Portas pilots and the Association of system as it is at the moment, obviously there will be Town and City Management particularly—a really a review and a rates revaluation in 2015 for 2017, good organisation—is that if people want to look at which will look at some of these issues in the way it what they can do, they can bring all of that learning does that revaluation. More importantly, even now, and information together to help areas move forward. those local authorities do have the power, if they feel that businesses need to go into a particular part of Q397 Mr Binley: Finally, can you book a date for a their town, whether it is retail or office space, and Worcester visit and for Northampton? need an extra boost to get it going, they have the Brandon Lewis: I am really grateful for the invite. I power to do that now and they should be looking at am very keen to get around and see areas, so I will no how they do that. I am sure you will be able to lobby doubt be seeing both and I am sure we could do a very well on your local authority to convince them of good half an hour together on the parking charges, that great power that they have. right across our country. Q399 Chair: Before we just move on, so far, I Q398 Mr Walker: Thank you for those replies. It is believe, 18 of 326 councils have used that power. I always good to hear a Minister speaking up for local understand from Bill Grimsey that Great Yarmouth is pubs, which is a cause very dear to my heart. I do just not one of those. Is that correct? want to say one more thing on business rates. This is Brandon Lewis: As far as I understand, that is correct. a fairly unique taxation system, in that it does not I would not defend them whatsoever. If the council in seem to change to reflect the underlying economics of Great Yarmouth, like any other, wants to see its town what is going on, unlike corporation tax, unlike centre really flying, they should look carefully. I have income tax, unlike almost any other form of taxation. to say we are very fortunate in Great Yarmouth. We It does not use thresholds in the same way as other have a great town centre with a great market. If taxes. anybody wants to visit, there are the best chips you The small business rate relief is fantastic. This Select can possibly get on our high street, in our town centre. Committee in the past, before I joined it, did a lot We do not have a huge amount of empty office space of very good work on that and I agree; I think the or shops. We do have one big issue there that the Government has advanced the cause of small business council is trying to deal with at the moment, but that rate relief a great deal. However, there is a challenge. is linked to the cost of dealing with asbestos. It is a challenge that I often get put to me by local businesses in Worcester. You can have a business that Q400 Chair: I do not want to go into the details. I wants to expand. It wants to take on new employees; could wax eloquent about the problems at Sandwell it wants to move to new premises; and it finds it hits council. Business, Innovation and Skills Committee: Evidence Ev 105
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP
Brandon Lewis: I was going to say, as it is a greater extent than someone that is simply just, for Labour-run authority, I would hope you would be able example, selling books or vintage clothing at a pretty to convince your Labour colleagues in Yarmouth to good return and not actually giving much else back see the light and use their powers. directly to the local community. Brandon Lewis: I can understand the temptation of Q401 Chair: Ultimately, Great Yarmouth is not that kind of option, but there are some problems with practising what you are preaching. It does smack a bit it. There is the complication, the cost and the question of passing the buck. of who assesses at what point something becomes a Brandon Lewis: Actually, Mr Chairman, that is the good social value, enough to benefit from extra point. It is a Labour-run authority and I would ask discounts. you—the Labour party—as well to put pressure on Ann McKechin: Mr Lewis, it is localism and local them, because I am certainly doing it. They should be authorities might decide. making sure that they use the power they have, like Brandon Lewis: That again comes back to the local any other authority. authority having that power, as opposed to saying that all charities are of a good charitable status. Equally, Q402 Chair: They will respond in the way that there is an issue around the point at which the charity councils across the board and across the political shops are a value to their community. Again I will be spectrum do. They will say they just do not have the colloquial. In Great Yarmouth, we have an cash to do it. organisation called East Coast Hospice, and they have Brandon Lewis: If they were empty shops, it would three shops now across my constituency, in different be in their interest to do it, so the argument does not high streets and town centres. Now, they are doing a stack up. hugely important role for the community and they do Chair: If you could demonstrate to local authorities use volunteers, bring people in and give people work that there is a financial benefit to them in doing so, I experience as well, as do some of the other charity am pretty certain local authorities across the board shops, which are very localised and which will bring would do so. footfall into their high street because people care about the issue that they represent. Q403 Ann McKechin: Can I ask you just a quick There are other charity shops, all around the country, question about charity shops, Mr Lewis? We have had some of which are brand names, but not always— differing evidence about the impact of charity shops sometimes they are local charities—that will not on local communities. The Booksellers Association, necessarily have people coming in just because they whose members obviously operate on very narrow use local volunteers, apprentices or are giving work profit margins, told us that Oxfam actually has more experience to people, but because they have a product outlets selling books than Waterstones, but enjoys a that local people have come to value in the shop itself. huge range of reliefs. Do you agree with the view that Whether that is vintage clothing or whether it is books charity shops are disproportionately advantaged? actually is important; they have become part of what Brandon Lewis: I think it is right that we give brings footfall into the high streets. I think charity advantages and discounts to charity shops, but equally shops have a hugely important part to play, but I do I think—to an extent, I suppose it could be seen to again say that local authorities have to look at what be politically incorrect to say this—that actually we gives a good makeup for their local town centre to undervalue charity shops. In some areas, they get encourage in the businesses that they think are quite a bad press when, in reality, they can be a huge appropriate to give the right balance, across the town part in bringing footfall back in. There are some areas centre, so you get that mix. Actually, the high street you will go to where you have charity shops of all or town centre is at its best when it has a good mix different types. It could be one of the big brand-name of offer. charities or it may be a very local charity you will only see in a particular area but, if they run something Q405 Caroline Dinenage: This is for Brandon as a really well run shop, they can do very well. They Lewis. You have extolled the virtues of pop-up shops can have really good products that, in themselves, as a way of regenerating our high street. Some build up a reputation and bring footfall in. What we members of this Committee took part in a pop-up are also seeing starting to grow now through charity summit earlier this month, and Roger Wade, who is shops is they are not just shops; some of them in the director of Boxpark in Shoreditch, told the themselves are becoming a community hub, where audience, and has subsequently submitted evidence to they will have tea and coffee or where people meet. back this up, that the rating system does not work. He That in itself is also very important. has offered at Boxpark three months’ free rent if, in return, the Government gives three months’ business Q404 Ann McKechin: This falls into the Grimsey rate relief, saying that such initiatives would kick start Review recommendation that the relief should be the retail industry, and many small businesses do not reduced, but there should be a local pot so that local get the small business rate relief because of the square councils can determine if someone offers an additional footage, which has always been the big problem for service. I was in my local Barnardo’s on Friday, and retailers, over and above other businesses. Would the they take on a lot of volunteers who are out of work Government be willing to take up this offer? and give them experience in the retail sector, so they Brandon Lewis: Again, it is the local authority that are actually giving back a public good. Those has the power to do that. It is for the local authority particular shops should be rewarded perhaps to a to look at. If they think that is the right thing to do in Ev 106 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP their area, they have the power to give that business of, as a councillor in my time, particularly as leader, rates discount, and we do part-fund it. is we completely changed the look and feel, and style and design, of our high street. It was struggling; we Q406 Caroline Dinenage: Would the Minister be had lots of empty shops, certainly a lot of charity prepared to write to the local council encouraging shops, where we thought we could have really good them to take up this offer? retail brand names. We had a mix of daytime and Brandon Lewis: I would be very happy to write to night-time economy that did not really work, so we the local authority to encourage them to use the changed it and we did that. That is not easy. It does powers that they have. Ultimately, it is a matter for take time, but a lot of that is around setting out—your them whether they use that power in that way. point exactly, Ms Dinenage—a strategic plan. There is a real onus on local authorities to start looking at Q407 Caroline Dinenage: Thank you. The other what they want their high street to look like in five or question is really about the high street initiatives. six years’ time. There is a plethora of different initiatives to help Mr Grimsey made the point about a 20-year strategic regenerate the high street—the Portas pilots, town plan in almost the same sentence as saying the high teams, the Future High Streets Forum, the BIDs, the street is changing faster than any of us can imagine. I high street renewal award scheme. Mike Davidson do not think you can do that. In terms of a 20-year from Land Securities said, “To get to the point where plan, when things are changing as fast as they are, you can spend your time most productively doing with people shopping online—and that will continue things that are going to develop some sort of strategic to accelerate because of technology—we have to be change, rather than sitting in numerous talking shops, realistic. However, I do think authorities should be is what we would like to be able to do.” Are there too looking at a five-year plan of what they want their many small initiatives tinkering around the edges and town centre to look like, what they can do to be part not enough strategic and political insight and of making that change and how they encourage and oversight? motivate, whether it is a town team or their town Brandon Lewis: They are slightly different things. centre manager, to have the power to make that The Future High Streets Forum is looking at the happen. strategic future of our high streets. I am in the process It can be really simple. I have to say, when I was first of slightly widening it, because it is very a council leader, one of the things I was really retail-focussed, which is fantastic. We really frustrated about was the makeup of brand names that appreciate all the time that the organisations and the we did not have. Why did we not have them? My retailers involved put into it. However, as I have said, officers kind of looked at me rather blankly and said, the high street is also about leisure and hospitality, so “We do not know. They just do not take the shops. we want to make sure that is reflected, and the night- That is not our job.” I took the view that, as I am a time economy, in looking at this. That also works at a leader of a council that represents its residents, it is local level as well. my job to make sure our town centre provides what Portas pilots are a really good example. Nobody ever our community wants, so we went and asked, and said, that I can see, that the Portas pilots are all going found out what is it that Body Shop wants to see. to be the same and they are the answer to the problem. I actually asked a few weeks ago. I met John Lewis They are exactly what they say on the tin; they are and I said to John Lewis, “I would like to know from pilots. Every single one has got some differential you,” and they were talking about business rates, between it, looking at what works in different areas. “what is the point at which you decide that that is a What I think is quite interesting when we look around town centre that you want to be in. Is it just the country—and there are some really good examples demographics? Is it business rates? Is it car parking?” around the country of things, whether it is Stockport, I think that is a really important question local Rotherham or Sevenoaks, which are doing some really authorities need to ask. If there are certain types of good things, and we have heard some more noted just brand names they do not have that they feel they this morning, from Mr Binley and Mr Walker, which should have or types of shops they have not got that I look forward to visiting—is you will see different they should have, go and do some work to find out things work in different places. What will work in one why, and then you can look at whether you can place will not necessarily work in another. It is right provide it. They will have the tools locally to do that, that, as a Government, we put out there a range of so they have to make use of that. That strategic look things and give the flexibility for local areas to pick at what is going on at a local level is hugely important. and choose what will work best for them. They work out what is locally right for them and it is locally Q408 Chair: Before we just move off this, the driven. We give the support for that and we put question was asked about Government support for £1 million into the Association of Town and City schemes like Boxpark. In fairness to the Government, Management, which is a national organisation. Local you had the Portas review, which made some areas, if they want that support and information, can recommendations, and the Government has come up go there for it. with some cash to back those recommendations. Why Bear in mind, as I said, that the new business rates can it do this and not back a scheme like Boxpark, retention scheme is going to really drive local which, I think you could argue, has equal merit? authorities’ potential growth for the future. When I Brandon Lewis: To an extent, I would say we have, was a council leader, we had a five-year plan and we in that we have given that power to the local authority did change things. One of the things I am most proud to do exactly that. Business, Innovation and Skills Committee: Evidence Ev 107
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP
Chair: You have given Government money to other part of my workload. I have regular meetings with the schemes. Why not this? Retail Policy Forum, which is centred in the Brandon Lewis: Boxpark could have bid for that for Department for Business and is attended by the Retail one of the schemes. For example, when the Portas Consortium, the Association of Convenience Stores pilot money was out, Boxpark could have bid for that and so on. That meets very regularly. I attended a as part of a Portas pilot project, if it wanted to. It meeting of it last week. It is my job to keep in touch could have bid for it as part of one of those kinds of with the major organisations, like the Consortium, the funds, and it would have been looked at as part of that Association of Convenience Stores and the major bid process. What I am saying, though, is there is that retailers, and that is something that I do regularly. wider power, on a day-to-day basis, so that any local Other business Ministers, of course, participate in authority, even if there is not a particular pot of money other aspects of that. For example, the Minister for available from the Government at the moment, can do Skills is involved in the skills that are needed in the that. The Government does part-fund that, so we are retail sector and so on. If you are looking for a playing our part. Minister for retail, it is me. Chair: You are saying, essentially, that they did not Brandon Lewis: I would just add to that as well. In conform to a particular process that the Government Communities and Local Government, we have an set up. interest because it is communities and we work Brandon Lewis: What I am saying is that, if at any together. We have been working together recently, point in time, if there is a particular project the actually partly for the benefit of national retailers, Government is running that they want to bid for, they around the primary authority schemes, so we do work obviously can do that. However, regardless of that, the together on that. You have the benefit of having a local authority has the power to do that. The Minister who is looking at it from the community’s Government is supporting it, because we part-fund it. point of view as well as from the business point of Chair: You are saying Boxpark could actually make view. Ultimately, I certainly answer to the Secretary a bid for that cash. of State, who has a keen interest, as has the Prime Brandon Lewis: Absolutely, yes. The local authority Minister, in making sure we have vibrant high streets and the Government part-fund it. in future. It is a really key area that the Government is very focussed on. Q409 Rebecca Harris: With all these people inviting Minister Brandon Lewis to their constituency, I would Q411 Rebecca Harris: One other question is that the just like to put on record my gratitude to him for BIS Retail Policy Forum, I gather, meets three times having visited my constituency. In fact, he will be well a year. Do we really think this is sufficient, given it is aware that Castle Point council has got a very such a big area? It employs 3 million people in the ambitious programme for redesigning Canvey town economy, and there are so many different parts of centre. Government that need pulling together to make sure I would like to turn to the BIS retail strategy and bring we address it. in Michael Fallon, who has been very quiet here. We Michael Fallon: It met last week, as I said, and I have been bombarding the DCLG Minister with attended that meeting, but it is not the only interaction questions, and it is quite interesting that the retail between Government and the retail sector. I have strategy that the Government has is in the remit of regular meetings, for example, separately with the BIS and BIS only, despite the fact that so many other Retail Consortium and, as I said, with the Association Government Departments are responsible for the retail of Convenience Stores. I see them on a regular basis. sector. The focus of this morning has been largely on We see the major retailers regularly. There is constant DCLG. Why is it BIS’s responsibility? interaction between us, and I make sure the retail Michael Fallon: It is a BIS responsibility because it sector is represented. To give you one example, the is business. It is a sector in business, but of course it Prime Minister’s European Business Task Force has cuts across many other areas of government. I work just reported its recommendations which he took to very closely with DCLG on issues like business rates the European Council last week, and on which he and small business rate relief. We work with the reported yesterday to this House. I chaired that task Department of Health, for example on older force. There were six business leaders on that task consumers, older customers. We work with Treasury force; two of them were from the retail sector. It is right across Whitehall. The overall responsibility for one of my jobs to make sure that retail is properly the retail sector has to sit somewhere, and I think considered across government. business is the most appropriate Department for it to sit in. Q412 Chair: I do feel that there is a real problem for you, as Minister for retail, insofar as the biggest issue Q410 Rebecca Harris: We also heard earlier from that we have come across, as a Committee, is business Bill Grimsey, very much advocating that we should rates, which are ultimately controlled by the Treasury. actually have a Minister devoted to the retail sector. I The other issues closely following that are issues wonder whether you feel that we do, in fact, have a surrounding parking and planning, which are the Minister devoted to the retail sector or what your responsibility of DCLG. You are effectively views on that proposal would be. responsible for a policy for which the key Michael Fallon: I am the Minister responsible for the determinants of success are determined by other retail sector at the Department for Business. I have Departments. Do you feel that is an appropriate way other responsibilities as well, but retail is an important of promoting the interests of the high street, or are Ev 108 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP there alternative processes that you think could town team should be and on the best way to spend deliver, within Government, a better outcome for the money. The experience I have in Northampton is that high street? you have to cross government boundaries, local Michael Fallon: You have singled out two there, government boundaries, enterprise zone boundaries, Chairman, and they are important—rates and county council boundaries and LEP boundaries. I am parking—and I know your Committee has looked very just wondering if we see this whole business of a town closely at them, but they are not the only concerns of centre and the town itself being related to the retail sector. In the Retail Policy Forum, we cover connectivity, to transport and to all of those other a whole range of issues. They are engaged with us on issues, which are important to the heartbeat of a given the burden of regulation, the way in which regulation town. I am asking if you are giving enough guidance has enforced the success of the primary authority as to how that should operate, how you got the scheme, which we are widening out, the need to information based on the guidance you give and if you improve the skills base of the retail sector, how are doing too little. My question, actually, Mr Lewis, Government can help them manage the transition to suggests you are. more digital commerce and what needs to be done to Brandon Lewis: I did understand the inference. The break down some of the barriers in Europe to a more point you made is absolutely right. Because of the successful digital single market. There is a range of way local government works, there are lots and lots issues here, apart from rates and parking, where of different boundaries for lots and lots of different Government can help. That help is best centred in things. One of the important changes we made my Department. recently, particularly for BIS, is that actually they can look at the economic area, rather than being tied down Q413 Chair: There is a whole range of regulations to a particular local authority boundary. One of the that come under other Departments, are there not? great advantages of enterprise zones as well is they Michael Fallon: There are, but I am also the Minister look at that economic boundary, as the local enterprise for deregulation across government, and I deal with partnerships do. That has been quite an important step the red-tape challenge across government, together forward. Certainly, town teams, looking at an area, with the Minister responsible for Government policy. can work on an area that they define. I am responsible for a number of policies in this area To back up the point Michael made, I also meet not to promote better enforcement, to reduce the burden just the Future High Streets Forum but the British of red tape and to make sure that business really sees Retail Consortium; I have met Mary twice in the last the benefits of that. two and half weeks, and I am seeing other organisations as well over the next few weeks. One of Q414 Chair: What have you done in terms of DCLG the conversations I have had with Mary directly is that regulation that will help the retail industry? we have got over 300 town teams. The fact that they Michael Fallon: All Governments are subject to our are local people looking to deliver locally means we overall review of red tape. They all have to come up will see quite big variations, and I think that is quite with the regulations in their sectors that affect right, because otherwise we get homogenous town business, and have to put them before us, and before centres, which really does not do our country or their the officials in my Department, to see whether they communities any justice. need to be overhauled or scrapped—whether they are I appreciate the point, in terms of what we can be really fit for purpose. doing around connectivity and giving good advice. It Secondly, there are individual sectors inside DCLG is one of the things the Association of Town and City that are the focus of what we call focus on e Management is looking at. They have just produced enforcement reviews, as to how regulations are a really good report this week around best practice enforced. A very good example of that is the recent and trying to share this. One of the things we do not review of fire safety, where Brandon and his officials necessarily do well enough in this country across local have had to come to us and explain how the pilot that government—and I keep talking to the Local they have been running will now lead to a much more Government Association about this—is share best proportionate regime of inspection and enforcement, practice, which means that the space can get filled up particularly for small businesses. DCLG, like every with some examples of what does not work. Actually, other business, is part of the Government’s overall they are quite important. Looking at what does not work on deregulation and on better enforcement. work helps us learn lessons down the line. We have When they come forward with new regulations, as to be a bit more courageous about things not working every Whitehall Department does from time to time, and failure, in order to learn. they are subject to the rule that we have established Whether it is around connectivity or whether it is of one in, two out, and they have to make the case around our shared passion for getting the parking for their new regulation before my officials and the structure correct and priced correctly, it is about taking respective Cabinet committees, just like any other best practice and sharing that around so other areas Department. can look at what has worked, whether it is the parking charges in Braintree or whether it is the connectivity Q415 Mr Binley: When Mary Portas gave evidence they are bringing in in Bedfordshire at the moment, to the CLG Select Committee in September, she and bringing that change through there, which will talked about the Future High Street Forum, adding make a massive difference, particularly in central that it is only just beginning to get going and that there Beds. It is a really good idea. The local authority has was too little guidance from Government on what a looked at an area, decided to get behind something Business, Innovation and Skills Committee: Evidence Ev 109
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP and make something happen that would not otherwise think we have done enough so far to alleviate those have happened and, once it is up and running, will concerns, and when do we expect action to be taken make a massive difference. That is an important part on the consultation on permitted development rights? that we should certainly be looking at, yes. Brandon Lewis: The consultation I think has just closed, but I will confirm the date for you in writing. Q416 Mr Binley: Requiring local government to do Obviously, we will then be responding to that. I get a six-monthly report on what they are doing in this asked this particularly with regard to pubs, but we respect and then simply collating that—a bit of have to make sure we do not create more regulation bureaucracy, but never mind—would not be a bad and make it more difficult for retail and other parts of thing. the high-street sector to flourish. One of the important Brandon Lewis: We have to be a bit cautious around things we have looked at is the flexibility around putting more burdens and red tape on local authorities. permitted development, particularly this two-year I know they love getting a guidance letter from me at option for businesses to come in, which can be the best of times, but certainly, as my boss would say, beneficial for pop-up shops to be able to come in and we would encourage muscular localism. It comes back open up and trial something and get something going. to having this five-year plan: looking at what they That could be a really big step forward. That is an have, what they want their town centre to be like and, area where we are looking at that extra flexibility to more importantly, what their community wants and help retail and actually give people that chance to do needs from its town centre, and then looking at what something, without the extra cost of going through the they need to deliver it. That also puts that local regulatory cost of getting planning, but just for that authority in a stronger position, if it does need to come temporary short period. to central Government, to bid for investment funds of whatever type, whether it is transport, connectivity or Q419 Mr Walker: That two-year option, I would to feed into the review that is going in at the moment agree, is an exciting area to explore. You also talk between DCLG and the Department for Transport. We about the need to protect groups like pubs and are looking at parking particularly, and yellow lines community assets. Can you define more precisely and double-yellow lines for town centres. It just gives what is actually defined as a community resource? them that opportunity to play a really important part Brandon Lewis: A community asset, in terms of an in that, and they need to do that. asset that can be listed, is not something that we define. That is part of the beauty of it. Again, it is the Q417 Mr Binley: The final question from me is flexibility. Pubs are something obviously I feel about the funds allocated as part of the Portas money. passionately about, as the community pubs Minister, Do you know how much has been spent and who is but it applies to a whole range of things. What a auditing those funds to ensure that it is being correctly community needs to do, if it has an asset like a pub— utilised? Again, I do not want a great big bureaucratic and I will take the chance to just give a bit of a network, but I do want to know that our money is being spent well and properly. promotion to CAMRA, which is doing some great Brandon Lewis: In terms of the amount that has work about getting pubs listed—is really simple. You actually been spent, as of today, obviously it is all need just 21 electors to sign it and get it listed as an allocated but, if you do not mind, I will come back to asset by the local authority. It is a really good way. you to make sure you get exactly the correct figure Pubs are a really good example of how this works in for that. I will get a note to the Committee. practice. What it means is that, if they get it listed and Mr Binley: That would be helpful. the community values it, and a pub company, a Brandon Lewis: I am very happy with that. The brewery or the owner of a free house decides to sell whole point of the Portas pilots is that they bid for that pub, they get that six-month grace period for the money for specific projects, so they will be using that community to come together and buy it. It gives them money to deliver those projects. As I say that could that protection. It does not stop a business that is not be an area like Braintree, which has come up with a viable from moving on to be something else, but it new parking scheme, which seems to be working very just gives the community that opportunity to take over well. They have shown about a 40,000 increase in and protect that particular asset. It is footfall, not by taking away all the charges but making community-driven and it is for the community to them reasonable. I think it is 10p, so at least they can decide what they think that asset should be. Pubs are also monitor it, so they can actually show the benefit the one that everybody is focussed on at the moment, they are having. It is a really good scheme. In other but it is not limited just to pubs. areas, Great Yarmouth is doing some good things like Mr Walker: It could apply to shops, if you had that—free parking after four o’clock—so there is a people coming and saying, “This is a community job to do in sharing that kind of best practice as well. shop, but we really value a local shop in the village,” I will come back to you with the exact numbers, if for instance. that is okay. Brandon Lewis: If you can get the people in the community to sign up to it and then get it to the local Q418 Mr Walker: The new BIS retail strategy authority, they can list it, but particularly with pubs, contains a line that says, “The Use Class system has the local authority does have more protection as well, been criticised as being overly prescriptive and because they also have the ability to use what is called insufficiently flexible, and thereby a barrier to the an article 4 direction, which local authorities have growth and performance of town centres.” Do you been reluctant to use and there is no reason for them Ev 110 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP to be reluctant. If they think it can make a difference, they properly represent local economic geographies then local authorities should use the powers they have. and that the way in which our constituents now work Again, we also must make sure we are not propping has changed. They drive across local authority up a business that is not succeeding. There is a really boundaries, sometimes commuting great distances fine line there, and we think we have got the balance into particular centres. The local enterprise right without being too top heavy; by giving that grace partnerships are much better suited to address that. period, that does not mean we are propping up a There will of course, as you have pointed out through failing business, but just gives a community the your own responsibilities, be areas of overlap. We chance to keep something it values. Like anything— encourage the local enterprise partnerships to work shops, pubs, post offices—if the community values with the city, if there is a city inside their area, but something and wants to use it, they have to use it if also to work with the neighbouring LEPs in tackling they are not going to lose it. Equally, the commercial some of these issues they have in common. I would operator has to make an offer that the community far rather have the overlap than any degree of wants. It is a two-way street. There has to be good underlap, or the kind of rigid local authority value-for-money customer service, a good product, administrative boundaries that got in the way of and the community then, if it wants to keep it, has to sensible economic support in the past. go and use it. Mr Binley: You reassure me, Minister. I am grateful.
Q420 Mr Walker: Another point in the retail Q422 Katy Clark: I was wanting to ask some strategy was that more could be done to help LEPs questions about skills. What specific skills training do recognise the importance of retail and town centres to you think is required for the retail sector? Do you local and regional economies. Anecdotally, we have think the type of training that is needed and the kinds heard quite a lot of evidence that some LEPs pay of skills that are needed are generic skills or very attention to retail; others do not. Do you think there sector-specific? is more that can be done in that space for every LEP Michael Fallon: I am not convinced there are very to engage with the importance of the retail economy? special skills in the retail sector that are easily distinct Michael Fallon: Perhaps I should take that, as I have from every other sector. Obviously there are basic responsibility for LEPs at BIS, shared with Brandon’s skills in customer service. There are management colleague at DCLG. Yes, it is in the nature of LEPs, skills. There is increasingly a need for digital skills at all 39 of them, that they are different from one all levels of the retail sector. I do not think it is for us another. They are locally led, comprising local to tell the retail sector how they ought to organise businesses and local authorities. We do not impose a their skills training or to set out a particular agenda pattern on them and tell them what they should for them. It is for employers to articulate the skills prioritise. However, we have been working with them they need, to identify, through bodies like the Retail this year on the preparation of their growth plans, Policy Forum, where they think the skills gap is and which will guide the way—for example, they apply then ask us how we can help to fill it. From the structural and cohesion funds from next year—and Government’s point of view, because these are more the way in which they see the economic opportunities generic skills and it is not a very specific set of skills in their area for our revision of the assisted areas map, that might apply in one very specific industry that I which also comes into effect next year. There is a am responsible for—for example electronics, nuclear, process under way at the moment, whereby obviously aerospace or whatever—our role really is one of we are discussing with each of the LEPs the nature of enabling rather than directing. their growth plan and the scale of their ambition. I am sure encouraging them to focus on retail centres Q423 Katy Clark: What did you learn from the retail should be part of that. STEM skills gap analysis that you carried out in February 2013? Q421 Mr Binley: Can I come in with a Michael Fallon: We learned that there are still skills supplementary, Minister, but declare an interest? I am gaps inside the sector. The Minister for skills in my a director of a LEP board, as you now know. Also I Department continues to meet the Retail Consortium chair unofficially the Northampton Alive steering and each of the individual retail employers, alongside group, which is made up of the leader of the county the National Skills Academy, to make sure they are council, the leader of the borough council, the getting the best out of the apprenticeship scheme, that chairman of the LEP and the chairman of the urban they put forward good bids for the employer development corporation, both of which are involved ownership pilot schemes and to see what we can do with the enterprise zone. That cross-connectivity is to help stakeholders, particularly in this sector, map vitally important, and I wonder what you are doing to the range of retail roles that will require digital skills encourage that, in terms of the boundaries, the silos, in the future, not least the ones that will demand a which have been a destructive force in local higher level of maths and knowledge of code than we government for so long. have seen up till now. Michael Fallon: They have been, because they have reflected administration. To be brutal about it, they Q424 Katy Clark: You have already published a have reflected politics rather than economic retail strategy, but your new policy document, A geography. It is the great strength of the local Strategy for Future Retail, states that BIS will enterprise partnerships that, unlike the regional “explore with the retail sector how best to engage development agencies that were their predecessors, retailers in the design and piloting of new or evolving Business, Innovation and Skills Committee: Evidence Ev 111
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP skills and qualification initiatives and processes…by street, there is some indication already, with the March 2014”. Why do you feel that this further work figures we have, that after many years of decline in is required? Do you not think you are in a position to the high streets, we have started to see over the last make decisions at this stage, based on what you have 12 months a plateau and a slight improvement in already done? footfall and empty shops in high streets, which is a Michael Fallon: No. The retail strategy itself isn’t good thing but it is only a start. That is partly because new. What we published last week is a refresh, one it is not just about retail. We are starting to move into year on. There are other policies across government, another very successful area in this country, which is the launch of the digital capability programme and so the leisure and hospitality industry, linking back to my on, that have come on stream this year, which need to community pubs brief as well, which is doing very be tailored to what we are going to do on digital. We well. Again, that is a hugely successful industry, are not dragging our feet on this at all. We want to massively innovative. work with the industry and make sure that we can In terms of how we assess the outcomes and if we really focus our effort on where they think the can say we have made a beneficial impact, there is an priorities are and on where they think the gaps are. answer, but we also have to be a bit cautious. There is a risk that, if we set out too many tick-box KPIs Q425 Chair: What concerns me, and I have to say around high streets, we start seeing examples of town that this applies to all Governments, is that the process teams that want to show they are doing really well can often replace any assessment of outcomes. The and can tick the boxes—in the way that local refresher of the retail strategy does seem to me part authorities used to do for a comprehensive area and parcel of this particular problem. How will you assessment under the Audit Commission—and get a judge outcomes from this strategy? great score, but be providing nothing the local Michael Fallon: You have seen some outcomes from community actually wants, cares about or is interested the original document already, in the development of in. We have to be really careful about that. an international strategy for retail and some of the Through the Future High Streets Forum, we discussed work we are doing with the Commission and across this just a couple of weeks ago. With the support of the member states to ensure that our retailers find it the Association of Town and City Management, which as easy to do business in other member states as they we are funding, we are doing some work at the do online, for example in the United States or with moment to look at how we can actually take a view Australia. There is a lot of work already going on on about and judge that very point around outcomes, not that. There is an e-commerce task force looking at the just based on tick-box culture but actually looking at wider opportunities that arise from digital. We have a the social benefits as well. Part of the problem is concerted effort now from UKTI to help smaller almost that X factor. You know your high street is retailers that have not yet exported to be able to do so doing well because you have been in it, walked down online, and look at some of the barriers to that. We it and felt the vibrancy and the vitality. As soon as have already seen a series of outcomes from the first you start trying to put that into some kind of a piece retail strategy. We have refreshed it now, one year on, of paper that we can then disseminate and send and we will continue to work with the industry. around, you start taking away that real essence of I would emphasise that we see the retail sector—I what you know makes your high street work when know there are concerns over the future of rates and you are walking down it. there are issues about parking. There is obviously We all, taking Mr Binley’s point from earlier, want to concern as the industry changes and more of it make sure that the money the community is putting becomes online and multichannel. I would stress that in—and, from retail’s point of view, the money they this is a very successful industry. In terms of the way are putting in—is getting results. We know that from it is working, in product innovation, in sales, in walking around. The ATCM is looking at exactly how services, and the way it is reaching out now online to we can measure that in a productive way, but it is not markets across the world, this is one of the industries straightforward. We want to make sure that we do not we do really well in this country. I see it as one of our kill off the vibrancy and vitality that you can success stories. instinctively feel but, once you start going to a tick box, you can have an unintended consequence. Q426 Chair: I certainly agree with you; I think it is a success story. I suppose the issue is what role BIS Q427 Chair: I certainly was not, I do not think, has played within it. What concerns me is that you advocating a tick-box mentality, but there are ways of have basically underlined the point I have made. You judging it: for instance, level of turnover in a town, have described, as two outcomes, what are actually footfall, rents and so on. It is reasonable to assume in strategies. What I would like to know is how you will a vibrant centre that rents would begin to rise. measure the outcomes from these strategies. Brandon Lewis: Mr Chairman, I understand the point Brandon Lewis: Mr Chairman, can I just clarify? Are you are making, but the problem with that is some you talking about the impact on the high street town centres may well take the view that what they generally? want to see is the community coming together. It will Chair: Yes, and on retailers. not necessarily be about turnover in a retail Brandon Lewis: My responsibility in DCLG is about establishment. I visited St Albans recently, and one of the high street and town centres. I need to clarify: the things St Albans has started to do is put on there is a difference between that and retail, which community events in the town centre and the high falls entirely within Michael’s remit. For the high street. That is bringing lots of people in and linking Ev 112 Business, Innovation and Skills Committee: Evidence
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP up with the cathedral. They are coming into the town expenditure in terms of capital support for very centre. They are not necessarily going to see all of high-cost research and development. It is not a sector that benefit in turnover in the shops, because some of where there are very high barriers of entry into the those people will come in to that event, see that event sector. It is, at the moment, a very successful sector, and then leave. That does not mean that town centre growing strongly, extremely competitive and not in is not vibrant and an important part of the community, need of the kind of long-term framework that we have where it is coming together. You will not necessarily put in place for aerospace or life sciences or some of judge that just through footfall or turnover in a shop. the other major industries. That is why I say we have to be really careful about what we see as that social value and how we work Q431 Nadhim Zahawi: I have got one small that out. That is a really tricky thing to do, without supplementary. How do you explain the demise of the putting ourselves into a tick-box culture. Skillsmart Retail? Michael Fallon: I am sorry; I am not familiar with Q428 Chair: Basically, what you are getting at is that Skillsmart. May I get back to you on that? criteria for success may differ from locality to locality Chair: It was the sector skills council for retailing. but, if some of the structures that have been Michael Fallon: The former skills council, yes. recommended by Grimsey and others are set up, it Again, the way we have reorganised skills is now should be possible to measure them. better suited to an industry like this, encouraging them Brandon Lewis: To an extent, it is measured when we to bid through the ownership pilots, to map out the are walking around our town centres and we feel they skills gaps that they require and work with the Skills are vibrant, good places to be. As soon as you start Academy to fill those in. saying, “We want to say, ‘Has a town centre got this, this, this and this to judge by?’” then we start the Q432 Chair: Do you not think that perhaps the unintended consequence of the tick-box culture. employer ownership pilot approach was geared more Chair: We could probably have a long debate. I have to manufacturing than the retail sector? a couple more questions for Michael Fallon that I Michael Fallon: It was certainly not designed to want to bring in, on the skills agenda. exclude retail. As you know in this Committee, probably better than anybody else in the House, we Q429 Nadhim Zahawi: Welcome, Minister. How do are seriously short of skills in the manufacturing you respond to the comment made to us by the sector. It is a constant cry from every manufacturing National Skills Academy that many employers have business I visit, up and down the country, from been disillusioned by the changes that have happened engineering to aerospace to automotive and so on. We within the skills funding system? make no bones about that. There are serious skills Michael Fallon: That has not been our experience in gaps there, and these are gaps that have not suddenly BIS. We have had a huge amount of interest in the emerged. They have been created by a legacy of employer ownership pilot, and the move to give underinvestment in maths and science teaching much employers themselves more responsibility for the earlier in our educational system. There was no skills funding and the skills training that they need to attempt to discriminate against retail. The employer do has been welcomed. ownership pilots have been extremely successful and they were massively oversubscribed. We had to judge Q430 Nadhim Zahawi: Martin-Christian Kent, each of these bids on quality. That is why the People research and policy director at People 1st, told us that 1st bid was not successful. many in the retail sector were slightly dumbfounded by the fact that retail is not part of the vision for the Q433 Chair: I was going to say: have there been any roll-out of industrial partnerships, given that it successful retail bids? employs one in five people. Your recent strategy Michael Fallon: Not to my knowledge but, if I am document A Strategy for Future Retail: Industry and wrong on that, I will get back to you. Government Delivering in Partnership has no mention of industrial partnerships. Why is there not an industry Q434 Chair: I would be grateful for some partnership for retail, or do you consider the retail information on this, because I do feel the retail sector, sector to be less important than others? given its size—the number of people it employs and Michael Fallon: No, it is not less important. Let me its contribution to GDP—does feel that it is perhaps deal first of all with their bid. I know People 1st were not regarded as important as some other sectors of the disappointed that their own particular partnership bid economy, and this would be a reflection of it. did not get through. The employer ownership pilot Michael Fallon: I am sorry; I did not catch the end scheme, the second round, was six times of that. oversubscribed. We had a huge number of very Chair: I will just repeat. I think there are many within high-quality bids. The fact that theirs was not accepted the retail sector who feel that, given the size of the does not mean that we were opposed to the sector. contribution to GDP and the number of people they If you are asking me more generally why we do not employ, the approach within the skills sector does not have a fully fledged industrial strategy for retail, in reflect their importance within the general economy. the same way that we do for aerospace, chemicals, Michael Fallon: That is certainly not our view. This automotive and many of the other more traditional is one of the most important sectors of all in the industrial sectors, the answer is that this is not a sector British economy and one of the most successful but, that requires an enormous amount of government as you have already said, Chairman, one of the largest. Business, Innovation and Skills Committee: Evidence Ev 113
29 October 2013 Rt Hon Michael Fallon MP and Brandon Lewis MP
We certainly regard it as one of the most important. Michael Fallon: I will certainly undertake to respond As Katy Clark and I were discussing earlier, there are to you very specifically on that. skills issues there that we do need to address, notably Chair: Thanks very much. Any further questions the improvement that is needed in digital skills as before we close? Can I thank you, Ministers, for your more and more retailing moves online. contribution? That is very helpful. We will deliberate and duly make our report in due course. Thanks very Q435 Chair: The employer ownership pilot model much. does not seem to be addressing them. This is the argument. Ev 114 Business, Innovation and Skills Committee: Evidence
Written evidence
Written evidence submitted by the Department of Business, Innovation and Skills 1. Introduction/Summary 1.1 The UK benefits from a diverse, extremely competitive and innovative retail sector which has proved resilient during recent economic difficulties. It includes world class international companies, stable high street anchors and innovative independents, but also many retailers struggling to survive in an extremely competitive environment with rapidly changing consumer habits. 1.2 Retail operates in every location of the UK. It is the link between producer and consumer, influencing supply and demand, and is a valuable route to market for manufacturers. Retail sales are a bellwether of the wider economy and of consumer confidence. 1.3 Retail is subject to fierce global competition. It is not dependent on government for financial support but is affected by a wide range of government policy and regulation which impacts more on retail than, arguably, any other industrial sector. 1.4 Increasingly retailers operate both store and non- store selling operations. Traditional business models based in physical shops (bricks and mortar retail) are evolving. Increasingly retailers are moving to “multi- channel” operations—their sales channels include in-store, e-commerce, m-(mobile) commerce, distance and catalogue selling. 1.5 An increasing number of retailers are taking this further by reengineering their businesses to integrate all of the various sales channels into a seamless, integrated and flexible experience for the customer. The options a customer has for browsing, purchasing and delivery are widening, with advances such as click & collect becoming ever more popular. 1.6 The growth in popularity of these new channels is having an impact on high streets and shopping centres, reducing the number of physical stores retailers need. It is also creating a need for new and different retail roles. Customer service however remains a vital differentiator in both physical and non-physical shopping. 1.7 Town centres up and down the country are being energised by the initiatives emerging from the Portas Review and the subsequent Government response. Many communities who have not been able to access high street funding have set up partnerships with their local businesses and community organisations to find innovative solutions to revive their high street. 1.8 Government considers retail as a sector that is important to both the economic and social wellbeing of the nation, and is working with the sector to deliver the BIS Retail Strategy (BRS), the aims of which are to: reduce the burdens of regulatory compliance through better inspection and enforcement; breaking down barriers to retail investment and cross border trade in Europe and overseas through the European Retail Action Plan (ERAP) and the newly launched UK Retail Industry International Action Plan; and addressing operational barriers within the EU where there is not a single market for retail. 1.9 BRS is also about closer working between government and the retail sector including new opportunities such as better engagement between the UK research base and retailers on new or enhanced knowledge exchange mechanisms; exploring the market opportunities of an ageing population through accessible products, services and stores; and exploring how to narrow the STEM skills gap in the retail skills pool. 1.10 Locally projects are underway through Gloucestershire Local Enterprise Partnership (LEP)—the first retail pathfinder LEP. This includes the provision of a toolkit to enable retail and other high street businesses, local authorities and LEPs to understand and analyse high street performance to inform how they could develop growth strategies to suit their unique local needs. 1.11 BIS evidence addresses issues identified by BISCOM and also other emerging issues in which the Select Committee might be interested, such as changing business models and the operating landscape. The structure of the evidence (in the sections below) differentiates between store and non store retailing, as each have unique and distinctive features. Note: This evidence document is supported by an economic overview for the UK retail sector developed by BIS economists (Annex A) which sets out the key economic characteristics of the sector, key trends and future drivers.
2. UK Retail (“Bricks and Mortar” Stores) 2.1 The UK retail sector is—and always has been—extremely competitive, and responsive to the changing wants and needs of consumers. New channels to market including e-commerce and m-commerce have been developed which, supported by high penetration of fixed and mobile internet access and broadband—have contributed to the huge increase in home delivery, and a reduction in town centre footfall. 2.2 Technological innovations, and the relative ease with which new online businesses can be established, have substantially lowered barriers to entry. Today’s competitors are not just down the road or in the next town Business, Innovation and Skills Committee: Evidence Ev 115
but across the country and globally. The traditional role of retail is being further challenged from manufacturers and suppliers increasingly selling directly to customers through the internet, and from entrepreneurs testing the market through the internet before investing in bricks and mortar. 2.3 The growth of e-commerce is making cross-border market entry much easier for retailers—both for UK retailers to test overseas markets and for overseas retailers to test the UK market. This is increasing the global competition for retailers at a rapid pace. 2.4 Bricks & mortar retailers are responding to these challenges by developing their multi channel offerings. Web and mobile phone-based, shopping is combined with other parts of the traditional offline retail purchase process including combinations of online or physical browsing and purchasing, delivery to store or to home, click & collect shopping etc. 2.5 Retailers with many stores across the UK recognise that they no longer need a physical presence in every high street and are therefore reducing their bricks and mortar presence to fewer sites to maintain profitability. For some the pace of change and impact on profitability has been too rapid and has contributed to some high street chains going into administration. 2.6 Like the economy as a whole the retail sector (as with other mature sectors), has encountered challenging times over the past few years. The Retail Sales Index shows a small increase in sales by both value and volume across a broad base of retail sub-sectors. Despite volatility, retail sales in 2012 were higher than previous years and the January and February 2013 volumes were strong, with unusual month-on-month growth between January and February.1 Sales amounted to £303 billion in 2011 and £310 billion in 2012.2
Employment 2.7 Around three million people work in retail (one in 10 of the working population) with employment more flexible than is the case in most other sectors. 50% of retail employees work in sales and customer-facing roles, 18% in managerial or executive positions. Retail is also a significant contributor to self-employment and many retail premises are SME businesses. These businesses are often the source of employment for more than one member of a family. In the convenience store sector, for example, more than half (51%) of smaller businesses have two or more family members working in the store as their sole occupation.3 2.8 Retail provides employees with broad career and development opportunities across all levels and parts of the companies concerned. It provides flexible working opportunities (56% of retail employees work part time) for those caring for children or other dependents; who are studying; whose religious observances require certain working hours; or whose health prevents full-time working and who would, in many other sectors, have been compelled to leave work. It acts as a gateway to employment (or re-employment) to the long-term unemployed and those returning to work after life changes. The gender balance in retail is 58% women to 42% men.4 2.9 Just under a third of employees are aged between 16 and 24.5 This illustrates the crucial role which the sector plays in providing first working opportunities and engaging the young who are generally under- represented in other parts of the UK workforce. Despite the economic downturn, many retailers have maintained their commitment to job creation and providing skills and training opportunities for employees, with several large retailers announcing further significant intakes of new staff and apprenticeships. 2.10 The BRC-Bond Pearce Retail Employment Monitor6 identified that in the last quarter of 2012, full- time equivalent retail employment rose by 0.6% compared with the same quarter a year earlier. The number of stores however fell by 3.6% and consequently employees per store are at the highest level since September 2009 as retailers change the way they use space and move towards a more expansive network of convenience stores.
The Role of Government 2.11 The Government recognises the importance of retail to growth, local economies and job opportunities, and as a core deliverer of government polices (eg flexible working), and contributor to the public purse (eg business rates). Building a good relationship with key retailers and industry bodies is essential to foster joined up working between industry and Government on emerging challenges, threats and opportunities. 2.12 This is achieved primarily through collaboration across government, and BIS’s Retail Policy Forum (RPF). This meets three times a year and is an opportunity—welcomed by the retail membership, Government policy leads and others to discuss with the sector, from an early stage, new initiatives, regulations and opportunities. 1 ONS, “Retail Sales Index February 2013”, 2013 2 ONS, “Retail Sales by Internet and non-Internet”, 2013 3 Local Shop Report, Association of Convenience Stores, September 2012 4 Leading Globally, Serving Locally http://www.brc.org.uk/downloads/UK_Retail_Leading_Globally_Serving_Locally.pdf 5 Skillsmart Retail, “The Age of Retail”, 2010 http://www.skillsmartretail.com/SiteCollectionDocuments/Research/ Themed%20Research/workforce%20demographics/The%20Age%20of%20Retail.pdf 6 BRC-Bond Pearce, “Retail Employment Monitor Q4 2012”, 2013 Ev 116 Business, Innovation and Skills Committee: Evidence
2.13 Although Government does not provide retail-specific business support schemes, smaller retailers can benefit from the range of general business support available to enable businesses to start and thrive. This includes better access to debt and equity finance; and getting support and advice through www.gov.uk, the new home for Government services and information online.
Regulatory climate
2.14 The regulatory environment in the UK for retail (bricks and mortar) is arguably more favourable than that in other countries as there are relatively low regulatory burdens on retail in UK and low barriers to entry.7
2.15 Much of the regulation impacting on retail derives from the EU (Employment, Standards etc). The European Commission recognises the importance of retail and has recently published the “European Retail Action Plan” (ERAP)8 setting out proposals to address constraints on retail investment and growth.
The Future
2.16 Retail and high streets are often used as interchangeable terms. Although they are generally interdependent, they are not synonymous. Retail problems affect the high street, problems on the high street impact on retail.
2.17 A high street or town centre needs a thriving and diverse retail sector, and retail needs thriving town centres. But the town centre is no longer just about shopping—it is about socialising, entertainment, services, and culture. Successful towns know and nurture this. This is not about high street versus out-of-town, or the internet. High streets must change and evolve to compete—and in some cases to survive.
2.18 The future of the brick and mortar retail sector in the UK is challenging, though there are many good news growth stories (Annex C). Verdict Research has predicted that growth for the high street will be 0.6% in 2014 as retailers change the use of space to adapt to the multi-channel competition model.9
3. UK Retail (Non-store) and the Changing Face of Retail
3.1 The last decade has seen a major shift in retail business models with increased non-store retail (online, catalogues, direct selling and marketing) facilitated by more internet use (both fixed and mobile) and faster broadband availability.
3.2 The growth of e-commerce and multi-channel retailing has led to a shift in focus by many retailers. Previous assumptions that ever bigger stores and unrestricted opening hours delivering greater workforce productivity were the key to continued growth have been challenged. Many major retailers are moving away from “big box” retail and developing local offerings which can still deliver an expanded range through new models (eg “click and collect” and same day delivery).
3.3 E-commerce is part of a wider development of online sales including mobile (or m-commerce)—the use of mobile devices for shopping.
3.4 The increasing take up of e and m–commerce provides a key challenge to the UK high street. In time, for consumers the distinction between e and M-commerce along with high street retail is likely to become less important. Omnichannel retailing—where web or mobile phone-based shopping is combined with other parts of the traditional, offline retail purchase process with delivery to store or to home, “click & collect” shopping etc—is likely to continue to grow.
3.5 The UK has one of the most sophisticated and competitive online markets in the world. According to the OECD, the UK had the highest share of consumers who ordered or purchased goods or services on the internet in 2011 (around 64%) out of all OECD countries.10 In line with this statistic the UK has a stronger business-to-consumer (B2C) e-commerce sector than other countries, with the proportion to GDP triple the global average.11
3.6 The rise of m-commerce is both an important growth opportunity and a challenge to high street retailers. M-commerce expenditure is set to rise by more than 500% in the UK during the next five years, delivering 25% of all online sales within the same period. The typical M-commerce shopper is forecast to spend £905 per year by 2017, a 243% increase from 2012.12 7 IBIS World, “E-Commerce and Online Auctions in the UK”, 2013 8 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52013DC0036:EN:NOT 9 Verdict Research, “UK Town Centre Retailing 2012”, 2012 10 OECD, “Internet Economy Outlook 2012”, 2012 11 A T Kearney, “The Internet Economy in the United Kingdom”, 2012; http://www.atkearney.com/documents/10192/b4017381- eeb9–4963-b575–8959020de3f1 12 Verdict research, “M-commerce in the UK 2012”, 2012 Business, Innovation and Skills Committee: Evidence Ev 117
The Role of Government—Supporting the EU and UK Digital Agenda 3.7 The shift in business models is reflected in how Government supports the sector (both in UK and in Europe), particularly through fostering an agenda on the Digital Single Market, which the Government is keen to support. 3.8 The UK Digital Economy is a broad sector, spanning Information and Communication Technology (ICT) (electronics, telecoms, software and IT and computer services), e commerce and the digital creative sectors.13 3.9 UK has identified three areas to focus on in order to foster an EU Digital Single Market: — Modernising the EU intellectual property framework; — Improving e-commerce by securing a modern legal framework data protection system balancing business and consumer interests as well as reliable payment services; and — Improving infrastructure and encouraging broadband roll out. 3.10 The UK, with nine like-minded Member States, has lobbied the European Commission calling for more focused action on the Digital Single Market, particularly regarding the roll-out of high speed broadband, reforming copyright management for the digital age, and providing certainty for businesses and consumers when trading on line. 3.11 Published in 2010, the Digital Agenda for Europe covered a number of initiatives, ranging from telephony, to broadband coverage, to e-Government. The UK, along with other Member States called for a more focused plan of action with measurable milestones. This was published by the Commission in the form of a Digital Roadmap in February 2012, prioritising 16 actions. The UK is now closely involved with the negotiations on these proposals. 3.12 The Commission has announced further measures to support the Digital Single Market in the Single Market Act 2 package to be completed by 2015. The Single Market Act 2 includes measures on electronic payment services, parcel delivery and broadband roll-out, which have been key UK business requests. The detail of these proposals is expected by summer 2013. 3.13 The EU Commission has taken several steps to foster cross-border trading across the EU through the Digital Single Market but those measures have not so far resulted in greater cross-border trading within the EU. 3.14 The Government has established an EU e-commerce taskforce which will look at practical, short-term actions to boost cross-border e-commerce that could be implemented quickly, as well as giving policy makers a clearer understanding of how and where the EU/UK regulatory framework creates obstacles. Key issues to be addressed are: — how can it be made easier for customers to shop across borders; and — how can it be made easier for vendors to sell across borders. 3.15 The taskforce will provide a deeper understanding of how to achieve an EU single market with a fully harmonised legal framework, including consumer and data protection rights. The taskforce will also stimulate and contribute to the UK government’s work with other Member States and the Commission on the EU Digital Single Market Agenda. Cabinet Office and BIS will also be working with stakeholders from e-commerce and related sectors (including payment providers and logistic companies). The taskforce is a short-term “task & finish” body and is due to end in June 2013. 3.16 In addition to the research on short-term practical measures businesses can take, the Government is pursuing a longer-term strategy to press UK priorities for the Digital Single Market and influence EU Commission policy on e-commerce and related Regulations. In partnership with the Finnish Government the UK will host a Digital Single Market event in Brussels in May 2013. 3.17 This, together with the EU e-commerce taskforce and other measures, are progressive steps in a chain of events intended to inform the EU Commission’s Single Market Act 3, which is likely to be published in autumn 2013. Creating a true EU Single Market will offer UK retailers significant new growth opportunities.
Regulatory climate 3.18 Retail in general depends on consumer trust and confidence. It is therefore important that consumers are clear on their rights and options within the EU. UK Government supports this on the background of the growth agenda and to ensure a true EU single market. The EU and the Member States have jointly founded the European Consumer Centre, which has a presence in all EU countries, and offers help and advice to consumers in the case of dispute. 3.19 There are well-developed rules already in place across Europe giving consumers a “cooling off” period of seven days within which they can return products they have bought online. The Consumer Rights Directive which will be implemented in 2014 will increase this cooling off period to 14 days after buying and will also ensure that consumers get clear information before they buy anything. 13 BIS, “Impact Assessment for the Digital Economy Act 2009”, 2009 Ev 118 Business, Innovation and Skills Committee: Evidence
3.20 The Government is also updating domestic consumer law to address specific issues in sales of digital content, including when it is downloaded or streamed from the Internet. Giving consumers clear rights and remedies for this type of transaction will increase their confidence in purchasing intangible digital content from the Internet, underpinning growth and competition in this expanding market. 3.21 The UK’s National Cyber Security Strategy’s objective is for UK communications networks to be inherently secure. This is through a combination of actions at the network/national level to detect and defend against cyber attacks, and consumers/businesses taking appropriate preventative measures such as regular system patching. 3.22 Government activity in this area includes raising firms’ and consumers’ awareness of potential risks from cyber threats, and developing schemes to enable them to access approved sources of trusted advice and technical support. If the Government can develop its national approach to cyber security to the point where firms operating in the UK are seen as comparatively less vulnerable to cyber exploitation than counterparts elsewhere, these firms may gain competitive advantage. 3.23 Building on the 2010 Hargreaves Review of Intellectual Property (IP) and Growth, the Government has undertaken a programme to modernise the IP regime and make it fit for the digital age. The UK has embarked on comprehensive copyright reform, including changes to domestic exceptions and limitations to copyright, as well as providing schemes to unlock works that have no known or locatable owner. An industry-led Copyright Hub is also looking to offer a streamlined process for licensing of copyright works, while ongoing reforms to the IP court system will help companies of all sizes as well as consumers obtain justice on IP issues at proportionate cost. 3.24 Internationally, IP attachés from the Intellectual Property Office help UK companies to enter new markets in Latin America, China, India and South East Asia. All this contributes to an environment that further encourages investment both in new technologies and in creative content in the UK.
The Future 3.25 E-commerce is a significant opportunity for retailers selling products ideally suited to online transactions such as small consumer goods and digital media such as DVDs and books. A clear cost advantage can be gained by some retailers through avoiding a high street presence altogether. Adding choice, convenience, and the ability to make price comparisons makes the online offer increasingly attractive. 3.26 The concept of distance selling is not new. Many catalogue businesses such as Freemans and Littlewoods have been active for many years. The internet has facilitated a move from printed catalogues to the advertising of product availability over the internet. The shift to digital media (music, books, software) has also facilitated the increase in online purchases. As the market for these products is quite mature it is likely that there will be an increase in online purchases of other products and services such as shoes, clothing and groceries. 3.27 According to the ONS over three quarters of businesses had a website in 2010, though few actually transact online (estimates range from 15%14 to 33%15). In terms of selling online internationally only 6.4 % of UK SMEs reported selling to customers in other EU countries and 5% to customers in the rest of the world in 2010. According to the European Commission, only 9% of EU consumers in 2010 (8% in 2009) bought online from another member state with e-commerce accounting for less than 4% of total European trade.16 3.28 Over time the distinction between e and m-commerce along with high street retail is likely to become less important to consumers. M-commerce has key characteristics that cannot be found in traditional e- commerce. Mobile phones provide the ability to make contactless payments, compare prices, product detail and information about substitutes. The UK’s plans for 4G mobile broadband services roll out will provide smart phones with the speeds and capacity capable of delivering an even greater range of digital services and an improved user experience. This multi-channel approach, where retailers are able to offer to the customers various option to carry out transactions in an interconnected way is the future of retailing,
4. High Street Renewal—Implementing the Recommendations of the Portas Review 4.1 High streets, town centres and local parades are important for communities and economic growth. 4.2 The Portas Review,17 published in December 2011, made 28 recommendations on what government, local authorities, businesses and communities can do together to help high streets to be vibrant and successful. The Government published its response to the Portas Review on 30 March 2012, accepting 27 of the 28 recommendations. There are many success stories of how communities have been developing innovative 14 ONS, “E-Commerce and ICT Activity of UK Businesses”, 2011 15 Lloyds Bank , “Britain’s Digital Opportunity”, 2013 16 European Commission, “A coherent framework to boost confidence in the Digital Single Market of e-commerce and other online services”, 2012 17 https://www.gov.uk/government/publications/the-portas-review-the-future-of-our-high-streets Business, Innovation and Skills Committee: Evidence Ev 119
solutions to develop their high streets. Government highlighted a few of these in “Future of the High Street” progress summary on 25 March,18 and DCLG will be producing an update on Portas Pilots’ progress later in 2013, a year after their launch.
The Role of Government 4.3 Government has a role in helping the high street to adapt and to compete. We work with communities to make their high streets attractive places to visit: not just for shopping, but for culture, entertainment and community activities; with pop up shops, restaurants and coffee shops; and social entrepreneurs and market traders working alongside traditional retailers. So this is as much a social challenge as an economic challenge. Towns have seized the opportunities to bid for funds and have taken a more strategic approach to developing their high streets even where their bids did not gain funding. 4.4 Government has put in place new policies including on transparency, and has been supporting and encouraging local initiatives in addition to activities on the Portas Pilots. DCLG has taken the lead in facilitating opportunities for experts in local government, academia and business to be brought together to set the course for the future through the Future High Streets Forum, launched March 2013. These contributions are explored in more detail in the rest of this section. 4.5 Within Government, DCLG and BIS are working together on delivery of national and local projects such as the Retail Pathfinder, a key component of the BIS Retail Strategy, and ensure joint representation on forums where appropriate.
Key Facts—Portas and beyond 4.6 The box summarises key achievements from, and components of the Government’s future high street strategy: Mentoring and support for the 27 Portas Pilots on areas such as marketing and governance, provided through business via Business in The Community, the Association of Town and City Management, and directly from businesses. This helps them make good use of the £2.3 million funding from Government. More than 330 town teams established as Town Team Partners with a package of support from Government (including over £3.3 million funding) as well as advice and support from experts. “Love Your Local Market” fortnight was started last Summer and there will be another during 15–29 May 2013. Delivered a £10 million High Street Innovation Fund for the top 100 places most affected by the riots or with the highest empty shop rates. Set up the Future High Streets Forum, co-chaired by Mark Prisk and by Alex Gourlay, Chief Executive of Health and Beauty Division at Alliance Boots. This is providing joint business and government leadership and provides advice and guidance on the formation and delivery of policies to support high streets. 54 local areas applied for the £1 million High Street Renewal Awards scheme (formerly known as the X Fund). This will provide funding to areas who have demonstrated the most effective and innovative ideas for supporting their high streets since May 2011. The winners will be announced shortly. £0.5 million loan fund to help those looking to set up Business Improvement Districts to be announced shortly. 4.7 There were 28 recommendations in the Portas Review, on what government, local authorities, businesses and communities can do to help high streets to be vibrant and successful. 27 were accepted. Of these, 19 fall directly or mainly to Government, and there has been progress on all of them. It should be remembered that as “pilots” not all ideas that are initiated will work or be successful but we need to promote innovation.
Establishing town teams and supporting businesses 4.8 Portas Pilots were a key recommendation from the Portas Review, where strong “town teams” are established by local businesses, landlords, community and public sector representatives to manage local high streets. The first 12 Portas Pilots were announced in May 2012 and 15 more Portas Pilots (of which three were funded by the Mayor of London) were announced in July 2012, each receiving up to £100,000. 4.9 Every one of the 27 Portas Pilots has had access to valuable advice and support from a wide range of leading retailers (including Boots, The Co-op and Wilkinsons) to help breathe new life into their high streets, as well as expert organisations. The Association of Town and City Management (ATCM) has been proactively involved in providing help and support to the areas involved in the programme as has the Business in the Community (BiTC) who have brought in support from businesses. For example, BITC launched their “High Street Champions” programme in April 2013 to help Pilot areas by bringing them the expertise of large 18 https://www.gov.uk/government/publications/the-future-of-high-streets Ev 120 Business, Innovation and Skills Committee: Evidence
businesses.19 The Arts Council has given a number of one-off grants to spark creative and cultural activities on the high street, and increasing footfall by attracting more young people and families. Case study 1: Dartford is one of the Portas Pilots. They introduced a Sunday trading day with free parking and subsidised advertising, which led to a 20% increase in trade for some shops. They are now looking at introducing free wi-fi in the town centre in partnership with major service providers. They have opened up a community shop in the town centre which is acting as a village hall in the heart of the town centre, provided free by the local shopping centre. A number of pop-up shops have also opened for business with a high take up from start-up businesses. The town team has attracted £300,000 worth of additional funding or services in kind. 4.10 The Portas Review kick-started the debate on how to renew our high streets, and began practical work on the ground. Government’s support for towns and high streets has gone beyond the 27 Portas Pilots. We have also provided £10 million to the 100 areas with the most empty shops and those which were affected by the 2011 riots. This High Street Innovation Fund was designed to attract new businesses to the towns and bring empty properties back into use. 4.11 Consequently, councils across England have been able to be flexible and innovative in turning boarded- up shops into thriving new businesses. For example, some have offered discounts on business rates, reducing the ongoing costs for businesses, while others have used the “meanwhile use” policy which means empty property can temporarily be used for different purposes than they were intended. Case study 2: Manchester City Council spent considerable time engaging with businesses, landlords and individuals or organisations wishing to move onto the high street. They are currently focusing on delivering three exemplar projects, each to be supported with £20,000. One of these brings the creative talent of staff and students from the Manchester School of Art together with the businesses of the Northern Quarter to deliver a two day festival of art and design exhibitions in May. Four empty properties will be brought back into use, and over 20 retail window spaces will be redesigned. 4.12 In addition to funding support to Portas Pilots and other town teams, the government is providing up to £306,000 match funding for the Enterprise Business Connectors scheme. This scheme, run by Business in the Community, helps small businesses in disadvantaged communities survive and thrive by encouraging partnerships with local large firms. Government is also working to increase provision of mentors and raise demand for mentoring through other activities including: — Mentorsme.co.uk—the national mentoring portal operated by the British Bankers Association; — the £1.9 million Government-funded Get Mentoring initiative, which aims to recruit and train 15,000 volunteer business mentors from Small and Medium Enterprises; — Calling on large companies to play their part through corporate business mentoring programmes that enable their staff to volunteer as mentors; and — The National Skills Academy for Retail is also rolling out a national mentoring scheme for retail Small and Medium Enterprises, throughout its network of over 50 Skills Shops.
Markets 4.13 Government and the retail markets industry have worked closely together to deliver more than the specific recommendations in the report, with a national Market Day on 15 June 2012 followed by nearly three weeks of events when people could try being a market trader for the first time, at free or subsidised cost, plus support from the market industry professionals. Over 400 markets were held in England during that time under the banner of “Love Your Local Market” and 2,000 people signed up to trade. Many places organised events that the whole community could join in, and some new markets were established during this time. Government and the markets industry are working together to deliver another Love Your Local market campaign in May 2013. Case study 3: Market Rasen, one of the first 12 Portas Pilots, recently won a prestigious award for being Britain’s best small speciality market 2013. The award put Market Rasen amongst a handful of locations recognised for pioneering local entrepreneurship by hosting and managing outstanding markets Business rates 4.14 The Government recognises the importance of business rates to small businesses and independent retailers, which is why we have taken firm action by doubling small business rate relief for three and a half years to help small shops. The Government has made it easier for businesses to get the small business rate relief to which they are entitled by removing the legal requirement for them to submit an application form. 4.15 Through the Localism Act 2011, the Government has provided councils with new powers to introduce and fund local business rates discounts as they see fit. It is for local authorities to consider how to use their new powers to provide business rate discounts to small businesses and independent retailers. 19 http://www.bitc.org.uk/programmes/high-streets-and-business/high-street-champions Business, Innovation and Skills Committee: Evidence Ev 121
4.16 Local authorities should be the leaders on, and drivers of, economic growth and high street improvement, and, through the Local Government Finance Bill, local authorities are being allowed to keep a proportion of the business rates they collect, providing a strong, new financial incentive for local authorities to go for growth, support their high streets and create an environment attractive to business.
Business Improvement Districts 4.17 Business Improvement Districts (BIDs) are highlighted in the Portas Review as one model which is already working well in high streets. This is a model for businesses to club together and fund projects to tackle specific common problems and improve the local trading environment. BIDs might, for example, support local branding or marketing campaigns, work together to improve business waste management, prevent crime and anti-social behaviour, or provide shared facilities like Wi-Fi. 95 % of BIDs continue beyond their agreed original term, demonstrating that businesses see the value in them. 4.18 The empowerment of successful BIDs and sharing of best practice to help new ones to emerge is one clear way that can shape the high streets of the future. DCLG is working closely with industry groups, and is establishing a £500,000 BIDs Loan Fund later this year to enable more towns to establish a BID. 4.19 There is an ongoing debate about landlords, their role and involvement in the high streets, and how they contribute to BIDs. Government welcomes the principle of getting all the major high street stakeholders taking responsibility and working together wherever this is possible. As an occupier levy there is no compulsion on all landlords making a levy payment towards an occupier BID. Currently landlords can, on a voluntary basis, fund and take an active role in BIDs. DCLG will be consulting in spring 2013 on options for property owner BIDs.
High street design and parking 4.20 DCLG is actively promoting good town centre design. In July 2012, DCLG published a guide on “Reimagining Urban Spaces to help revitalise high streets”.20 This guide was developed in partnership with 19 expert organisations. 4.21 The Government is committed to improving transport access and infrastructure. The Department for Transport is giving £1.8 billion to local authorities for transport measures, including improving roads and support for walking and cycling. £560 million is also being provided over this Parliament for the Local Sustainable Transport Fund, delivering up to 90 projects. The Department for Transport also announced £15 million in February 2012 for better cycle routes and facilities. 4.22 Mary Portas’ report highlights the crucial role parking has in the vitality and success of a high street. Government has changed planning rules to allow councils to provide appropriate parking spaces in town centres, to help them compete with out-of-town supermarkets and has issued guidance that encourages councils to attract shoppers by setting competitive parking charges. DCLG encourages all local authorities to be transparent and publish parking charges. 4.23 DCLG has recently consulted on whether or not parking information, including the number of spaces available and revenue from parking charges and fines, should be included as a dataset for publication in the Code of Recommended Practice for Local Authorities on Data Transparency and is now reviewing consultation responses.
Deregulation and cutting red tape 4.24 Government has put in place a streamlined, deregulated process to reduce burdens on local authorities, including parish and town councils, making it easier to revoke out-of-date, archaic or unnecessary byelaws that hinder the effective operation of traders, businesses or markets. The Red Tape Challenge looked at retail regulations, and more detail on this is set out in section 6.
Use classes and the planning system 4.25 The National Planning Policy Framework makes it clear that councils should put town centres first. Planning policies are expected to promote a competitive town centre, and set out policies to manage town centres effectively, helping them to grow. In drawing up their local plans, local planning authorities are expected to actively promote viable and vital high streets, recognising that they are the heart of local communities. They should also offer genuine choice for consumers and a diverse range of retailers and promote policies which respect the strengths and individuality of their local high street. 4.26 Government has put measures in place to focus retail development in town centres through a “town centre first” planning policy. The focus is on helping high streets to adapt to changing consumer demands and new technologies; through becoming more competitive, and complementing out of town and online shopping experiences. The high street will offer something different to just retail including public services, leisure, night time economy and alternative uses for buildings that were previously shops. 20 DCLG (2012). “Re-imagining urban spaces to help revitalise our high street”: https://www.gov.uk/government/publications/re- imagining-urban-spaces-to-help-revitalise-our-high-streets Ev 122 Business, Innovation and Skills Committee: Evidence
4.27 The Government has also made it easier to build more homes on the high street, by introducing permitted development rights for two flats above shops. This will help the overall regeneration of local high streets as well as increasing the customer base for local shops. DCLG’s announcement of 24 January 201321 outlines further regulatory measures for making the use classes system more flexible. Changes are being introduced which will make it easier for landlords to convert offices into housing; and for councils to change other buildings into shops. Regulations are to be in place by spring 2013. 4.28 The recent Budget Statement indicated Government’s intention to consult (summer 2013) on further relaxations to the use classes. These will include a new permitted development right allowing small shops in secondary locations to convert to residential use. This means that high street property does not lie empty simply because the planning system currently requires that it be used in a certain way. This flexibility is balanced with appropriate protections so that councils can, for example, protect community resources such as pubs, or prevent excessive growth of betting shops. 4.29 Local authorities also have powers under both licensing and planning regulations to control the type of businesses in their areas. The thrust of our changes is to deregulate the planning system in order to facilitate growth. This is not about restricting business or opportunities for enterprise. The Government will continue to keep the operation of the use class system under review to ensure it is as flexible as possible and promotes sustainable development. This complements national planning policy on town centres which asks local councils to work closely with business to resolve any barriers to investment and to adopt policies to promote the vitality and viability of town centres. Case study 4: Wycombe District Council used the planning system to tackle the impact of a new town centre development and the economic downturn on parts of the old town centre. By using a Local Development Order (LDO) they made it easier to bring about change of use to help vacant units be reoccupied. Whilst it provided for some flexibility, it did not lead to a “free for all” on aspects they considered important, in this case external changes to shop fronts. To complement this, the Council has been amending its Local Plan policies to provide more flexibility for changes of use in other parts of the town centre.
Empty properties and community involvement 4.30 Empty shops have a negative impact on the high street and the communities which the high street serves. DCLG is interested in looking at innovative ways to enable landlords to put empty property to good use. This is a topic in which the Future High Streets Forum will engage. 4.31 Government is keen that communities should have a stronger role in the planning system. As of April 2013, over 500 communities have taken up the right to make a legally binding plan for their area, and more are joining them each week. Of the 24 plans published online, many discuss improving or maintaining high streets. For example, in Thame in South Oxfordshire local people have written policies to support local shops, retain retail frontages, encourage a diversity of uses on upper floors and to site new business and employment development in the town centre. 4.32 To support communities in bringing forward neighbourhood plans or neighbourhood development orders, the Government recently launched a new support contract: Locality, in partnership with the Royal Town Planning Institute, Planning Aid England and others, will deliver a new £9.5m Supporting Communities in Neighbourhood Planning programme. The two year programme will offer practical, hands-on support and grants of up to £7,000 per neighbourhood area for communities to progress their neighbourhood development plan or order. Full programme details and details of how to apply for support, as well as guides to neighbourhood planning, are available online.22 4.33 Local people who positively plan for growth should also share in the benefits that new development can bring. That’s why areas with a neighbourhood plan will receive 25% of Community Infrastructure Levy revenues with no upper limit—significantly higher than areas without a neighbourhood plan. 4.34 Mary Portas has highlighted imaginative ways in which empty properties have been put to valuable community “meanwhile” use, maintaining vibrancy in places that would otherwise be lifeless. There is more that can be done to encourage this kind of activity on the high street. DCLG is delivering significant support for communities on this issue.23 Government wants communities to use the right to bid and we support imaginative “meanwhile” uses. A new “community right to try” would require primary legislation and DCLG will first explore the impact of other new community rights they have put into place before considering whether to take this additional right forwards. 21 https://www.gov.uk/government/speeches/change-of-use-promoting-regeneration 22 http://mycommunityrights.org.uk/neighbourhood-planning/ 23 Model Meanwhile Lease documents are available online to encourage all landlords to make empty shops and other property available for temporary “meanwhile” use. The Right to Reclaim Land and the Community Right to Bid help communities make positive use of vacant space. The Right to Reclaim Land makes information about land owned by public bodies more easily available and the new Community Right to Bid was introduced in September 2012 and gives communities the opportunity to identify assets of community value. When put up for sale, the community can stop the clock and get up to six months to prepare to bid for them and raise the finance. As of March 2013 over 300 assets of community value were listed by local authorities across the country. Business, Innovation and Skills Committee: Evidence Ev 123
The Future 4.35 Looking ahead there are a number of initiatives being put in place to enhance economic growth and develop high streets fit for the 21st century. 4.36 From April 2013, the Association of Town and City Management is leading a £1 million, two year programme of work to support and develop high streets and town centres, providing support on business planning, offering advice, getting mentoring in place and developing “how to” guides. The programme will look at how communities can plan to meet their changing needs from adapting to climate change and an ageing population; developing markets and pop up shops; and creating more housing and attracting volunteers. The results will be improved leadership within communities, a broader take-up of innovative ideas, and best practice shared around the country. 4.37 DCLG minister Mark Prisk co-chairs the Future High Streets Forum with Alex Gourlay, the Chief Executive of Health and Beauty Division, Alliance Boots, The Forum was launched in March and meets quarterly, to identify ways of tackling some of the key challenges which are common to many high streets around the country. 4.38 DCLG will shortly be announcing details of a loan fund to help those who wish to set up Business Improvement Districts. They will also be amending legislation to allow for cross boundary BIDs and will consult on options for property owner BIDs this Spring. 4.39 To reward success and innovation, DCLG will shortly be announcing the results of the £ million High Street Renewal Awards scheme (formerly known as the “X Fund”) which will provide funding to areas who have demonstrated the most effective and innovative ideas for supporting their high streets.
5. BIS Retail Strategy 5.1 The BIS Retail Strategy (BRS),24 published in September 2012, was developed in partnership with the sector (primarily the British Retail Consortium and the Association of Convenience Stores, Gloucestershire Local Enterprise Partnership and members of the Retail Policy Forum) and key officials in Government on specific issues. It focuses on sector-specific, deliverable actions which will have a positive effect on the growth and performance of the sector as a whole, without creating market distortions. The strategy is a living document, so as actions are delivered we will continue to work with partners to explore new opportunities to support growth. 5.2 The BRS was developed in recognition of the fact that the highly competitive and diverse nature of the retail sector made it unsuitable for the same degree of intervention as the sectors identified for the Government’s Industrial Strategies—which tend to have high levels of R&D, high capital costs and barriers to entry eg aerospace, oil and gas and nuclear. Industrial strategies have been based on the spectrum of support (including financial) that could be given to sectors depending on their potential to grow, competitive advantage in the market place, and the extent to which government decisions can shape the sector. However in comparison to the Industrial Strategy sectors, there is less scope for cost-effective Government intervention for retail (with the exception of some regulatory issues). 5.3 The BRS comprises actions to effect positive change at the local, national, international and European level. We are making significant progress towards implementing the BRS actions, during what has been a very challenging time for the sector. Some projects have continued to evolve during implementation.
Maximising retail investment overseas 5.4 Taking a strategic taskforce approach to helping our successful retail businesses develop further in overseas markets, UKTI has published “UK Retail Industry—International Action Plan”.25 This commits Government to work with the sector to support international growth of UK companies by taking concerted action to maximise investment in priority markets. 5.5 The UK Trade & Investment International Retail Action Plan was launched on 13 March by the Secretary of State for Business, Innovation and Skills. It is based on targeted campaigns to help businesses export, grow and establish in emerging markets where there is demand from the growing middle class with high levels of discretional disposable income. This report was produced after a six month consultation with the UK retail industry including small and large retailers and the British Retail Consortium. 5.6 This is a two year plan (2013–15) which identifies the key themes for attention and the key markets for delivery of international growth for the UK retail sector. The action plan also sets out UKTI’s role in securing inward investment from the international retail sector. The key themes identified include: — Helping retailers access international markets including via e-commerce; — Helping the UK’s luxury brands access international markets and grow their exports; — Ensuring that the high-value opportunities globally for new shopping destinations are capitalised upon by British firms with relevant experience (known as the “Experience Economy”); 24 BIS Retail Strategy https://www.gov.uk/government/publications/bis-retail-strategy 25 http://www.ukti.gov.uk/uktihome/media/pressRelease/466480.html Ev 124 Business, Innovation and Skills Committee: Evidence
— Foreign Direct Investment; — Helping companies with international market access issues in a taskforce approach with BIS; and — Helping companies with international market development and supply chain development. 5.7 UKTI is developing a series of campaigns to deliver this action plan and details of the events and activities will be announced shortly for 2013–14. The aim is to deliver £500 million of value to the UK economy through assisting up to 1,000 businesses with their international growth in the two years to March 2015. 5.8 According to the Business Perspectives for Emerging Markets 2012–17 Report by Global Intelligence Alliance (GIA), emerging markets will continue to play a larger role in generating global revenues for the consumer and retail sector by 2017. The 39 global consumer and retail players surveyed in the report expect to generate on average 28% of their global revenues from emerging markets by that time.
Influencing action in Europe 5.9 We are working proactively to ensure that legitimate interests of UK retailers are fully recognised in EU policy debates and ultimately in the final decisions to avoid unnecessary cost and regulatory burdens on retail business. 5.10 To ensure effective representation of UK retailers’ views in Europe on the recently published European Retail Action Plan (ERAP)26 Communication “Setting up a Retail Action Plan”, we have set up a UK Retail Action Group for Europe (URGE). BIS will chair meetings of URGE which comprises key retailers, trade bodies and other partners. The Group has met once and a further three meetings are planned this year to coordinate and communicate UK messages on retail growth opportunities in Europe. 5.11 We will also continue consulting widely across BIS and other Government Departments through a virtual Whitehall URGE, to ensure a consistent approach to government input into EU policy relating to retail growth. 5.12 We will push the EU to address the barriers to a single market in retail, which if accomplished will help retail businesses to establish in Europe and overseas, enhancing cross border trade and create new jobs. We have been lobbying the European Commission on these issues for several years, including through our actions on the Digital Single Market (see Section 3 of this document). The ERAP is a good opportunity to reiterate our messages for the benefit of the retail sector in a coordinated way. 5.13 The Communication emphasises the pivotal role that retailers play in encouraging consumers to be more sustainable. UK retailers are already leading the way to improve environmental impact of their operations and products. The UK Government will need to be vigilant to ensure that unnecessary cost burdens are not imposed on businesses, where substantial progress has been made domestically.
National activities 5.14 Although the UK has very little retail-specific regulation, retail is impacted upon by a wider range of general company regulation than other sectors. Whilst there are other Government initiatives under way to reduce the amount of general regulation, the BRS focuses on reducing the burdens of regulatory inspection and enforcement on retailers. 5.15 The BRS activities are designed to complement the existing work being undertaken by the Better Regulation Delivery Office (BRDO). A more full description of the work of BRDO and its retail-focused actions is at Section 6 of this document. Two key areas are: — The Primary Authority Scheme (PA) is being enhanced and expanded under the Enterprise & Regulatory Reform Bill. Once the Bill receives Royal Assent, we will promote the benefits of PA to both retailers and local authorities, working with retail trade bodies and local and regional partners, to drive take-up. — Another important change to the scheme will enable franchise businesses and trade associations to develop PA agreements on behalf of SMEs. BRDO has held a series of workshops with trade bodies to explore the detail of how PA extension will work and we will undertake more detailed discussions with trade bodies once the Bill receives Royal Assent. — Regulatory Partnerships “Better Business for All”. Partnership pilots ran in 2012 in two Local Enterprise Partnership areas. The aim was to improve transparency, accountability, communication and trust between local businesses and regulators operating in those areas, thereby improving compliance and reducing the need for inspection. 24 LEPs, including Gloucestershire (the first Retail Pathfinder LEP) are now exploring how to implement these approaches in their own areas. 26 EC Communication: Setting up a European Retail Action Plan http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri= CELEX:52013DC0036:EN:NOT Business, Innovation and Skills Committee: Evidence Ev 125
5.16 The BRS actions focus on developing a deeper and more productive relationship between research bodies, academia, retail and government. The retail sector spends a significant amount of money on research and development. The UK has a world-leading research base in a number of different disciplines, with funding delivered through the Research Councils. The interests of retail cut across many of these disciplines, from social science to applied mathematics to biological research. From initial discussions with key stakeholders it was agreed that there is further potential to be tapped by developing a more strategic and sector-specific approach. 5.17 BIS is therefore working with several research councils (Economic & Social Research Council, Engineering & Physical Sciences Research Council Biotechnology & Biological Sciences Research Council Natural Environment Research Council, and Medical Research Council); five Higher Education Institutions (including Oxford, UCL, Nottingham Trent and Loughborough); the Technology Strategy Board; and the retail sector to develop a retail-specific, cross-disciplinary brokerage and engagement toolkit including case studies of successful industry/academic partnerships. This will make linkages and projects easier to identify and develop, and raise awareness of the funding that can be available. BIS held an initial workshop with partners in March and is working with them to develop the toolkit over the course of 2013. 5.18 The Economic & Social Research Council has chosen retail as a priority area of interest. ESRC are submitting details on their retail sector activities separately to the Committee. 5.19 There is a plethora of statistics, research and analysis on retail and town centres, and the drivers of change. BIS and DCLG are working with partners to identify the best sources and to identify gaps on what the drivers of change are, where they’re taking us, and informing future research priorities. We held an introductory workshop with retailers, academics and policy officials at the end of 2012, and the Future High Streets Forum is setting up a “task and finish” group to take work forward in this area. 5.20 We have an ageing population, meaning that basic accessibility is becoming increasingly important for retailers to maintain market share amongst this growing segment of the customer base. 5.21 Under the BRS, we intend to hold an event in Autumn 2013 to showcase market opportunities for retail from more accessible products, premises and customer services. This will present current research and analysis on the potential in the market, and what some retailers and product designers are already doing. We are working with partners such as the Association of Convenience Stores, the British Retail Consortium, Age UK, the Technology Strategy Board, and key academics.
STEM skills for retail 5.22 The wider issues of retail skills are covered in Section 7 (Skills for a Successful Retail Sector) of this document. The original action under the BRS was to undertake a STEM skills gap analysis of the sector, including higher mathematics/data analytics, web platform technology and food engineering. However it soon became clear after consultation with partners that the mathematics/data analytics side should be the priority. 5.23 Retail is increasingly a data-driven business. To maintain competitive advantage in a fast-moving marketplace, retailers must use increasingly sophisticated approaches to utilise the rich data that they collect— customer demographics and trends, sales patterns and online sales etc. However whilst there is an increasing need in retail for skills and qualifications in higher mathematics applicable to advanced data analysis (and/or with the right skillset to design or incorporate high level data analysis for commercial strategy), the sector is competing against other industries such as financial services to attract the right people from a small pool. 5.24 We will be shortly be consulting with retailers to explore the extent to which there is a disconnect between supply and demand for the job roles that require these skills, and will subsequently work with the sector and HEIs (Higher Education Institutes) to explore solutions.
Retail and the Local economy 5.25 The importance of retail to local economies is not always recognised. It is one of the few sectors with a presence in every neighbourhood. Local economies are underpinned by retail as a provider of employment, skills development, and the goods and services people need and want. Under the BRS, we are working with locally-focused partners such as the Gloucestershire LEP to better understand market conditions and challenges, and carrying forward actions to maximise retail’s contribution to local economic, social and spatial performance. Section 4 (High Street Renewal and implementing the recommendations of the Portas review) covers some of these activities in more detail. 5.26 Local Enterprise Partnerships (LEPs) offer a business-led, strategic approach to local economic growth and performance. Lord Heseltine in his report “No stone unturned” set out a vision of a decentralised, “locality” based approach to local economic growth which the Government has accepted in its response.27 The BIS Retail Pathfinder agreement with Gloucestershire LEP is an excellent example of collaborative working between partners on local initiatives that can be applied flexibly and disseminated nationally. 27 http://www.hm-treasury.gov.uk/ukecon_heseltinereview_index.htm Ev 126 Business, Innovation and Skills Committee: Evidence
5.27 Gloucestershire LEP was announced as the first Retail Pathfinder in March 2012, and the formal agreement and actions were signed off in June 2012. The actions were incorporated into the BRS. Gloucestershire was considered suitable because the LEP demonstrated a strong understanding of retail needs and concerns, and of the importance of retail and town centres to local economies. They requested Pathfinder status to enable them to work closely with retail, government and other LEPs, on retail growth opportunities at the local level. 5.28 The BRS action was “agreeing an action plan with Gloucestershire LEP (as the first Retail Pathfinder) to support Gloucestershire LEP to develop and pilot initiatives to support retail growth at local level”. This built further on the initial pathfinder agreement, and is meeting all its objectives including: 5.29 The “Successful Town Centres: Developing Effective Strategies” report and toolkit was funded by BIS, developed by Gloucestershire First and the Association of Town & City Management and partners. Launched on 20 March, the toolkit is designed to enable Local Authorities, local partnerships, retail businesses and LEPs understand and analyse how town centres are performing against a suite of indicators, informing development and implementation of local plans and strategies. It is being disseminated to LEPs, Portas Pilots and Town Teams, Business Improvement Districts, the Town Centre Manager network, and to Local Authorities via the LGA (Local Government Association). 5.30 A communication network “LEP Retail Network”, operates across all LEPs, identifying within each a specific retail-focused contact. This network is being used to disseminate information by BIS, DCLG, British Retail Consortium (BRC), Association of Town & City Management (ATCM) and other national partners. LEPs have been offered use of the network to share best practice, and government to consult LEPs on retail issues. To enhance this, from April 2013, the LEP is sending out a six-weekly email to the network, actively encouraging information sharing. 5.31 The BRS is a living document and will be reviewed, and refreshed annually in conjunction with key partners.
6. Regulations and Costs Affecting the Sector 6.1 Promoting deregulation is a core component of the Government’s growth strategy, with regulation as a last resort rather than the first option. Over the past few years, government has taken a number of actions to reduce the burden of regulation on the retail sector and to ensure application of regulation in a more business- friendly way. 6.2 A key factor in the UK retail success story is the relatively light regulatory regime in which it operates in terms of barriers to entry. This makes the UK a very attractive country in which to invest for overseas retailers. Indeed, many choose the UK as the first place in which to have a shop outside of their home country. 6.3 Retail stores are impacted by a range of regulatory regimes and initiatives, some of which come from Brussels, others from the UK and its Devolved Administrations of Scotland, Wales and Northern Ireland. These include the planning system (which addresses the use of properties, where they can be established), and certain aspects of how retailers operate (such as opening hours). Licences are required to sell certain types of goods— eg: poisons, fireworks alcohol, guns, prescription medicines and sex shops but a licence is not required to open a shop as is the case in many countries.
The Role of Government
6.4 Planning policy supports retail by asking local councils to pursue sustainable development, ie development with economic, social and environmental benefits. National Planning Policy asks local councils to work proactively with businesses to understand their needs and address any barriers to investment (for example lack of infrastructure). 6.5 In general new retail is guided to existing town centres as this has multiple benefits in grouping existing shops, supporting infrastructure, reducing unsustainable shopping patterns, and promoting a viable and vibrant town centre. Where retail proposals would have a likely significant detrimental impact on a town centre, they should not be granted planning permission. This means retail policy is very flexible, ie encouraging investment first into town centre locations but not preventing it elsewhere if there are wider benefits and no preferential locations. 6.6 The Government is keen to introduce flexibility into the planning system where possible to ensure that it is streamlined and fit for the needs of modern business. 6.7 Legislation regulating trading hours such as “The Sunday Trading Act” restricts the opening hours of larger retailers to only opening for 6 hours on a Sunday between the hours of 10.00 and 18.00. Although there was a relaxation for the Olympic and Paralympics games, the legislation contained a sunset clause with expiry 9 September 2012. Any permanent relaxation of the Sunday Trading rules would require new legislation with full consultation and impact assessment. Business, Innovation and Skills Committee: Evidence Ev 127
6.8 As well as compliance with a significant amount of regulation and initiatives relating to consumer and employee protection, energy conservation, health and safety of products operations and premises, shop retailers are increasingly been seen by government as a powerful force in helping to deliver policy objectives such as flexible working and informing consumers of products to promote energy conservation.
Tackling domestic regulation 6.9 The Government has moved on from “One-In, One-Out” to the more demanding policy of a “One-In, Two-Out” rule, consistent with the Prime Minister’s ambition of being the first Government in modern history to complete its term of office having reduced the overall burden of regulation, rather than increased it. The Fifth Statement of New Regulation published in December 201228 shows that the changes the Government has made will reduce the annual cost to business by around £919 million, compared with when the Government came to office. 6.10 As a result of the Red Tape Challenge process, the Government is committed to scrap or improve at least 3,000 regulations that affect business, and has already identified 1,500 to repeal or overhaul. Measures already implemented are saving businesses over £155 million per year. 6.11 The Government is seeking to improve how regulation is enforced through the Focus on Enforcement reviews.29 Evidence about how regulation is enforced has identified many common issues across different sectors: inconsistency of fees and charges, and the need for regulators to take account of their impact on industry.
Tackling Regulation from Europe 6.12 The Government has persuaded its EU partners to adopt a more rigorous approach to regulation at the European level. Our regulatory reform agenda is already backed by nearly half of member states. 6.13 The Commission’s Regulatory Fitness Communication published in December met 6 of the key proposals under the UK’s 10 Point Plan30 (Plan set by the UK to ensure that EU regulation is “Smart” regulation) including a new programme to reduce regulatory burdens at EU level. 6.14 One third of Commission proposals in 2012 with significant costs for business contained an adaptation designed to help SMEs: for instance, an exemption from certain EU accounting rules should benefit up to 1.4 million UK SMEs. 6.15 Firms have long complained about UK government departments adding additional regulations to EU laws which put them at a disadvantage compared to their European counterparts. So in 2011 we introduced tough new rules across Whitehall to put a stop to this “gold plating”. From July 2011 to December 2012, of 88 cases in which we have adopted laws from Europe, there was no evidence of gold-plating that placed additional burdens on business. 6.16 But we will keep up the pressure on Whitehall so that all EU legislation is implemented in the least injurious way. From now on Ministers will be required to transpose only the minimum necessary to comply with each Directive.
Red Tape Challenge 6.17 The Red Tape Challenge, a cross-Government programme led jointly by BIS and the Cabinet Office, was launched by the Prime Minister in April 2011. It gives business and the public the chance to comment by theme, on the regulations that affect their everyday lives, with the aim of scrapping or significantly reducing as many of them as possible. 6.18. The retail sector was the first to be considered, and the theme was open on the Red Tape Challenge website between April and May 2011. A total of 257 regulations were considered as part of the theme Retail Red Tape Challenge Results Scrap 114 (44%) Improve 41 (16%) Keep 102 (40%) — The Government is committed to scrap or improve 60% (155) of the regulations under consideration. — The Government in January 2013 introduced a new Age Restricted Products Code of Practice. This will protect young people and reduce red tape for responsible businesses that sell age restricted products safely, legally and profitably.31 28 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/36833/12-p96c-fifth-statement-of-new- regulation.pdf 29 https://www.gov.uk/government/news/focus-on-enforcement 30 http://www.bis.gov.uk/assets/biscore/better-regulation/docs/0–9/12–1326–10-point-plan-for-eu-smart-regulation 31 https://www.gov.uk/government/news/new-code-ends-tick-box-regulation-in-sales-of-age-restricted-products Ev 128 Business, Innovation and Skills Committee: Evidence
— The Government is piloting the inclusion of sales of alcohol in the Primary Authority model to make it easier for retailers with more than one shop to comply with the law. — In the Enterprise and Regulatory Reform Bill the Government is removing the requirement for retailers to notify TV Licensing of sales of televisions, which will save business £2.49 million a year. — The Government intends to consolidate 12 overlapping and confusing pieces of consumer legislation in to one, subject to Parliamentary procedure, making it clearer for both businesses and consumers what their rights and responsibilities are. — The Government is promoting greater personal freedom and responsibility by getting rid of symbolic cases of heavy handed intervention, such as requiring a shop selling liqueur chocolates to have an alcohol licence, and by lowering the age for buying harmless Christmas crackers.32 The most recent Freedom Day, 6 April 2013, removed these pointless regulations. — The Government has removed redundant legislation, such as rules around the safety of pencils, prams and hood cords where consumers are already protected by other legislation.
Non sector-specific regulations 6.19 In addition, the Government is making changes to Health and Safety, Employment Related Law, and Environment regulations. 6.20 From spring 2013 the Government will remove hundreds of thousands of low risk businesses from unnecessary health and safety inspections. 6.21 The Government has already extended from four to eight days the time an employee has to have been incapacitated before most accidents must be reported, saving an estimated £2.1 million for business over a 10 year equivalent period. We will make further changes to the Reporting Injuries, Diseases and Dangerous Occurrences Regulations to clarify and simplify the reporting requirements. 6.22 The Government has also published new guidance on portable electrical appliances to tackle the myth that all such appliances in low-risk settings need annual testing. 6.23 Changes to Employment law33 will make it easier for retailers to hire and manage employees, such as the change in the qualifying period to claim unfair dismissal to two years, forthcoming changes to TUPE and settlement agreements, alongside better guidance on how to take on a first employee and what employers are entitled to do. 6.24 The Government is improving the system of recording Waste Transfer Notes so that by January 2014 businesses will be able to upload all their waste information onto an electronic recording system, reducing administrative burdens. 6.25 Large retailers building on plots of land will benefit from clearer guidance that will save business an estimated £140 million a year by reducing uncertainty about when land needs to be remediated. This will allow regulators to make quicker decisions about whether or not land is contaminated and will prevent costly remediation operations being undertaken unnecessarily. 6.26 In the autumn of 2010 the Department of Health pioneered a Responsibility Deal34 approach in public health (including alcohol and food) which is a voluntary approach to policy challenges where retailers, manufacturers, public health groups and government come together as partners to find and implement solutions. Many leading food retailers have signed up and made commitments. Successes include firm commitments to reduce sugar, salt and saturated fats in processed food; better food and alcohol labelling, and; moves to promote lower strength beers and lagers over the premium, higher strength drinks. 6.27 The Responsibility Deal has been good for high street retailers, for manufacturers and for consumers by removing the need for Department of Health to mandate changes, which without the Responsibility Deal would have been brought forward as new regulation.
Regulatory Enforcement—BIS Better Regulation Delivery Office (BRDO) 6.28 BRDO was created on 1 April 2012 as an independent unit within BIS to promote a simple and clear regulatory environment by ensuring that the business voice is heard in the delivery of regulation and developing practical tools for regulators. Its activities are particularly relevant to retailers who experience a broad range of regulation and regulators, particularly where they have outlets trading in many Local Authority areas. The BRC is on the BRDO Ministerial Representative Steering Group recognising the importance of the retail sector to BRDO’s work. 32 Changes came into force on 6 April 2013. 33 https://www.gov.uk/government/publications/employment-law-2013-progress-on-reform 34 https://www.responsibilitydeal.dh.gov.uk/ Business, Innovation and Skills Committee: Evidence Ev 129
6.29 BRDO operates a “Business Reference Panel”35 which currently includes as members over 80 business representative bodies, trade associations and individual businesses. The panel serves as a sounding board for business concerns. A number of retail trade associations are represented. 6.30 Panel members work collaboratively to prepare evidence-based reports. From the retail members, reports have been submitted on Better Regulation of Age Restricted products, Better regulation of Date coded foods, and Better Regulation of the High Street.
Improving experience of Regulatory delivery—Regulatory Partnerships 6.31 BRDO supported two Local Enterprise Partnerships (Greater Birmingham and Solihull36 and Leicester and Leicestershire37) that wished to bring a more joined up approach by local and national regulators operating within their areas, and to forge closer links between regulators and their business communities to drive growth. The pathfinders tested a range of approaches including mechanisms to drive transparency and accountability in the relationship between regulators and business and to improve communication and trust. Programmes have been developed to improve regulators understanding of business. 6.32 The two pilot Local Enterprise Partnerships have shared their learning under the “Better Business for All” branding extensively with other Local Enterprise Partnerships including in a seminar in October attended by around 30 Local Enterprise Partnerships.38 A further 12 LEPs are now adapting learning from the pilots to their local situations.
Primary Authority (PA) 6.33 Primary Authority (PA) enables businesses that trade across Local Authority boundaries to enter into a “Primary Authority” agreement with a single Local Authority, which will provide an agreed framework of inspection and enforcement standards for that business, wherever it is trading. It is a scheme designed to provide clarity and consistency of regulatory support and supervision to businesses trading across Local Authority boundaries. 6.34 There are currently 703 businesses in partnerships involving 100 Local Authorities. The partnerships cover 59,800 premises and over 1.6 million employees (5.4% of UK employment). 6.35 PA was introduced by the Regulatory Enforcement and Sanctions Act 2008 (RES Act 2008),39 and currently covers only legislation specified in the schedules to the RES Act 2008 as amended. Primary Authority—Good for Retail Primary Authority partnerships cover 90% of the UK grocery trade. 42% of businesses in Primary Authority are from the wholesale and retail sectors. 49% of Primary Authority businesses are large (250+ employees), 21% are of medium size (50–249 employees) and 30% are small businesses (less than 50 employees). A full list of partnerships is published on the BRDO area of the BIS website.40 6.36 Ministers, BRDO and business groups have been active in promoting uptake of PA. A range of materials have been developed to explain the scheme to business and LAs. 6.37 A number of “Primary Authority Awards” aiming to recognise innovation and best practice in partnerships have recently been launched for nominations of LAs and business participants. It is intended that the first winners will be announced at the Trading Standards Annual Conference in June 2013.
Extensions and Enhancements to Primary Authority 6.38 BIS recently consulted on extending the range of regulations covered by PA to include the Housing (Health and Safety) Rating Scheme, sunbed tanning, and Welsh regulations on single use carrier bag charging. The consultation also sought views on the extension of Primary Authority to age-restricted sales of gambling. The Government will respond in due course. 6.39 With agreement from Home Office, the BRDO worked with a small number of businesses and their Primary Authorities to operate a pilot to trial age restricted sales of alcohol within Primary Authority. The pilot finished at the end of March 2013 and conclusions are being worked up. 6.40 The Enterprise and Regulatory Reform Bill intends to extend the scope of PA to businesses adopting a shared approach to compliance (participation is currently restricted to businesses trading across local authority boundaries). 35 http://www.bis.gov.uk/brdo/partners/business-reference-panel 36 http://centreofenterprise.com 37 http://www.llep.org.uk 38 http://www.bis.gov.uk/brdo/business/leps/bbfa-resources 39 http://www.legislation.gov.uk/ukpga/2008/13/pdfs/ukpga_20080013_en.pdf 40 http://www.bis.gov.uk/brdo/primary-authority/list-of-partnerships Ev 130 Business, Innovation and Skills Committee: Evidence
6.41 In addition franchise businesses that pursue this shared approach will also become eligible to participate in PA—which should benefit members of retail trade bodies. The Bill intends to strengthen the status of “Inspection Plans” agreed under Primary Authority Partnerships, requiring enforcing authorities to follow them rather than merely to “have regard” to them. This change was requested by Primary Authority partnerships and strongly supported by BRC. 6.42 The Bill has completed readings in both Houses, and subject to Parliamentary approval and Royal Assent the changes should be effective from 1 October 2013. 6.43 A number of retail trade bodies including the British Independent Retailers Association, National Federation of Meat and Food Traders, National Federation of Retail Newsagents and the National Federation of Fish Fryers are currently assisting the Better Regulation Delivery Office in pilot activity ahead of full scale launch from the 1st October. Primary Authority Supermarkets Group The BRDO operates various groups including Local Authority and business members of PA partnerships, to ensure that the full potential of the scheme to drive consistency and a proactive approach to partnership development. The Primary Authority Supermarket group meets regularly to explore and resolve issues common to partnerships in this sector.
Amending the Regulators Compliance Code 6.44 Following a Post-Implementation Review of the Regulators Compliance Code BRDO have issued a consultation on proposed amendments.41 The intention of the revised code is to require non-economic regulators to consider the impact of their activities on economic progress, take a risk-based approach to enforcement, provide advice and guidance to assist businesses in understanding their responsibilities, and to take proportionate enforcement decisions.
Duty of Non-economic regulators to have regard to Growth 6.45 In the Chancellor’s Autumn Statement 201242 the Government committed to consult on requiring regulators to have regard to growth and to take account of the economic consequences of their actions through a primary legislative duty. The aim is to re-shape the way regulators work with business, so that upholding standards does not act as a barrier to growth and enterprise. In a six week consultation launched on 8 March businesses and regulators have been invited to contribute to the development of a proposed “growth duty” for regulators.
Better regulation on enforcement of “Age restricted sales” legislation 6.46 A report on “Better Regulation of rules surrounding age restricted products”43 was submitted to the BRDO in September 2010 by a group of retail trade associations. One recommendation was to revise the code of practice guiding enforcement activity in this area. Industry and enforcement experts developed an Age Restricted Products and Services Framework44 setting out the rights and responsibilities of young people, parents and carers. 6.47 Following extensive consultation with Local Authorities and Government Departments in its preparation BRDO published the revised code of practice in March 2013.45 6.48 BRDO is currently involved in a series of seminars to promote the revised code to enforcement authorities and the retail business community. BRDO will be evaluating the impact of the voluntary code to determine whether further action is required to address business concerns.
Better regulation of the High Street—High Street Audit 6.49 In autumn 2012, Retail members of the BRDO Business Reference panel explored the impact of approaches to the delivery of all aspects of regulation on the high street. The members proposed that local business communities and their respective local authorities should jointly conduct comprehensive and systematic reviews of the impact of regulation in individual High Streets. This approach is currently being tested within the Leicester and Leicestershire Local Enterprise Partnership as part of the Better Business for All Regulatory Partnership Programme.
Business Impacts: Crimes against Retail 6.50 The retail sector is impacted upon by a wide range of crime and anti-social behaviour. These are primarily customer theft (shoplifting), employee theft, robbery, burglary, criminal damage, and of course verbal and physical abuse of staff. 41 http://www.bis.gov.uk/assets/brdo/docs/publications-2013/13–685-rcc-consultation.pdf 42 http://www.hm-treasury.gov.uk/as2012_index.htm 43 http://www.bis.gov.uk/assets/brdo/docs/publications-2010/10–1397-arp-report.pdf 44 http://www.bis.gov.uk/assets/brdo/docs/publications-2011/11–1465-arp-framework.pdf 45 http://www.bis.gov.uk/assets/brdo/docs/publications-2013/13–537-code-of-practice-age-restricted-products.pdf Business, Innovation and Skills Committee: Evidence Ev 131
6.51 The British Retail Consortium46 estimates that the cost of crimes against retail (including prevention measures) was £1.6 billion in 2011–12, equivalent to almost 135,000 full-time entry level jobs in retail. This is a 15.6% increase in the value of crime affecting the retail sector compared with the previous year. Customer theft represents 83% of all incidents and 28% of direct costs, but although fraud and e-crime represent only 15% of incidents, they represent 63% of direct costs. 6.52 Many areas of the country benefit from business-led local crime reduction partnerships and business crime reduction partnerships, and also many business improvement districts have a focus on reducing crime and anti-social behaviour. The 2012 Commercial Victimisation Survey provides a count of crime against business premises in four industry sectors: manufacturing, wholesale and retail, transport and storage, and accommodation and food. It is the first time in 10 years that a survey of this nature has been undertaken by the Home Office. There were 9.2 million crimes against the four sectors covered by the 2012 CVS in the year prior to interview. The majority of these (7.7 million) were experienced by premises in the wholesale and retail sector, which is the largest of the four sectors covered. The wholesale and retail sector also experienced the highest rate of crime of the sectors (19,701 incidents per 1,000 premises), mostly driven by shoplifting offences. The survey estimated a total 4.1 million incidents of shoplifting, almost half the total number of crimes across all four sectors surveyed. 6.53 The Government is clear that retail crime is not “victimless”—shops form the lifeblood of our communities and are vital to our economy and social fabric. We recognise the cost and disruption retail crime causes to businesses and their staff as well as the damaging effects for communities and consumers. 6.54 We work closely with businesses and trade bodies to improve our understanding of crimes against business and to find effective solutions. The National Retail Crime Steering Group (NRCSG), chaired by Home Office ministers, is the national partnership to tackle retail crime. Members include key retailers and sector bodies. BIS is also represented on this group. 6.55 The NRCSG has raised the profile of retail crime across many Police Forces with the introduction of Business Crime Single Points of Contact; delivering the Home Office Commercial Victimisation Survey (CVS), and deliver the “tackling retail crime together” website (www.tacklingretailcrimetogether.co.uk). This provides practical case studies and best practice information. It also highlights minimum standards for Business Crime Reduction Partnerships to ensure that businesses understand the services their local Partnership can provide.
7. Skills for a Successful Retail Sector 7.1 The significance of retail employment to the UK economy and the breadth of career opportunities in the sector have not always gained the recognition they deserve. Although retail jobs are sometimes perceived to be low skilled with few opportunities for progression (and always in customer-facing roles). Retailers offer varied roles at all levels of business in many different professions. Some senior leaders in the sector have worked their way up from the shop floor. 7.2 Retailers spend more on skills and training than companies in many other sectors,47 and are amongst the largest users of Apprenticeships. As well as broad career and development opportunities, the sector offers significant flexible working opportunities. Retail acts as a gateway to employment (or re-employment) to the long-term unemployed and returners. 7.3 The National Skills Academy for Retail operates from over 50 Skills Shops across the country, providing on the ground training for retailers, including pre-employment courses for the long term unemployed, business skills, and offers business mentoring services. 7.4 The main skills gaps in the current workforce and in job applicants (as expressed by employers) are job specific skills, customer service, planning and organisation, team working and problem-solving. 7.5 Despite the economic conditions, many retailers have maintained their commitment to job creation and providing skills and training opportunities for employees, with several large retailers announcing further significant intakes of new staff and apprenticeships. Retail remains a popular employer, with applications significantly higher than the jobs available. 7.6 Retail provides employees with broad career and development opportunities across all levels and parts of the companies concerned. It provides flexible working opportunities (50% of retail employees work part time) for those caring for children or other dependents; who are studying; whose faith commitments require certain working hours; or whose health prevents full-time working and who would, in many other sectors, have been unable to keep working. It acts as a gateway to employment (or re-employment) to the long-term unemployed and those returning to work after life changes. 46 British Retail Consortium: Annual Crime Survey 2012 47 Leading Globally, Serving Locally http://www.brc.org.uk/downloads/UK_Retail_Leading_Globally_Serving_Locally.pdf Ev 132 Business, Innovation and Skills Committee: Evidence
7.7 Over half (54 %) of the retail’s workforce are in sales and customer service related occupations, including sales and retail assistants, retail cashiers and checkout operators. Retail jobs are not just about sales and customer service. The sector needs a supply of highly skilled and qualified people given the increasingly sophisticated systems to manage supply chains, logistics, internet shopping, in-store operations, and marketing. 7.8 Retail also significantly contributes to self-employment and many retail premises are SME businesses. These businesses often employ family members. In the convenience store sector, 51% of smaller businesses have two or more family members working there as their sole occupation. 7.9 Just under a third of employees are aged 16–24. This illustrates the crucial role the sector plays in providing first working opportunities and engaging those age groups generally under-represented in other parts of the workforce.
The Role of Government 7.10 The Government’s Skills Strategy is based on three principles: focusing public investment on market failures in skills; leveraging greater employer investment; and driving greater rigour, quality and responsiveness in the skills system. In the current spending review period, the public funding for skills is around £3.5 billion. We are committed to devolving delivery from central government to empower learners, employers and training providers. 7.11 Since 2010 we have reformed Further Education and skills in England so that the system can be responsive to the local needs of learners, employers and communities. This was reaffirmed in our recently published strategy “Rigour and Responsiveness in Skills”48 which sets out what can be done to invest in the needs of employers and individuals, and to focus funding where the impact is greatest. 7.12 The UK Commission for Employment and Skills (UKCES) aims to drive up employer investment in, and ensure better use of, skills across the UK to help drive enterprise, sustainable growth and job creation. It works with Sector Skills Councils (SSCs), trade bodies, employers, trade unions and other partners to give leadership to business on skills. The UK Commission currently oversees the Employer Ownership Pilot as a step in achieving greater business ownership of the skills agenda. It is also responsible for licensing SSCs. 7.13 The Skills Funding Agency funds and contracts with some 250 colleges, over 500 independent providers and most local authorities. It allocates public funding to training organisations and colleges for post-19 education and training and-post 16 apprenticeships in England. 7.14 To empower industry and allow them greater ownership of the skills system, we launched the Employer Ownership Pilot (EOP). This enabled businesses to compete for £340 million of public funds to support new, innovative training approaches. Several retail projects were successful under Round 1 of EOP, and in Round 2 there is a bid for an Industrial Partnership (further detail later in this section). 7.15 Apprenticeships are at the heart of the Government’s skills policies. The National Apprenticeship Service (NAS), which is part of the Skills Funding Agency, has responsibility for delivery of apprenticeship services in England (the Skills Funding Agency is responsible for funding Apprenticeship training and resolving issues and problems in the delivery system). NAS has a key role in marketing, communicating and working with employers to help them take on apprentices. It provides an online vacancy-matching and CV registration service for employers and prospective apprentices. It also promotes access and participation for under- represented groups. 7.16 We are incentivising the FE and HE sectors to engage better with business. Government is also widening the strategic role of LEPs, including setting skills strategies in line with government priorities and the needs of their local labour markets, and working closely with employers and the FE and HE sectors. Sir Andrew Witty will be undertaking an independent review to explore how HEIs can support LEPs and other local partners to drive growth. 7.17 Retail is one of the largest users of Apprenticeships. In the 2011–12 academic year there were 108,300 Apprenticeship starts in the “Retail and Commercial Enterprise” Sector Subject Area, up by 5.4% on 2010–11 and up by 75.7% on 2009–10.
48 https://www.gov.uk/government/publications/rigour-and-responsiveness-in-skills, published 3 April 2013 Business, Innovation and Skills Committee: Evidence Ev 133
The Future: Retail Skills Needs Table 1 NUMBER OF RETAIL BUSINESS BY REGION AND NATION Region/country Number of %age of UK %age of local businesses businesses businesses North East 10,100 4% 13% North West 31,500 11% 12% Yorkshire and The Humber 23,300 8% 12% East Midlands 19,100 7% 11% West Midlands 24,300 9% 12% East 24,900 9% 10% London 41,700 15% 10% South East 38,300 13% 10% South West 25,400 9% 11% Wales 13,100 5% 12% Scotland 23,200 8% 12% Northern Ireland 9,300 3% 11% United Kingdom 284,200 100% 11%
Source: Inter Department Business Register, 2012 7.18 Between 2013 and 2020, the retail sector workforce is projected to grow by 54,800, based on Working Futures data. The majority of this growth (41,700) is expected to be in managerial positions. Sales and customer service occupations form the largest group in the retail sector and although numbers are projected to fall by 4%, poorer retention rates will mean a further 384,200 new sales and customer service staff will be required to replace those leaving the sector. In total, around 873,100 people will be required to satisfy recruitment demand across the sector in the coming seven years -which is almost a third (29%) of the existing workforce. 7.19 Looking at recruitment and skills gaps among applicants, the retail sector compares well to the wider economy—it can mostly meet its current demand for skills. However this may underestimate the rate of change in retail and the impact of customer trends. Retail does less well however with regard to skill levels within its existing workforce. 17% of employers report skills gaps compared to 13 % across the economy. 7.20 The demand for higher level skills has previously been described as modest, but changes within retail and the service sector of technology, customer trends and more sophisticated supply-chain management are likely to accelerate the need for more highly skilled managers.
Table 2 RECRUITMENT PROFILE—RETAIL AND WHOLE ECONOMY COMPARISON Whole Retail economy VACANCIES Number of vacancies 65,900 635,900 Vacancies as a proportion of employment 2% 2% Proportion of establishments with vacancies 12% 12%
HARD-TO-FILL VACANCIES Number of hard-to-fill vacancies 9,600 143,600 Proportion of establishments with hard-to-fill vacancies 3% 4% Hard-to-fill vacancies as a proportion of vacancies 15% 23% Hard-to-fill vacancies as a proportion of employment 0.3% 0.5%
SKILLS SHORTAGE VACANCIES Number of skills shortage vacancies 6,300 103,500 Proportion of establishments with skills shortage vacancies 2% 3% Skills shortage vacancies as a proportion of all vacancies 10% 16% Skills shortage vacancies as a proportion of hard-to-fill vacancies 65% 72%
SKILLS GAPS Number of skills gaps 229,700 1,489,500 Proportion of establishments with skills gaps 17% 13% Skills gaps as a proportion of employment 7% 5%
Source: People 1st analysis of the Employer Skills Survey, 2011, UK Commission for Employment and Skills Ev 134 Business, Innovation and Skills Committee: Evidence
7.21 The key skills lacking in applicants are those specific to the job (mentioned by 56% of employers with skills shortage vacancies), planning and organisational skills (44 %) and customer handling skills (44 %). At a higher level, strategic management skills (40 %) are also lacking and as the sector continues to experience structural changes these are likely to remain a requirement. Skills gaps within the workforce were most often attributed to staff being new to the role (said by 54% of employers reporting skills gaps) and to staff training having only partially been completed (53%). These suggest the reasons for skills gaps are associated with high staff turnover. 7.22 It is likely, based on the customer trends People 1st found in their research, that increasing expectations around the level of customer service skills, together with an increasing amount of technology skills, will be important future skills needs within retail across both management and sales and customer service occupations. The recent 2012 Sector Skills Insight report for retail said “Staff in intermediate level positions will increasingly need to apply their skills in a more technology intensive, customer friendly environment which is likely to drive up skills requirements in a range of retail sector jobs”.
Management of Retail Sector Skills 7.23 Businesses can work with their Sector Skills Council (SSC) where they want to develop solutions to tackle skills issues affecting their sector (including through EOP where appropriate). SSCs have been refocused to lead collective action on behalf of groups of employers. Through the Growth and Innovation Fund and the Employer Investment fund, Government has supported a range of projects to deliver greater employer investment and tackle specific skills issues affecting sectors. SSCs are licensed by the UK Commission for Employment and Skills. 7.24 Skillsmart Retail was the Sector Skills Council for Retail until Autumn 2012. Skillsmart was not successful after changes to SSC funding—the move from core Government funding to contestable funding— and the Board of Skillsmart Retail therefore agreed an orderly wind-down of the Sector Skills Council. 7.25 People 1st became the Standards Setting Body for the retail sector on 1 October 2012 following the closure of Skillsmart Retail. This part of People 1st trades as Skillsmart Retail UK limited. It is responsible for overseeing National Occupational Standards for the retail sector, certificating Apprenticeships, and issuing Apprenticeship Frameworks. It also took on responsibility for the National Skills Academy for Retail (NSAR). 7.26 Since October 2012, People 1st has been working with employers to understand their needs. The second round of the Employer Ownership Fund has given the opportunity to look afresh at the strategic support retailers require, and several employers are supporting a bid to create an Industrial Partnership for the tourism and visitor economy, of which retail is one of four key sectors. If successful, the outline bid would enable People 1st to engage the sector on a wider basis to fully scope up the bid and galvanise interest. 7.27 People 1st has successfully bid into the UKCES Universal Services fund to develop National Occupational Standards and apprenticeship frameworks to include content to equip staff and managers to address the skills needs to support multichannel retailing. It has also been supporting the development of a higher apprenticeship in retail that is being taken forward by Newham College and has been looking at the apprenticeship frameworks in retail and whether they are sufficiently robust enough to support progression pathways.
National Skills Academy for Retail (NSAR) 7.28 National Skills Academies (NSA) work with Sector Skills Council and other industry bodies to drive change and achieve the priorities identified by employers. They act as a first point of contact for employers to training provision. They operate through colleges, universities, training providers and schools to deliver specialised skills to employees and learners to respond to employers’ business needs. 7.29 The NSA for Retail was established in 2008 and received government development funding for the first three years of its operation. Since 2011, the NSAR has been self-sustaining. It runs and delivers a range of learning opportunities focused on employees and employers in the retail sector through its partnership network of 53 retail skills shops. 7.30 Skills shops are located in major retail centres across the country such as Bluewater, Westfield Stratford City, and Meadowhall. They comprise local partnerships of retail stakeholders such as shopping centres, town centre management, local authorities and retailers. They provide specialist training provision for retailers such as: — Pre-employment training for people seeking to work in retail; — WorldHost customer service training; — Guide to Successful Retailing—business courses aimed at SMEs; and — Work-based learning including Apprenticeships. 7.31 It also provides a business mentoring service for small retailers and a successful retail ambassador programme aimed at attracting young people to careers in retail. Business, Innovation and Skills Committee: Evidence Ev 135
7.32 The NSAR has established a Retail Apprenticeship Scheme, delivering training through the skills shops network supported by a dedicated national Retail Apprenticeship Training Agency (RATA). RATA launches in May 2013 and has two key aims: to assist SME retailers who might otherwise not be able to employ an Apprentice; and to provide a route for young people seeking careers in the retail sector. 7.33 In November 2012 the NSAR, in association with People 1st and the Hospitality Guild, successfully bid for £500,000 to develop an innovation centre of excellence in North London. This will provide a central facility for the service industry to drive customer service and skills training across the retail and hospitality sectors. The Centre is planned to open in summer 2013. 7.34 The NSAR Skill Shops support local retail and hospitality employers to recruit and train staff. They have a very positive track record in getting people into work through the People 1st, Employment 1st, and Retail Works pre-employment programmes (on average, a 49% success rate). Qualification Frameworks have been developed under this (see Annex B).
Employer Ownership Pilots (EOP) Round 1 and 2 7.35 In EOP Round one, the NSAR was a partner in a successful bid led by the Midlands Co-operative society on behalf of a consortium of retail employers and retail trade associations to create new programmes aimed at supporting new employment opportunities for young people and business growth. The programmes will benefit up to 30,000 learners in 7,000 businesses who will receive specialized training and Apprenticeship opportunities. 7.36 In round two, an outline bid for an Industrial Partnership (IP) is being submitted by employers with support from People 1st and over 100 employers across the tourism and visitor economy sector. The IP is seen by employers as a move from being a consumer to them taking responsibility as they work with government and suppliers. 7.37 As part of the bid, employers are working with local partners in Kent and Gloucestershire to pilot how the sector can increase its impact locally to support regeneration and town centre renewal. Gloucestershire LEP (Retail Pathfinder) is bringing together a major employer with Gloucester University and the NSAR skill shop to up-skill and help progression in local retail. 7.38 If the bid is successful, the aim is to engage more local areas which have already shown interest at the outline stage and to galvanise more employers to support and commit to help take forward the Industrial Partnership. Ev 136 Business, Innovation and Skills Committee: Evidence
Annex A UK RETAIL SECTOR AN ECONOMIC OVERVIEW APRIL 2013 Contribution Of Retail To The UK Economy Size and definition of the UK retail sector 1. Retail is a key sector of the UK economy. In 2011, the sector generated around £71 billion in gross value added (GVA), representing around 5% of the total UK economy. It also employed over three million people, representing around 10% of the UK workforce. 2. Retail sales in non-specialised stores (ie supermarkets) and retail sale of other goods in specialised stores (eg clothing and footwear) are the largest sub-sectors accounting for nearly 75% of total GVA and employment in the UK retail sector in 2011 (see Chart 1 below).
Chart 1 Share of sub-sectors to total retail GVA and employment, 2011
46.1% Retail sale in non-specialised stores 41.6%
28.4% Retail sale of other goods in specialised stores 31.5%
8.4% Retail sale of other household equipment in specialised stores 9.3%
5.6% Retail sale of food, beverages and tobacco in specialised stores 4.9%
3.3% Retail trade not in stores, stalls or markets 4.7%
5.2% Retail sale of cultural and recreation goods in specialised stores 4.2%
1.6% Retail sale of automotive fuel in specialised strores 2.7% % of Retail Employment % of Retail GVA Retail sale of information and communication equipment in 1.3% specialised stores 1.0%
0.2% Retail sale via stalls and markets 0.1%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Source: BIS analysis of ONS Annual Business Survey data 2011 3. Much of retail trade is still conducted through physical stores. Retailers following what is referred to as a “brick and mortar” business model approach may base their operations in different locations including town centres (eg high streets), out-of town shopping centres and retail parks as well as more localised neighbourhood shopping precincts in inner city and suburban areas). 4. The retail trade is, however, also being increasing conducted through so-called multi-channel business models which do not involve a physical presence such as via mail order and the internet. In 2011, retail sales classified as not in stores, stalls or markets accounted for nearly 5% of total retail GVA and over 3% of total retail employment.
Retail and the wider economy 5. Retailing is also closely linked with other sectors of the economy. These include various manufacturing industries (eg food and drink, clothing and footwear, and electronic and electrical equipment), wholesale distribution and the wider logistics sector which includes freight transport, support services for transportation (eg cargo handling), as well as warehousing and storage. 6. The retail sector also forms part of the wider high street economy which includes services-related activities such as food and restaurant outlets, real estate, recreational and cultural activities (eg cinemas and theatres and leisure facilities) and public amenities (eg post offices and libraries). Business, Innovation and Skills Committee: Evidence Ev 137
Economic performance of the UK retail sector Gross Value Added (GVA) 7. Retail gross value added has increased steadily in real terms between 1997 and 2011, rising from around £46 billion to £67 billion, representing real growth of nearly 50%. This reflects the significant increase in final consumption expenditure by UK households during this period financed in part by various factors including higher real disposable incomes, rising property prices, a lower rate of saving, and increased private debt. As Chart 2 shows below, retail trade was one of the main contributors to nominal UK growth between 2000 and 2011.
Chart 2 SECTOR CONTRIBUTIONS TO NOMINAL UK GROWTH (2000–11) Financial intermediation Professional and Business Services Health and social work Construction Education Public adminstration and defence Retail trade Wholesale trade Community social and personal services Mining Transport and storage Utilities Hotels and restaurants Real estate Motor trade Chemicals includeing pharmaceuticals Food beverages and tobacco Post and telecommunications Machinery Metals and metal products Publishing Agriculture Mineral products Transport equipment Textiles and clothing Rubber and plastic Electrical and optical equipment -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
Source: ONS National Accounts data Note: This analysis does not capture the importance of those sectors which enable and stimulate growth indirectly (eg transport investments that lead to agglomeration benefits, or those that improve productive capacity through delivering resource efficiency). Ev 138 Business, Innovation and Skills Committee: Evidence
Employment and skills 8. Retail is comparatively more labour intensive than other sectors of the UK economy. A high proportion of the labour force are women who work part time (see Chart 3 below) while a third of employees are under 25 years of age.49
Chart 3 NUMBER OF EMPLOYEES IN UK RETAIL SECTOR, BY GENDER AND HOURS WORKED (000S), 2000–12 1,400
1,200
1,000
800
600 Employee Jobs 000s 400
200
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Male FT Male PT Female FT Female PT
Source: ONS Employee Jobs 9. Over a third of retail employees have a NVQ level 3 or higher qualification.50 Many retail jobs have a clear customer-focus with around 50% of retail staff employed in sales and customer service occupations. Around 20% of employees in the sector are classified as managers.51
Productivity 10. Productivity is a measure of how efficiently various inputs (labour, capital, knowledge, technology etc) are being used to produce goods and services. The two measures most commonly used are labour productivity and total factor productivity.52
49 Source: Skillsmart 50 Source: Skillsmart 51 Source: Skillsmart 52 Labour productivity measures the average level of output per worker or hour worked. Total factor productivity (TFP) measures the increase in output over and above that which can be accounted for by increases in inputs. TFP therefore measures the efficiency with which inputs are combined in the production process to generate outputs through better use of innovation, organisational structures and technology. Business, Innovation and Skills Committee: Evidence Ev 139
11. Productivity in the retail sector is difficult to measure. This is because the main outputs are not simply the goods which are obtained from wholesalers and producers and then sold to the final consumer. Rather, it is a bundled product which includes value added associated services such as sourcing, displaying and selling those goods.53 According to ONS figures, labour productivity growth in the wholesale and retail sector has performed comparatively better than many other sectors of the UK economy since 2000 (see Chart 4 below). Using growth accounting techniques, it is possible to attribute labour productivity growth in the retail sector to investment in ICT and non-ICT capital and also improvements in the quality of the workforce.54
Chart 4 AVERAGE UK LABOUR PRODUCTIVITY GROWTH (2000–11) 12.0%
10.0%
8.0% 2000-2008 2008-2011
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0% ion
vices Fuels
-6.0% Textiles
Publishing
Chemicals
Real Estate Real
Food & Drink & Food
nd Recreation nd
Metal Products Metal
Other Services Other
Rubber & Plastic & Rubber
Electircal Products Electircal
Wholesale & Retail & Wholesale
Transport & Storage & Transport
Telecommunications
Transport Equipment Transport
Professional Services Professional
Government Services Government
Machinery & Equipment & Machinery
Finanical Intermediation Finanical
Hotels & Accommodat & Hotels
Admin & Support Ser Support & Admin
Arts, Entertainment a Entertainment Arts,
Source: BIS analysis of ONS productivity statistics
53 Productivity Commission, Australian Government, “Economic Structure and Performance of the Australian Retail Industry” 54 BIS analysis of EUKlems productivity database. Ev 140 Business, Innovation and Skills Committee: Evidence
12. Productivity level comparisons are often problematic owing to difficulties in measuring both labour inputs and total outputs in the retail sector. The best available analysis from the OECD, however, suggests that the UK wholesale and retail sector performed more strongly than its international peers between 2000 and 2007 both in terms of labour productivity growth, and total factor productivity growth (see Chart 5 below).
Chart 5 AVERAGE ANNUAL LABOUR AND MULTI-FACTOR PRODUCTIVITY GROWTH (2000–07) 4.0%
3.5% Labour productivity growth
3.0% Multi-factor productivity growth
2.5%
2.0%
1.5%
1.0%
0.5%
0.0% UK Germany USA France
Source: OECD productivity database
Exports and foreign investment 13. Retail services are by convention not highly tradeable. That said, there is significant foreign direct investment by UK retailers in overseas markets. In 2011, the UK wholesale and retail sector invested around £36.8 billion in outward FDI. Around 80% of this was in European countries with around 10% each in American and Asian markets.55
55 ONS Foreign Direct Investment statistics Business, Innovation and Skills Committee: Evidence Ev 141
14. According to the latest Deloitte survey, there were 15 UK companies in the global top 250 retailers list in 2011, accounting for over 6% of total retail revenue generated (see Chart 6 below). US retailers have the greatest presence in the global top 250 accounting for around 30% of companies in the top 250 and 40% of total retail revenue generated.56
Chart 6 SHARE OF UK RETAILERS, BY NUMBER OF COMPANIES AND RETAIL REVENUE IN GLOBAL TOP 250 LIST, 2011
US
Germany Share of top 250 retail companies, by retail revenue Japan Share of top 250 retail companies, by country UK
France
01020304050
Source: Deloitte (2013) Global powers of retailing 2013: retail beyond
Structure And Dynamics Of The UK Retail Sector Competition and industry structure 15. The retail sector has become increasingly concentrated in recent years with a smaller number of players accounting for a large share of the market. This has particularly been the case in the non-specialist sector where, as a result of merger and acquisition activity in the early 2000s, the four largest supermarkets now together account for nearly 80% of total retail sales.57 16. Despite the concentrated nature of the market, competition remains strong. While the comparatively greater size and scale of the larger players may provide them with a cost advantage over their competitors, their ability to behave in a monopolistic fashion is greatly reduced by virtue of the fact that in many cases there is close product substitution between chains and brands of similar products. The competitive advantage of larger players may also be reduced because smaller, more independent shops have specialised in niche markets and are providing more personalised customer service which larger retailers are less able to offer. 17. The nature and severity of the barriers to entry will vary across the different retail sub-sectors. In some instances, there may be specific regulations which restrict the number and type of retailers which can operate in a particular geographical location (eg pharmacists and betting shops). The availability of land and planning permission may also act as a restraint on market entry particularly for larger retailers and supermarkets.58 18. The existence of sunk costs—ie fixed costs which cannot be recouped upon exit—may act as a further deterrent to market entry. Larger retailers and supermarkets may be able to benefit from economies of scale and scope associated with floor space, logistics, distribution, store networks and bargaining power which smaller or independent stores cannot as easily exploit and pass onto their customers in the form of lower prices or greater consumer choice.59 19. Advertising, goodwill and loyalty may also act as a deterrent to market entry. Incumbent retailers may have established a strong reputation and brand which customers trust as well as a strong track record of quality and delivery and customer service. This may make it difficult for potential new retailers to enter the market as significant resources would likely need to be invested in advertising and marketing in order to establish a firm 56 Deloitte (2013) Global Powers of retailing 2013: retail beyond http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/ Documents/Industries/Consumer%20business/Deloitte_Global_Powers_of_Retail_2013.pdf 57 Kantar WorldPanel 58 OFT (1997) Competition in Retailing. Research Paper. 59 OFT (1997) Competition in Retailing. Research Paper. Ev 142 Business, Innovation and Skills Committee: Evidence
presence.60 This is supported by the finding from the 2011 UK Community Innovation Survey which shows that marketing accounts for a relatively greater share of innovation expenditure by retailers compared to the economy as a whole.61
Innovation and changing business models 20. The three most commonly cited motives for innovation given by UK retailers are to improve the quality of goods and services, increase the range of products available to customers and to grow market share. 21. Innovation in the UK retail sector has taken the form of changing business models and strategies which add value and diversity to the goods and services offered to the consumer and meet growing demand for improved shopping experience, particularly with respect to convenience and quality of customer service. 22. A growing trend among UK retailers, which in part has been facilitated by recent technology developments, is the shift towards new multi-channel retailing business models. 23. Multi-channel retail is the activity of selling retail goods and services and fulfilling orders over more than one channel, including physical store retail, online commerce, telephone and catalogue selling. In essence the retailer offers goods and services in more than the traditional “physical” space. Choosing, purchasing and receiving are increasingly being integrated in a seamless experience. Customers can perform different parts of the buying process in different channel combinations to suit their needs and preferences, such as browse a retailer’s store, place the order online, track by mobile and receive package with home delivery.
E-commerce 24. E-commerce relates to the purchase and sale of goods and services over the internet and can also form part of the multi-channel business model whereby retailers use more than one channel to sell goods and services. Increasingly e-commerce is broadening to include mobile or “m-commerce” involving the use of mobile devices for shopping. Consumers will increasingly use a multi channel approach to buying goods and services. Approximately three-quarters of UK e-commerce is classified as Business-to-Business (B2B) with the remainder Business-to-Consumer (B2C). 25. According to the OECD, the UK had the highest share of individuals of all OECD countries who ordered or purchased goods or services on the internet in 2011 (around 64%).62 In 2012, internet retail sales amounted to £29.0 billion, representing around 9.3% of total retail sales in the UK. 26. The rapid growth of e-commerce can be attributed to supply and demand-side factors. On the supply- side, firms are using recent advances in the area of information and communication technology to adapt their business models in response to increasing competitive pressures and rising operating costs. On the demand- side, consumers are becoming more sophisticated, are often time constrained and find e-commerce retailers appealing because they offer a wider range of goods and services compared with the high street. Such retailers may also be able to offer lower prices owing to lower overheads. Furthermore the cost to the consumer in terms of searching for a product is lower online. 27. There are three broad reasons for the growth in e-commerce. First, the success of product sales by e- commerce can be argued to be partly dependent on the existence of physical stores which provide potential customers with an opportunity to test new brands and products before purchasing them online. Second, some goods and services may be less amenable to e-commerce, particularly those which are more exclusive, customised and perishable. For example, compared to books where 80% of total expenditure in 2013 is expected to be on-line, the corresponding figure for health and beauty products is significantly lower at around 5–6% (Verdict Research, “E-retail in the UK 2012”, 2012). Third, a significant proportion of UK households are reported to have never used the internet for shopping. While the proportion of households using the internet for shopping may well increase over time it is possible that there could be a limit on the extent to which e- commerce will replace physical stores as the main retailing channel for purchasing goods and services. 28. Overall, the extent to which high street retailers selling certain goods and services are sustainable may in part be dependent on how well they adapt to the new multi channel retail environment most consumers increasingly value. Those retailers that satisfy such demand are likely to have a bright future. E-commerce which allows retailers to reach new customers from and a wider catchment area should be seen not just as a challenge but also an opportunity.
Barriers To Growth Business environment 29. There may be issues around the quality of the public realm and supporting infrastructure. For example, retail activity in the high street may be negatively affected if people perceive the area to be unsafe (eg crime, vandalism and other forms of anti-social behaviour), discouraging them from visiting it. 60 OFT (1997) Competition in Retailing. Research Paper. 61 Source: 2011 UK Community Innovation Survey. 62 OECD, “Internet Economy Outlook 2012”, 2012 Business, Innovation and Skills Committee: Evidence Ev 143
30. Retail activity may be further hampered by the existence of co-ordination failure at the local level whereby desired improvements to the public realm is hampered because planning and transport policy are not co-ordinated or there are weak incentives for local authorities and business to collaborate on local developments. Co-ordination failures could lead to issues such as poor supply/proximity/cost of car parking, traffic congestion and mobility/accessibility not being effectively addressed. 31. Utility and transportation costs incurred by retailers could rise in the future as a result of increasing demand for fuel from emerging markets leading to higher international prices. The possibility of higher and more volatile prices increases uncertainty around future retailer’s costs in the short to medium, potentially hampering further growth.63
Overseas trade and investment 32. “The OECD”64 identifies two key barriers to the overseas expansion of retail companies: regulatory barriers and institutional, cultural and organisational barriers (eg ability to adapt to the culture of new markets, develop local supply capacity, and adopt local business and cultural practices. 33. Middle tier UK retail firms are competitive and dynamic in the UK. Those in the top 250 grew faster between 2003 and 2008 than those in competitor countries. It has been suggested that some may lack the knowledge to overcome barriers to international expansion, specifically in terms of researching/identifying suitable markets, local expertise and contacts, familiarity with local regulations and distribution arrangements and advice on potential local partners. Retail companies with different organisational capabilities and cultures differ considerably in the extent to which they are prepared to invest in and achieve business strategies that will be successful in local markets. Those willing to adapt their business models and incorporate new ideas and approaches are more likely to be successful in gaining a foothold in a new market.
Trends And Drivers Of Change Recent consumption patterns 34. Since the recession, consumer spending has fallen back as a result of various factors including: wage restraint, persistent price inflation, the tightening of credit, the implementation of austerity measures such as increasing taxes (VAT); increased fears over unemployment and efforts by households to reduce personal overindebtedness.
63 Total operating costs totalled some £328 billion in 2011 (Source: ONS Annual Business Survey). Purchases accounted for around £273 billion, the overwhelming majority of which related to purchases of goods and services for resale accounted for around 80% of the total cost. Purchases of utilities and transportation costs accounted for a very small share of total retailers’ operating costs. Retailers paid £8.1 billion in local and national taxes, duties and levies, excluding VAT and £41.8 billion employment costs such as wages, salaries and social security payments (Source: ONS Annual Business Survey). VAT paid by the retail sector totalled around £5 billion in 2010 (Source: HMRC statistics). 64 The Globalization of Trade in Retail Services, 2010. Ev 144 Business, Innovation and Skills Committee: Evidence
35. The impact has varied across the retail sector as shown in Chart 7 below. Sub-sectors specialising in the retail of necessity and discounted goods and services have fared better than those sub-sectors involved in the retail of luxury or non-essential items (eg recreational services and ICT equipment). This reflects in part a consumer “shift to thrift”, as 84% of consumers now report that price is very important when choosing which stores to shop at. This change in consumption patterns has led to a rise in value based retailers and discount chains, promotional offers offered by retailers and the shift to online shopping where price discounts are often greater (KPMG).
Chart 7 CHANGE IN GROSS VALUE ADDED IN UK RETAIL SECTOR, BY SEGMENT (2008–11) CURRENT PRICES
Retail sale of automotive fuel in specialised stores 134%
Retail sale in non-specialised stores 12%
Retail sale of food, beverages and tobacco in specialised stores 4%
Retail sale of other goods in specialised stores 4%
Retail trade not in stores, stalls or markets -2%
Retail sale of other household equipment in specialised stores -4%
Retail sale of cultural and recreation goods in specialised stores -6%
Retail sale via stalls and markets -9%
Retail sale of information and communication -48% equipment in specialised stores
-100% -50% 0% 50% 100% 150%
Source: ONS Annual Business Survey
Future consumption trends 36. Future consumption patterns both will be influenced by a number of economic, social, technological, demographic and environmental drivers. The main factors are as follows: Business, Innovation and Skills Committee: Evidence Ev 145
Rising incomes
37. In the longer term, household incomes are likely to rise leading to higher levels of consumer spending with a further shift towards more luxury, high quality end of market. Sectors associated with the sale of high value household and ICT equipment and cultural and recreational goods and services are likely to be the main beneficiaries from rising incomes (see Chart 8 below).
Chart 8
PERCENTAGE CHANGE IN CONSUMER SPENDING FOLLOWING A 10% INCREASE IN UK HOUSEHOLD INCOME
Housing and utilities (22.1%) Alcohol and tobacco (3.6%) Food (9.6%) Education (1.5%) Heath (1.6%) Clothing (5.4%) Communications (2.1%) Restaurants and hotels (10.1%) Recreation (11.3%) Furnishing (5%) Transport (14.3%) Miscellaneous (12.2%)
0246810121416
Source: PWC (2011)
38. UK consumers will continue to become more demanding, with an increasing premium on convenience consumption (where the receipt of the product requires little time), experience consumption (a desire for more than just a product to be supplied in a different way) and market segmentation (where consumption reflects the self-identify of individuals and groups, increasing the importance of brands, labels and marketing.
Demographic/lifestyle change
39. The UK population is continuing to age. The ONS projects that by 2033 there will be around 20.5m people aged over 60, representing nearly 29% of the UK population. This could lead to an increase in consumer demand for food and drink, health and recreational and cultural services as older households tend to allocate a greater share of their budget on these goods and services compared to younger households.65
40. At the same time, lifestyles are also changing with many people working longer hours than before and more women entering the labour market working part time hours. This will lead to increased consumer demand for a greater choice of high quality goods and services which can be purchased and delivered quickly. With people working longer hours, there is also likely to be a greater need for shops to be open later.
Technological advancements in information and communication technologies
41. There have been significant developments in recent years in the areas of information and communication technology. First, there has been major private and public investment in broadband infrastructure which has greatly improved speed and connectivity, particularly of mobile broadband. There has also been major progress in mobile technology with the rapid emergence of more sophisticated devices including smartphones and tablets.
42. Ongoing technological improvements in mobile broadband and devices is likely to bring about further changes in consumer and business behaviour who are increasing using the internet on the move, including for shopping purposes, and making use of social networking sites to communicate with others. This is contributing to increased consumer demand for greater choice, convenience and quality of service. 65 BIS analysis of household expenditure survey data Ev 146 Business, Innovation and Skills Committee: Evidence
43. In order to remain competitive, retailers will need to continue to adapt their business models to meet the demand of an increasing sophisticated and mobile customer base. Investment in online commerce has outpaced store investment for second consecutive year according to a survey of 150 top UK retailers representing 70% of UK retail market66 as internet connectivity become ever more widespread and technology usability better.
Globalisation and international trade 44. The strong globally-recognised corporate brands developed by a number of UK retailers provide them with an international competitive advantage which they can use to gain a foothold in overseas markets. Further globalisation and trade liberalisation at the European and international level will therefore provide many UK retailers with opportunities to enter new overseas markets or expand operation in existing ones. 45. At the European level, UK retailers are well place to benefit from further steps to create a better functioning single for retail services. UK leadership in European online commerce and trendsetting in the wider retail sector means that UK retailers are also well placed to benefit from new steps to create a digital single market in the EU. 46. UK retailers and also likely to benefit from increased demand in emerging markets for higher value products in the areas of food, fast-moving consumer goods, household and leisure goods and fashion. This demand will continue to be driven by further growth in the middle class in these countries who will wish to use their rising disposable incomes to purchase more luxurious and better quality products and brands.67 This is especially true in BRIC countries, where demand for luxury goods is a very high growth industry and British brands have strong association with quality.
Annex B RETAIL QUALIFICATIONS FRAMEWORK Retail Knowledge Retail Skills Level 1,2&3 Retail Apprenticeships Award/Certificate/Diploma Level 1,2&3 Foundation Degree in Retailing Level 2 and 3 Funeral Operations and Services Level 4/5 Licence to Trade Qualifications Level 2 and 3 Awards in Food Safety Award in Underage Sales Prevention level 2/3 Getting in to Retail Qualifications Award/Certificate/Diploma in Fashion Retail Diploma in Buying and Merchandising level 2 and 3 Diploma in Visual Merchandising level 4 Retail Knowledge level 4
APPRENTICESHIPS: RETAIL BREAKDOWN OF CERTIFICATES ISSUED Framework Numbers Certificated Retail Intermediate includes 4,985 Sales Assistant Stockroom Assistant
Retail Specialist Intermediate includes 13,048 Beauty Consultant Visual Merchandising Fresh Food Counter Assistant Sales Assistant (Builders Merchants)
Retail Management Advanced includes 1,168 Retail Supervisor/team Leader Department Manager Store Manager (small Outlet)
Retail Sales Professional Advanced includes 820 Senior Sales Assistant Craft Expert (eg Bakery) Style Advisor Senior Sales Assistant (Garden Centres)
66 Martec International, “IT in Retail 2013”, 2013; quoted in Guardian; http://www.guardian.co.uk/media-network/media-network- blog/2013/feb/26/changing-face-ecommerce-online-retail 67 BIS, “UK trade performance across markets and sectors”, 2012 Business, Innovation and Skills Committee: Evidence Ev 147
Framework Numbers Certificated Retail Visual Merchandiser Advanced includes 60 Supervisor Senior Supervisor Garden Centres
Total Certificates Issued 20,081
In addition, two frameworks have been developed that were issued in October 2012: — Intermediate Funeral Operations and Services. — Advanced Funeral Operations and Services.
Annex C A SELECTION OF RECENT GOOD NEWS STORIES ON RETAIL Since Christmas 2012… — The £1 billion Whitgift Centre redevelopment in Croydon is going ahead, and will create 5,000 jobs. — The city centre Trinity Leeds development is one of the largest shopping and leisure centres in Europe. On opening in March 2013 it had 130,000 visitors. — Waitrose continues to expand, including rollout or its new “Little Waitrose” format rolling out. — HMV was bought out of administration saving 141 stores across the country. — Argos celebrated its best performance for five years. — Morrisons acquired over 70 former Blockbuster, HMV and Jessops sites to roll out its “M Local” format. They plan to add 2m sq ft of new space over the next three years. — Camera Retailer Jessops, which closed in January, has returned to the high street and the internet as a multi channel retailer with plans to expand. — Lakeland Limited plans to expand from 60 outlets to 100 over the next five years. — Discount supermarkets continue to grow and gain market share, with Aldi and Lidl opening 90 stores between them in 2013. — Sports Direct, John Lewis, Hobbs and Urban Outfitters all celebrated double digit sales growth in 2012. — Sainsbury’s is providing permanent jobs for 2,300 workers hired over the Christmas period. — John Lewis is investing £57 million in 2013 on Department Store refurbishments. Note: This is to provide a flavour of retail good news reported in the national press in recent months, and of course we cannot capture all stories. The inclusion or non-inclusion of particular retailers should not be taken as representing a value judgment by BIS, or as endorsement or otherwise of individual organisations.
Supplementary written evidence from Rt Hon Michael Fallon MP, Minister of State for Business and Enterprise During my appearance before the BIS Select Committee for Retail on 29 October, I undertook to write on some of the points raised. First, Nadhim Zahawi asked me to explain the demise of Skillsmart Retail. The UK Commission for Employment and Skills moved away from providing Sector Skills Councils with equal share core funding to a contestable funding model from 1 April 2011. This move to a contestable funding model exposed those Sector Skills Councils who had failed to gain the support of the employers in their sector and were financially non- viable. Skillsmart Retail fell into this category and after exploring a range of options, including with the National Retail Consortium, their Board agreed that they could no longer meet the criteria set for a licensed Sector Skills Council. The UK Commission for Employment and Skills undertook an extensive consultation process with employers and key stakeholders to establish if any other party or grouping of employers in the sector were willing to take over their role. No-one within the retail sector stepped forward. Recognising the value of retail to the economy, the UK Commission for Employment and Skills arranged for the sector to be added to the footprint of People 1st Sector Skills Council, responsible for hospitality, passenger transport, travel and tourism in the UK. This arrangement is working well. Both the Commission and BIS continue to have a strong relationship with both the National Skills Academy for Retail, and People 1st on retail skills priorities. About the level of success that retail bids have had in the Employer Ownership Pilot (EOP) scheme, you asked if there were any successful retail bids. I can confirm there have indeed been successful EOP bids from the retail sector including a collaborative Round one bid led by Midland Co-operative. They aim to develop a programme of industry recognised, bespoke and accredited learning with clear progression routes to deliver Ev 148 Business, Innovation and Skills Committee: Evidence
Apprenticeships and to support SMEs across the sector. EOP funding is directly supporting the development of skills that are so important for the future of the retail sector in the UK. As I said during my evidence to the committee, we received a large number of high quality bids, and all applications that met the quality threshold were considered for investment. In round two the funding pot was six times oversubscribed. A number of bidders from the retail sector were progressed to the next stage of the process and will enter the grant negotiation/development phase.
I was also asked whether the Employer Ownership Pilot is more geared towards manufacturing, rather than addressing skills needs in areas such as retail. While it is true that the government has identified priority sectors and has developed industrial strategies for them, EOP is a competitive fund that was not intended to be targeted at specific sectors. No particular sector got preferential treatment by virtue of being an industrial strategy sector in itself, and the selection of bids was entirely based on how they scored on the key quality criteria.
Lastly Katy Clarke asked an interesting question on digital skills. We are working with stakeholders across Government, industry and skills providers to join up activities that are driving digital skills uptake. For example, we are setting up a digital skills working group to bring together all the sector skills bodies that have similar digital skills and qualifications issues.
The Information Economy Strategy, which was published in June, presented a vision for a thriving UK information economy that enhances national competiveness and supports growth. One of the main priorities was to address the digital skills gap by bringing together the supply and demand side of education and skills provision to develop solutions. To ensure that government and business work in partnership to deliver the strategy, an Information Economy Council has been set up with membership drawn from Government, industry and academia. The Council has established three industry-led working groups to implement the strategy including one focussed on Skills and Capability.
“A Strategy for Future Retail” published in October 2013 commits us to work with the sector to ensure greater collaboration and coordination of digital skills initiatives for retail, including exploring how best to ensure that these are aligned with and complementary to the digital skills elements of the Information Economy Strategy. Discussions are already under way with, amongst others, the British Retail Consortium and the National Skills Academy for Retail (NSAR).
As well as existing employer-led activities, other initiatives include the rollout of revised retail qualifications incorporating skills for multichannel, and the joint NSAR/Association of Town & City Management digital high street road shows in 2014 (which will advise retailers and high street businesses on opportunities for digital skills training and the benefits of e-commerce).
I hope I have satisfactorily answered the questions raised by the Committee and I look forward to meeting with you again in the future. 11 November 2013
Written evidence submitted by the Association of Convenience Stores
ACS (the Association of Convenience Stores) welcomes the opportunity to give evidence to the Business, Innovation and Skills Select Committee Inquiry on the UK Retail Sector. ACS represents 33,500 local shops across the country including the Co-operative Group, Spar, Costcutter, Londis and thousands of independent retailers.
There are nearly 50,000 convenience stores in the UK, generating over £33.9 billion in sales and contributing over 372,000 jobs. The convenience sector is in growth, outperforming the rest of the grocery market. The market is highly entrepreneurial, still predominantly made up of independent small businesses who account for 77% of all the stores in the country, everyday entrepreneurs working at the heart of communities. ACS’ Voice of Local Shops Survey68 shows that retailers regularly participate in community or charitable activity with 72% collecting money for charity and 34% provide support or funding for community events.
However the sector is also going through a period of significant change. Significant new entry especially by the supermarket companies is taking place alongside on going decline in the overall number of stores in the market.
ACS views on the issues under consideration in this Inquiry can be summarised as follows: — BIS Retail Strategy—ACS supports the BIS Retail Strategy and agrees with its objectives in terms of driving better regulation, knowledge transfer and promoting action on retail to Local Enterprise Partnerships. The Retail Strategy covers issues directly within the remit of BIS, but should be a cross Government strategy. As a consequence it fails to tackle policy issues of fundamental importance to future of retail. 68 ACS Voice of Local Shops Survey Feb 2013 Business, Innovation and Skills Committee: Evidence Ev 149
— Portas Review—The Portas Review is a positive initiative that made a series of important recommendations and should be implemented by Government in full. The Government’s performance in delivering against the recommendations of the Portas Review has been unconvincing. They have focused too heavily on best practice initiatives such as Portas Pilots and not enough on the hard policy recommendations. We welcome the formation of the Future High Streets Forum and will work with the forum to promote policy interventions that will make a real difference to high streets.
— Regulations and Costs affecting the Sector—ACS has identified Planning Policy, business rates, parking, employment and energy costs as priority areas for action. Action in these areas is needed urgently as set out below.
BIS Retail Strategy
ACS supports the Retail Strategy developed by the Department for Business, Innovation and Skills (BIS). ACS was consulted fully on its content and is closely engaged in the delivery of its objectives.
The strategy identifies objectives and priorities at international, national and local level. ACS recognises the important role for Government in helping retailers to access markets across Europe and the wider world. However for ACS the priority is supporting the delivering of the strategic objectives identified at the national and local level and our comments are limited to these elements. These are:
— Better Enforcement of Regulation
The core role for BIS is to champion better regulation both through programmes to reduce the burden of existing regulation such as the “Red Tape Challenge” and, crucially, through challenging policy development across Whitehall on new regulatory burdens. The Strategy could be more explicit about the role that BIS has to play in championing better regulation for retail across Government.
The Strategy rightly identifies that regulatory burdens are often resultant not from the regulation itself but from inconsistent or inappropriate enforcement. Retailers are particularly susceptible to this burden as they are subjected to enforcement from a number of different agencies in many different locations. The Primary Authority initiative is a vital forward step, in delivering consistency for retail businesses. BIS is right to prioritise the expansion of this scheme.
— Transfer of Knowledge
ACS strongly endorses the role that BIS can play in helping in the exchange and transfer of knowledge. ACS has directly benefitted from the facilitation that BIS provided in developing a joint research project with Said Business School, University of Oxford. The result is a project that provides significant new evidence about the social and economic value of local shops69 and a toolkit for retailers on how to maximise the value of community engagement. ACS is also delivering a Global Summit in conjunction with the Economic and Social Research Council (ESRC) to bring together retailers and academics thinkers from across the globe to discuss and address emerging trends and threat in the convenience retail sector.
— Local Enterprise Partnerships
BIS have rightly identified the opportunity for promoting growth and innovation in the retail sector at the local level through Local Enterprise Partnerships (LEPs). ACS is fully supportive of the partnership between BIS and the Gloucestershire LEP and is keen to see the outcomes of the partnership as a model of best practice to be used by other LEPs across the country.
It is important that BIS has a Retail Strategy and it sets important objectives and is a focal point to reassure retailers that there is awareness in Government about the contribution of retail to the wider economy. However the Strategy does not in itself set a direction for intervention in the most important policy issues facing the retail sector that will shape the future of retail in the UK.
ACS urges the Committee to consider the impact of policy in a context wider than that which is included in the BIS Retail Strategy. In particular to consider the Government’s performance against the recommendations made in the Portas High Street Review. 69 ACS worked with the University of Oxford and the Retail Industry Business Engagement Network (RIBEN) to undertake in depth qualitative research to understand the economic and social contribution of local shops. Ev 150 Business, Innovation and Skills Committee: Evidence
Portas Review RELEVANT PORTAS RECOMMENDATION Business Rates Parking and Access Planning Property 6–8 9–10 12–15 & 24–25 21–23 6. Government should 9. Local areas should 12. Address the 21. Local authorities consider whether implement free restrictive aspects of should make more business rates can controlled parking the “Use Class” proactive use of better support small schemes that work system to make it Compulsory businesses and for their town easier to change the Purchase Order independent retailers centres and we uses of key powers to encourage should have a new properties on the the redevelopment parking league table high street of key high street retail space Local authorities 10. Town Teams should 13. Put betting shops 22. Empower local should use their new focus on making into a separate “Use authorities to step in discretionary powers high streets Class” of their own when landlords are to give business rate accessible, attractive 14. Make explicit a negligent with new concessions to new and safe presumption in “Empty Shop local businesses favour of town Management centre development Orders” 7. Make business rates in the wording of 23. Introduce a public work for business the National register of high by reviewing the use Planning Policy street landlords of the RPI with a Framework view to changing 15. Introduce Secretary the calculation to of State CPI “exceptional sign off” for all new out- of-town developments and require all large new developments to have an “affordable shops” quota 24. Run a high profile campaign to get people involved in Neighbourhood Plans 25. Promote the inclusion of the High Street in Neighbourhood Plans
The Portas High Street Review provided a balanced assessment of the challenges faced by the retail sector and has had a positive impact on raising the profile of high streets and engaging people both nationally and locally. The recommendations of the review addressed the fundamental problems high streets face; property costs, planning policy, town centre access and local engagement and partnership working. However, the Government has made more progress in some areas than others. The focus of the Government’s response to Portas has been in rolling out the “Portas Pilots” and other initiatives such as “National Market Day”. However as the table below shows Portas also made a series of substantive recommendations related to national policy and the Government’s commitment to deliver these has been far less apparent. Further action is required by Government to deliver change in these key areas, as follows: — Planning The future success of the high street will be driven by effective planning policy. This is recognised strongly and clearly in the National Planning Policy Framework, introduced in March 2012. However the trends in retail development continue to move away from investing in town centres. Promoting investment in town centres is the key to promoting sustainable diverse retail provision into the future. Planning policy should not protect poor retailers or poor centres but it should direct the investment potential that is available to where it will have the most benefit to the local economy. In the case of grocery retail there is still a positive and growing investment Business, Innovation and Skills Committee: Evidence Ev 151
opportunity. Grocery retail is a vitally important part of the future of town centres especially in the smaller towns across the country. However the majority of grocery retail developments in the planning pipeline are for out of town retail and the trend is in the wrong direction. According to the latest industry figures70 81% of new grocery developments in the pipeline are planned for out-of-town sites. These figures further reinforce the view that more needs to be done to enforce Town Centre First policy locally and nationally.
CBRE GROCERY PLANNING PIPELINE—IN TOWN VS OUT-OF-TOWN 45
40
35
30
25
20 total Town Centre
15 total O-O-T
10
5
0 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12
It is incumbent on local authorities (supported by Government) to drive investment in town centre through robust and consistent enforcement of “Town Centre First” policy and more creative use of tools such as permitted development and local development orders. Government must support its commitment to town centres in national planning policy with concrete action in three areas: — Support local authorities to deliver the objectives of national planning through their own decision making, both when they are setting the local development priorities and in the development control decisions they make. Key to this is the publication of appropriate Guidance (as recommended in the Taylor Review71) on how to implement the NPPF rules on town centre first. — Set the direction of national policy with the appropriate use of Call In powers to ensure that decisions made at the local level are consistent with the National Planning Policy Framework. — Provide further training and advice to local authorities on how to use new and existing tools (such as powers provided by the Localism Act 2012) to provide new attractive investment opportunities for retailers in town centres. — Business Rates The Portas Review called for greater support for small business and independent retailers on business rates. In response the Government has extended and made more generous the provisions of the long standing small business rate relief scheme. They have also decided to delay the five yearly business rates revaluation from 2015 to 2017, citing explicitly that implementing this revaluation would have a negative impact on small shops. These actions are inadequate and will not make a substantial difference to the burden of rates on the retail sector. The relationship between cost of property and business viability in retail (especially in town centres) is increasingly unsustainable and radical reform is required. Business rates continue to be a significant barrier to growth. The total costs of rates to the retail sector is just under £7.5 billion per year72 and the annual increases in rates in 2012 and 2013 combined have cost the retail sector an additional £525 million. The retail sector has urged to consider radical change. The Committee should support this call by making recommendations as follows: 70 CBRE Grocery Planning Pipeline 71 Lord Taylor Planning Review 72 British Retail Consortium Ev 152 Business, Innovation and Skills Committee: Evidence
1. Encourage Government to find new innovative ways to encourage or incentivise local authorities to provide rate relief to wider group of retail businesses. The Localism Act 2012 provides local authorities with the power to provide discretionary rate relief to any business it chooses, but this has not been widely taken up because to do so Local Authorities would have to fund the relief themselves. 2. Reconfigure the way annual rates increases are calculated and cap annual increases at 2%. Currently rates are increased in April based on the value of RPI Inflation in the previous September. This is an arbitrary mechanic that in recent years has been particularly damaging. ACS advocates that the indicator for setting business rates increases should a 12 month average of CPI in the previous year with a cap at 2%. The same as council tax increases and in line with the Bank of England inflation target. — Parking and Access The Portas Review highlighted parking and access issues as one of the key elements for creating successful high streets. Competition from out-of-town stores with free and abundant parking means radical action is needed. However, parking in town centres is often an essential source of funding for local authorities so there is little appetite for reducing fees. Local authorities taking action to implement more high street friendly policies on parking charges are still the exception and there is currently no mechanism to hold them to account. ACS supports the Government’s proposal for a central list or league table of authorities ranking their performance on parking charges. Parking issues are not limited to the provision of car parks and the policies for setting charges. Many centres are served by on street or small amounts of off street parking provision. Relatively small changes to parking enforcement policies, street furniture or property conversions can lead to significant loss of parking that serves a local high street. Too often Councils or other local agencies fail to consider the impact of their decisions on parking provision affecting local retail. ACS believes that the Government should consider options for requiring councils to have a duty to consider the impact of these decisions on the local economy, thereby giving businesses a say in the decisions made that affect their business.
Regulations and Costs As well as policy interventions that will create the right conditions for the promoting growth and investment in the key areas of town centres and other local centres, the Government must also consider how it tackles the pressure of increasing costs on the future success of the retail sector.
Job Creation Costs Employment costs such as national minimum wage (NMW) increasing year on year has had a severe impact on the staffing structure of small retailers’ businesses. Pay structures between staff and managers are squeezed and supervisory roles are cut from the business. ACS’ evidence to the Low Pay Commission73 highlighted that 82% of retailers favoured a freeze in NMW. There are other additional employment costs on the horizon such as auto enrolment pension reforms coming into force that will increase the cost and administrative burden on retailers curtailing further job creation. However this is an area where Government has taken positive steps. The proposal to provide a National Insurance rebate of up to £2,000 from April 2014 is an incentive that we are optimistic will have a positive effect on retailers’ ability to provide more employment opportunities. Nonetheless the impact of the overall burden of increasing employment costs on reducing job creation in retail is not fully understood by Government.
Red Tape The retail red tape challenge was the first review schemes initiated by the Government and provided an invaluable opportunity to review existing regulations. There needs to be an ongoing review of retail regulations and greater regard in Government on the creation policy and the impact on growth. Encouraging better enforcement has been a central theme for the Better Regulation Delivery Office. Inconsistent or overzealous enforcement activity is a drag on business productivity and we hope the introduction of a National Local Authority Enforcement Code and expansion of the Primary Authority scheme will go some way to overcome enforcement difficulties. There are a number of new regulatory interventions under consideration by the Government which will affect the retail sector significantly. The reform of licensing regulations and the introduction of the tobacco 73 ACS Low Pay Commission Evidence 2012 Business, Innovation and Skills Committee: Evidence Ev 153
display ban for small stores in 2015. Action on these regulatory interventions will make real difference to the burden on businesses.
Energy Costs Utility costs continue to rise steeply. This has a significant impact on the retail sector, because of the relatively intensive use of energy they require. Retailers need to keep shop premises open, warm, well lit and, in the food sector, to provide refrigeration. More is being done to help retailers to reduce their energy uses, with a range of innovations underway such as providing far less energy intensive solutions for refrigeration for example. Nonetheless retailers are facing significant immediate difficulties in managing their relationships with energy suppliers. Small businesses in particular are faced with a complex market place and are ill equipped to secure the best deal and terms for their energy supply. Retailers are currently at risk of receiving back bills costing many thousands of pounds; being automatically rolled over onto binding expensive contracts; and facing “blocking” practices when seeking to transfer between providers. ACS strongly believes that small businesses should benefit from the same regulatory protections as domestic customers. The work of Ofgem extending the regulatory protections to a wider group of small businesses and seeking voluntary commitments from utility companies to limit the scope of backbilling is vital and urgent. ACS is keen to provide further evidence to the committee and discussion this submission in more detail. 15 April 2013
Written evidence submitted by the Association of Town and City Management Executive Summary Town centre retailing is exposed to multiple economic, social and technological changes with the continued growth of online shopping in various forms, and changing demographics. To ensure that town centre retailing is capable of supporting the UK in meeting current and future challenges, ATCM recommends: — The future for town centres in the UK must be one where the role of retail is revised and re- imagined in alignment to other uses, building the resilience of such locations through their diversification and/or convenience. Recognising that each centre has a unique future, so too must each centre have a unique vision determined locally by the town centre community, and facilitated, but not dictated, by national policy-makers. — The UK Government carefully considers the data being used to form policy, taking into account the strengths and weaknesses of various methodologies and ensures the assessment of the health of all the functions of the town centre—not just retail. — The UK Government reconsiders the exemptions from planning applications for Class B uses to residential and moves away from a nationally prescriptive Use Class Order system altogether, allowing local government and communities more flexibility over the evolution of their town centres. — The UK Government must continue to invest in the local leadership of town centres through the professionalisation, or otherwise, of all town centre management schemes, including Town Teams and BIDs, helping to create a defined career structure for town centre management practitioners. — The BIS Select Committee, and subsequently, the UK Government, appropriately considers the work of the governments in Northern Ireland, Scotland and Wales to identify strategies and solutions to the challenges of town centre retailing. — The BIS Select Committee and the administrations across the UK encourage the collaboration between town centre partnerships and other local bodies, driven by their natural synergies and a recognition of the imperative of a strong town centre economy, providing a comprehensive vehicle for local economic and social development. — The UK Government supports town centres, mobile operators, card issuers, retailers and others by helping to co-ordinate efforts to bring forth the digital revolution into town centre retailing. The UK Government must ensure it creates favourable conditions for investment by the private sector for this modernisation to take place. — The UK Government considers the modernisation of the business taxation system working with industry to ensure it is fair and proportionate for all stakeholders, capturing revenue where it is rightly due, and providing relief where the burden is not responsive to modern business models or the economic climate. ATCM would be happy to take part in any subsequent oral evidence sessions to discuss these issues or others in more detail with the Committee. Ev 154 Business, Innovation and Skills Committee: Evidence
1. Introduction to ATCM 1.1 The Association of Town & City Management and UK BIDS is a not-for-profit membership organisation dedicated to promoting the vitality and viability of town and city centres. It has more than 540 members including key stakeholders in town and city centres across the UK. More than 400 of its members are town and city centre management initiatives around 60 of which are BIDs. Nearly all of these initiatives work as partnerships, some with several hundred contributing members. They develop and implement shared visions, strategies and action plans for a total of more than 700 district, town and city centres throughout the UK. 1.2 ATCM welcomes the opportunity to respond to this BIS Select Committee Inquiry. It comes at a significant time of change for the UK retail sector which has implications for a range of traditional urban centres ranging from regional city centres to local neighbourhood shopping parades. Each of these play vital economic and social roles and can assist the UK in meeting key challenges in the future. 1.3 With the separation of agriculture and the production system from mainstream society, retail is simply a necessity that will continue regardless of the nature of government intervention. However, governments across the UK will influence what type of retail sector we will have, whether it is diverse enough to meet the needs of all consumers, whether it can sustain high levels of employment, whether it can fulfil various other social objectives and whether it will continue to be regarded as world leading. Policy-makers can shape the capacity of retail to make a positive contribution to the UK’s future. 1.4 While ATCM and its members do not represent a narrow sector interest, we do represent specific locations—traditional urban centres of many sizes. This submission therefore, provides recommendations that governments can undertake to ensure town centre retailing, above all, can be sustained and contribute to healthy and vibrant local economies.
2. Background 2.0.1 Town centre retailing is exposed to multiple economic, social and technological changes. Below is a brief snapshot of some of the major current and future trends primarily centred around the growth of retail environments and its impact on town centres.
2.1 Current Trends in Town Centre Retailing 2.1.1 There has been a long-term decline in town centre’s share of retail spending in comparison to out-of- town and non-store retailing according to Verdict. 2.1.2 According to the BRC, store numbers in town centres and on high streets have been declining for over a decade as a consequence, suggesting that the restructuring of retail is long-term and not a result of the recession. 2.1.3 Town centre retail floorsapce has declined relative to out-of-town developments, while floorspace for neighbourhood retailing has remained stable, suggesting a continued need for convenience. 2.1.4 According to the BCSC, up to 20% of current retail space across the UK could be surplus to modern retailing requirements. 2.1.5 The internet economy in the UK is the largest of the G20 countries in terms of share of GDP (Boston Consulting Group 2012). 2.1.6 The BCSC states that smartphone penetration means that 8.2% of all e-retail sales in the first quarter of 2012 were mobile, a two year growth rate of 2000%. 2.1.7 Statistics on store closures mask variations between sub-sectors and product categories with some more exposed than others to the internet. 2.1.8 Chains specialising in convenience goods and catering have grown, but services such as financial and travel are contracting according to CBRE. 2.1.9 The greatest impact of online retailing has been on products which can be digitised. According to CBRE, the two categories hardest hit are music (with 55.2% of all sales now taking place online) and books (with 35.1% taking place online). 2.1.10 Since the recession, vacancy rates across the UK have increased. However, this masks significant differences between various centres in different regions and also masks changes within specific centres with primary, secondary and tertiary space all being exposed to a variety of different pressures. How it reshapes consumer behaviour will remain unclear with continuing innovation and rapid, constant change.
2.2 The Future for Town Centre Retailing 2.2.1 The UK population is ageing. Experian reports the median age of the population will rise from 39.7 in 2010 to 42.2 in 2035. In 10 years, three million more people will be over 70 and in some areas over half of all residents will be 60 or over. Business, Innovation and Skills Committee: Evidence Ev 155
2.2.2 In five years’ time there will be half a million fewer teenagers and young adults according to Experian. 2.2.3 According to the BCSC, 25% of all UK retail sales will be online by 2020, driven by m-commerce. 2.2.4 According to Experian, UK retail sales online are expected to reach 12.1% in 2015 although the rate of growth is expected to decline. 2.2.5 According to E-Consultancy, sales from mobile devices are expected to show strong growth going from 2% of all e-commerce transactions in 2011 to 7% in 2016. 2.2.6 Digital technology will continue to rise and reshape consumer behaviour. With the rapid pace of continuous innovation, there is little certainty of what a digital future looks like.
3. Recommendations 3.1 Decoupling Retail from Town Centres 3.1.1 The links between town centres and retail are historical. Many town centres were formed as a central trading point around which communities coalesced. It made sense that when we talked about issues related to retail, we conflated this with issues to do with the town centre and the high street. It meant regeneration was often retail-led. Today, for the future health of both, we have to decouple the way we think about retail and town centres. 3.1.2 As the aforementioned trends demonstrate, decades of poor planning policy, under-investment, lack of cohesive management and the growth of the internet have weakened the offer of town centre retailing. We need to be creative in our visions for the future of town centres and, in some locations, this future might not be retail-led. 3.1.3 To be clear, retail can and should be still be an essential part of the town centre, responsible for a large proportion of spend. However, many centres will need to build their resilience to the internet by recognising people as visitors looking for an experience, not exclusively as shoppers. Many centres will have to work on becoming destinations with a more balanced and integrated offer in which retail might just be one activity sitting alongside leisure, cultural and community activities, public services, service based businesses, and an attractive offer for the evening and night-time economy. Other centres may have to position themselves as convenience or specialist locations supplying a more specialist range of products and services not easily found, or conveniently supplied, on the internet or out-of town locations. 3.1.4 This strategic positioning of town and city centres may well be linked to their heritage and/or aspirations, with some choosing to become sustainable destinations, arts and culture hubs or locally sourced gourmet meccas, among other options. In each case the current and future role and function of town centres across the UK needs to be carefully considered with an adequate adjustment to the role of retail within that to align retail outlets with the overall strategic positioning of that centre. This issue has been explored in depth in a recent report funded by BIS—“Successful town centres—developing effective strategies”. 3.1.5 ATCM recommends that the future for town centres in the UK must be one where the role of retail is revised and re-imagined in alignment to other uses, building the resilience of such locations through their diversification and/or convenience. Recognising that each centre has a unique future, so too must each centre have a unique vision determined locally by the town centre community, and facilitated, but not dictated, by national policy-makers. 3.1.6 The first step of this decoupling has to be how we consider the performance of town centres and retail. Many of the key performance indicators popularly cited to demonstrate the health of town centres and high streets continue to be narrowly focused on retail vacancy rates, footfall and retail sales, and fundamentally fail to illuminate the complexity of the town centre, particularly in terms of the interdependency that exists between the different performance variables. 3.1.7 Vacancy rates, for instance, can be problematic for a number of reasons. Firstly, there has to be clarity on the area being assessed with its relationship to the wider location with primary, secondary and tertiary areas being clearly defined. Where possible there has to be more clarity and transparency on the methodology used by data providers so that it is easier to evaluate the applicability, accuracy and level of coarseness of the data to specific locations. The issue of transparency, compatibility and simplicity of data collection methodologies for different performance indicators (including retail and other high street services) is dealt with in detail by the “Successful town centres” report mentioned above, which offers the first ever do-it-yourself community toolkit for the use of town centre performance indicators that is compatible with other commercially available toolkits. 3.1.8 Secondly, there needs to be a much greater understanding of the underlying features behind vacancy rates. For example, a boarded up shop front does not necessarily equal an empty unit, if that unit has been re- let and is awaiting a new occupier to move in. An occupied unit does not necessarily mean a healthy high street if the occupier intends vacate but is rooted to the property, shackled for the duration of the lease. Vacancy rates themselves are a very narrow indicator of performance and need to be merged with other indicators to provide a better picture of the performance of town centres. Ev 156 Business, Innovation and Skills Committee: Evidence
3.1.9 ATCM recommends that the UK Government carefully considers the data being used to form policy, taking into account the strengths and weaknesses of various data collection methodologies and adopts a more holistic approach to assessing the health of all the functions of the town centre—not just retail.
3.2 Responding to Change through the Planning System 3.2.1 Recently, a conflict between the UK Government’s pro-growth agenda and localism has begun to emerge with the former superseding the desires of local government and communities. For town centres, this is potentially self-defeating and risks stifling long-term growth. Decision-making over planning and the evolution of town centres must take place at a local level and must be part of a vision co-developed by the town centre community. Nationally prescriptive policies and decision-making placed in the hands of individual stakeholders does not allow for coherent plans. This is why nationally prescriptive changes to the Use Class Orders to remove barriers to the conversion of space from retail or office space to residential are deeply concerning. 3.2.2 Some town centre managers want additional residential space in their town centres to replace vacant retail/commercial uses. However, others have not identified the erosion of employment/service hubs as beneficial for their locality. There are significant differences in terms of the need to alter the ratio between residential and commercial uses and the placement of such residence. 3.2.3 Nationally prescriptive exemptions do not place decision-making in the hands of those responsible for planning vibrant town centres. This runs contrary to the need for the better, coherent management of our town centres. It removes the ability of planning authorities to identify the most beneficial strategic locations for residence as many town centres may want to protect its core as a commercial hub but increase living in secondary and tertiary locations. 3.2.4 Furthermore, in areas where the potential return on investment for landlords is much higher for residential use, the impact may go well beyond shops and lead to the erosion of other Class A uses such as pubs and restaurants. These have been identified as critical for broadening the town centre offer and their loss will weaken the remaining retail offer. 3.2.5 Also concerning is the damage that could be done to neighbourhood retailing which remains an important part of the retail sector and will grow in importance as the population ages. The UK Government must not introduce policies that undermine accessibility to convenience retailing. 3.2.6 ATCM does however recognise that the current planning system is not ideal, with greater urgency and, in some cases, business involvement needed in the nature of plan-making. While we believe that national exemptions to Use Class Orders are not the right mechanism to achieve this, credible town centre management can provide a solution, as explained in 3.3. 3.2.7 ATCM recommends that the UK Government reconsiders the exemptions from planning applications for Class B uses to residential and moves away from a nationally prescriptive Use Class Order system altogether, allowing local government and credible town centre partnerships more flexibility over the evolution of their town centres.
3.3 Town Centre Management and Town Teams 3.3.1 Unlike shopping centres and other retail destinations, town centres and high streets have no exclusive owner, manager or investor. There are numerous stakeholders with varying degrees of ownership and responsibility including local authorities, businesses, property owners, transport operators, local charities, residents, the police and many others. Even within local authorities, there are separate departments with important roles to play such as licensing, planning and highways. To provide town centres and high streets with a fighting chance of adapting and responding to change, partnership and management remain as important as ever, epitomised by the headline recommendation in the Portas Review—the establishment of Town Teams. 3.3.2 There are two categories of Town Team partners—those who have successfully applied for up to £100,000 funding through the Portas Pilot programme and those who were unsuccessful but were awarded £10,000 to support their work. 3.3.3 ATCM is aware of the public criticism of Town Teams and the slow progress they have made in spending the grants. Some Town Teams have been criticised for their lack of outputs while others have been criticised for poor outputs that are said not to contribute to a decline in vacancy rates. We need to be clear about the challenge Town Teams in England and other town centre management schemes across the UK face in terms of: — competency in partnership building; — knowledge of the disparate elements of place-making and management; and — the ability to become financially sustainability. 3.3.4 Regarding Town Teams specifically, the Portas Review had an incredible effect in terms of taking town centre management to a new audience, bringing with it, the energy and enthusiasm of volunteers and community activists. The inconvenient truth is that it can take years of partnership development before a group, Business, Innovation and Skills Committee: Evidence Ev 157
such as a Town Team, is in a position to influence real change and regeneration. It can take months for a local authority to come to an agreement on major decisions affecting their jurisdiction. It can take businesses even longer to develop, agree and vote on a vision and action plan for a Business Improvement District (BID). Therefore, it could take years to fully develop a comprehensive partnership that is neither exclusively private nor public sector into an effective, representative and high performing group. 3.3.5 During this journey we expect instances where stakeholders will not always agree, but ultimately, such problems must be overcome if progress is to be made. It takes experience of partnership building and competence of stakeholder management, with patience to ensure such a group achieves success deriving the maximum value for the town centre community from multiple assets which are not directly under their control. 3.3.6 The time and skills needed to develop a credible and influential partnership is not the only challenge facing Town Teams and other town centre management schemes. Those in the industry cannot rely on their passion alone to achieve results. Town and city centres are complex organisms, and the success of town centre management schemes of all types will depend on their ability to understand issues like the impact of the macro economy, globalisation, retail, public services, spatial use, property, employment and skills gaps, housing, transport, demographics, leisure, hospitality, night-time economy, marketing and branding and many other issues, on a single location. This is extremely challenging. For those Town Team partners that are not led by experienced town centre or BID managers, both patience and professional support are critical to ensure they can build their knowledge and meet this challenge. This will not be an overnight process. 3.3.7 The final challenge that town centre partnerships face is sustainability. This issue effects Town Teams in particular and is likely to slow the use of the cash they have been given. The maximum any Town Team will have received directly from DCLG funding is £100,000. This is a very small pot of money which is not enough to sustain a “team” or enough for any significant capital investment or public realm improvements. Therefore, Town Teams have to consider extremely carefully how they use the money intelligently to achieve sustainability. This is likely to mean leveraging private sector investment to ensure a Town Team can contribute to a town centre for many years to come which overlaps considerably with the issue around partnership development. 3.3.8 Town centre management schemes, including Town Teams, that can meet these challenges to create and sustain successful partnerships must play a role in driving local change, such as through local planning as explained in the previous recommendation. 3.3.9 ATCM recommends that the UK Government must continue to invest in the local leadership of town centres through the professionalisation, or otherwise, of all town centre management schemes, including Town Teams and BIDs, helping to create a defined career structure for town centre management practitioners. The industry needs to attract and retain highly skilled and qualified professionals who have the capacity for complex partnership development and stakeholder management, who have a range of knowledge in disparate areas linked to place-making and place management, and who are able to undertake this sustainably with the use of appropriate funding mechanisms. 3.3.10 Across the UK we already have excellent, experienced practitioners. We need to ensure they are supported, given the job security and credibility they deserve, and offered the qualifications required for their progression. We then need to secure the help of these practitioners to support new entrants to town centre management via a number of routes into the industry. ATCM is working towards this, playing a leading role with the Manchester Metropolitan University in the formation of the Institute Place Management, supporting practitioners and Town Teams through academia. The investment by DCLG in Town Teams has been welcome but the support of the UK Government and parliament must be long-term and must not be derailed by naïve criticism that fails to recognise the difficulties of a challenging, but necessary, profession still in its infancy.
3.4 Beyond the Portas Review 3.4.1 The Portas Review is likely to be seen as a watershed moment in town centre retailing, taking problems and solutions which have been well rehearsed from within the industry and communicating them to a wider audience. However, the UK Government, parliament, and indeed, the BIS Select Committee must ensure the focus is wider than the solutions offered in the Portas Review alone. This is an inquiry on the UK retail sector and therefore, it must be acknowledged that there have been other, equally important assessments of the town centre and town centre retailing which we can learn from. 3.4.2 With devolution, we accept that the UK Government will have little influence in the health of retail in other jurisdictions other than England, but regardless, this need not hamper the process of learning about what works and what does not work. For example, in Scotland, the reduction in empty property rate relief has been used to partly subsidise 50% rate relief for the first 12 months for businesses entering a long-term vacant property. This useful idea for increasing occupier demand is itself based on an idea introduced in Northern Ireland. We therefore hope this inquiry sees it as useful to give consideration to the Town Centre Regeneration Inquiry in Northern Ireland (published in 2008), the Town Centre Regeneration Inquiry in Wales (published in 2012), the National Town Centres Review in Scotland (on-going) and other policy changes across the UK. We hope that the Select Committee will be able to identify many innovative ideas to common concerns emanating from across the UK. Ev 158 Business, Innovation and Skills Committee: Evidence
3.4.3 ATCM recommends that the BIS Select Committee, and subsequently, the UK Government, appropriately considers the work of the governments in Northern Ireland, Scotland and Wales to identify strategies and solutions to the challenges of town centre retailing.
3.5 Encouraging Collaboration between Town Centre Partnerships and Relevant Economic and Social Development Bodies
3.5.1 By maximising the opportunity to link town centre partnerships with other bodies which focus on local economic and social development we can foster an environment of positive change for commerce and communities. There are different bodies that are relevant across the UK.
3.5.2 For example, there are natural synergies between Local Enterprise Partnerships (LEPs) and town centre partnerships, each acting as private-public partnerships aiming to drive local economic development albeit on different geographical scales. However, this synergy means there is likely to be much to gain from these partnerships working together strategically. Many LEPs have been primarily focused on advanced manufacturing. However, the success of primary and secondary industries will be, to a certain extent, dependent upon the success of tertiary industries and vice versa.
3.5.3 Attracting highly skilled labour for advanced manufacturing, for example, will be made easier by the desirability of the location and the quality of the services on offer. Furthermore, successful town centre retailing will lead to derived demand further up the supply chain providing a boost to the manufacturing industry. Town centre retailing can also offer broader employment provision to supplement that offered by advanced manufacturing. It is critical to ensure there is joined-up thinking, especially at a time when exports alone cannot deliver the economic growth needed for the UK because of the continuing problems of the Eurozone. GFirst, the LEP for Gloucestershire, provides a useful example, becoming established as a retail pathfinder.
3.5.4 In Scotland, we acknowledge that there is an opportunity to develop links between town centre partnerships and Community Planning Partnerships (CPP). With the role of CPPs changing under the Scottish Government, we believe that by referencing town centres in their action plans and in Single Outcome Agreements, we can find a strategic fit which better enables the Scottish Government to meet its economic and social objectives.
3.5.5 ATCM recommends that the BIS Select Committee and the administrations across the UK encourage the collaboration between town centre partnerships and other local bodies, driven by their natural synergies and a recognition of the imperative of a strong town centre economy, providing a comprehensive vehicle for local economic and social development.
3.6 The Digital High Street
3.6.1 The internet is here to stay. However, the speed of its evolution is rapid, and in years to come it could have completely changed its form from what it is today. Town centres must get ahead of the curve and build their resilience to the internet, and furthermore, capitalise on the opportunities it offers for new and exciting methods of reconnecting with visitors. Smartphone technology, coupled with Wi-Fi and 4G innovation has the potential to create new experiences. This has been accepted as the future of retailing by the majority of the industry with traditional retailers seeking to offer an increasingly sophisticated online service and internet retailers paradoxically seeking to build their physical presence on high streets for the benefit of consumer convenience.
3.6.2 Town centres will need to adapt, making sure they have the right kind of spatial uses in the right locations and that this space is compatible with the vision of modern retailing. The ratio of space devoted to specific uses, logistics, storage and visual merchandising will all have to evolve, and quickly. This will require co-ordination from technology firms, retailers, and other stakeholders of the urban retail environment to agree a vision and plan for the future. This will require long-term investment to adequately alter the physical dimensions of town centres and ensure the implementation of the correct infrastructure.
3.6.3 With a highly regarded retail sector and our early adoption of online technology and infrastructure, the UK should be well positioned to become a European and even World leader in multi-channel strategies for our high streets. In truth, French and German governments have been more progressive in this area providing the drive behind significant pilot projects and trials in Berlin, Nice and Lille. Some productive exploration of the opportunities offered by technology has taken place in the UK but has been largely led by local government and transport operators or confined to the Smart Cities effort. We need to increase the scope of our investment in the digital high street across the UK.
3.6.4 ATCM recommends that the UK Government supports town centres, card issuers, mobile operators, retailers and others by helping to co-ordinate efforts to bring forth the digital revolution into town centre retailing. The UK Government must ensure it creates favourable conditions for investment by the private sector for this modernisation to take place. Business, Innovation and Skills Committee: Evidence Ev 159
3.7 Modernisation of Rates to Match 21st Century Business Models 3.7.1 The first step for creating the right conditions for adequate investment is a complete overhaul of the business rates system. We fear that the current system has a perverse effect on commercial investment in town and city centres. 3.7.2 The original rationale behind a system that will only ever increase revenue to the Government in line with inflation (measured by RPI) was that land and property were price inelastic as there were few suitable alternatives to undertake trade. Trading without property was virtually impossible, meaning taxation had little impact on investment decisions. However, years of increasing the land available for main town centre uses, coupled with the growth of the internet means commercial property, while critical to the UK economy, is not the attraction it once was. 3.7.3 The postponement of this year’s business rate revaluation to be implemented in 2015 is problematic as it means the locations that have suffered the most during the recession will continue to pay rates based on a valuation at the top of the market five years ago. However, the total take for the Government would still remain stable and increase with inflation. The revaluation is merely about shifting the burden amongst businesses, but the spate of retail casualties suggests that this burden is too much. Despite the criticism levied at upward only rental reviews, rental prices have fallen across the UK since the recession with some locations experiencing falls of almost 40%, with Central London providing a rare exception. However, business rates do not mirror this and have become a major barrier to any commercial regeneration. Anecdotally we hear that in extreme cases, business rates now even exceed the cost of rent. 3.7.4 We understand the importance of the pressures on the public finances and know the UK Government has a fiscal consolidation plan it has to work with, however, a situation where the country is not capable of capturing hundreds of millions (possibly more) due from multi-national organisations and fails to provide relief in business rates could have a long-term destructive impact on our ability to invest in new retail infrastructure, create jobs, trigger any town centre regeneration and ultimately support the growth that will erode the public debt. 3.7.5 ATCM recommends that the UK Government considers the modernisation of the business taxation system working with industry to ensure it is fair and proportionate for all stakeholders, capturing revenue where it is rightly due, and providing relief where the burden is not responsive to modern business models or the economic climate. 3.7.6 ATCM will be assessing the need for modernisation and what this modernisation might look like in more detail, in partnership with a broad cross section of industry. We would be happy to keep the UK Government, parliament and BIS Select Committee informed of our findings. 3.7.7 We hope that the BIS Select Committee finds the submission useful and illuminating. ATCM would be happy to take part in any subsequent oral evidence sessions to discuss these issues, or others, in more detail with the Committee. We would also be happy to direct the Committee towards any other useful information that should be taken into consideration as part of this inquiry. Please see the Appendix for further information. 15 April 2013 Ev 160 Business, Innovation and Skills Committee: Evidence
APPENDIX FURTHER INFORMATION Experian Town Centre Futures 2020 White Paper (2012)
BCSC The Rise and Rise of Multi-Channel Retailing (2012)
Northern Ireland Assembly Town Centre Regeneration Inquiry (2008)
Enterprise and Business Committee—National Assembly for Wales Town Centre Regeneration Inquiry (2012)
GFirst Successful Town Centres—Developing Effective Strategies (2013)
Written evidence submitted by Boots UK About Boots UK Boots UK operates the largest chain of community pharmacies in the United Kingdom. It is synonymous with pharmacy in the public mind and Boots is one of the country’s most trusted brands. Our company has around 2,477 stores trading under the Boots brand, of which 2,390 have a pharmacy. These are located in all the places where people live, shop, work and travel, with many open well beyond normal office hours and at weekends. Our chain encompasses pharmacies which serve small local communities, including some of the most deprived locations in the country, and health centres through to those which are part of the largest retail and destination shopping centres. The Boots brand also extends to Boots Opticians which is one of the leading opticians in the UK with 624 practices of which 184 operate on a franchise basis. Of these, 458 are standalone practices and 166 are in Boots stores. Boots stores are readily accessible to almost everyone in the UK. Nearly 500 of them have been in the same prime high street location for more than 40 years. It is estimated that 88% of the UK’s population is within a 10 minute drive of a Boots store, and 98% within a 20 minute drive. Alex Gourlay, Chief Executive of Health Beauty Division, Alliance Boots is co-chair of The Future High Street Forum with the Minister of State for Housing Mark Prisk MP. The forum brings together key stakeholders from local and national government, large retailers, trade bodies and academia. The purpose of the forum is to advise and lead on the development of policies for high streets and town centres.
1. General Comments 1.1 Boots UK welcomes the opportunity to respond to this inquiry. The retail sector in the UK is being shaped by social, economic, technological and demographic forces which are changing the relationship between the consumer, retailer and supplier. It is essential that both government and retailers understand the challenges posed by the changing environment and respond accordingly. 1.2 High streets and town centres are focal points of our local communities. They are an important employer, provide valuable opportunities for social engagement and cohesion, and are a vital link to shared history and identity. However changing consumer behaviour, economic circumstances and technological advancement means that the extent of their use has changed. 1.3 The British Retail Consortium estimates that in 2012 high street footfall fell by 3.3%, shopping centre footfall declined by 0.6%, while footfall in out of town developments fell by only 0.1%. The average national shop vacancy rate is 14.1% however in some areas it is higher than 30%.i This changing role, while exacerbated by difficult economic circumstances, is part of a longer term trend reflecting shifting consumer preferences and increasingly higher operating costs. 1.4 The decline of traditional retail formats raises a larger question around the future shape and development of our local communities. The broader social and economic value that high street and town centres support and provide necessitates a policy response. Nearly 90% of people live and work in town centres and citiesii and retail employs almost three million people, more than 10% of UK employment.iii Business, Innovation and Skills Committee: Evidence Ev 161
1.5 Government should have a clear vision for the future of retail in the UK and how this will shape our local communities. National and local government should implement a range of credible, coherent and sustainable policies to achieve this vision. We believe there are six key components to this vision: (1) Regional economic strategies. Regional economic strategies should recognise the value of retail as a major employer and driver of local economies. We believe the Local Enterprise Partnerships (LEPs) should consider and integrate the value of retail and high streets in their regional economic strategy. The rationale being that vibrant high streets attract inward investment and are historic market place for goods and services developed locally. (2) Intelligent commissioning and investment. As a major investor and commissioner of services government should consider the potential benefit from the accumulated impact of major investments. Decisions, such as the location of Government offices, can have a positive multiplier effect on high streets and local businesses which encourages investment from other sources. In order to safeguard their future, town centres and high streets will need to offer a diverse range of cultural, civic, health, educational and leisure facilities and services so as to generate footfall and attract investment. (3) Strengthening local partnerships. Local partnerships are a valued and recognised form of local engagement and Boots has a long history of working collaboratively. We believe that these partnerships add value when they bring together businesses, local authorities and public sector organisations to better inform local strategies and decision making. It is important that diverse stakeholders are able to work together in the long term interests of their local community. In the right circumstances and environment we would support the further expansion of Business Improvement Districts (BIDs). Effective collaboration at this level can lead to better understanding of issues such as local charges which directly and indirectly contribute to reduced footfall on high streets leading to poorer sales, increased vacancy rates and missed opportunities for investment. (4) International promotion. As three billion new consumers from across the globe access online retail over the coming years UK retail can support growth at home by expanding aboard. There is a clear role for the Government to showcase the best of UK retail internationally, to place retail at the top of the EU business agenda, and to negotiate the removal of trade barriers limiting exportation, foreign expansion and inward investment. (5) Reduce operating costs. The most significant challenge to operating successfully on high streets and town centres is business rates. The postponement of the business rate revaluation in 2012–13 comes at a difficult time for many struggling retailers. Independent evidence suggests that the Valuations Office Authority (VOA) estimations for many high streets are unduly high. As such this is compounding economic challenges that many areas are already facing. (6) Coherent and consistent strategy. A coordinated and holistic approach encompassing these elements (1–5) is necessary for long term and sustainable prosperity.
2. Government Support for the Retail Sector 2.1 Governments across England, Wales, Scotland and Northern Ireland are increasingly passing more responsibility to local authorities and local communities. This has created more opportunity for businesses and local people to have a greater impact on their locality. We have a long history of successful engagement at a local and national level. Boots UK and Business Improvement Districts—Building effective local partnerships We have been involved in supporting and developing town and city centre partnerships and Business Improvement Districts (BIDs) since their inception. We believe that we can achieve more to improve the external environment by working collaboratively with others, rather than independently or through a purely internal focus. For BIDs to be successful it is important that they have all of the right qualities to succeed including: appropriate experience; shared aims and objectives; suitable financial and non-financial commitment. BIDs should be private sector-led and Boots will only support BIDs where the local authority is a key partner with real input and influence over decision making. Where these qualities are not apparent we would oppose establishing a partnership. Boots has played a sector leading role in championing BID criteria and accreditation to improve the quality of local partnerships. For more than twenty years we have supported this commitment by providing free training for external partnership managers through our “Insight Training” Programme which looks at the key challenges, and solutions, to delivering effective local partnerships. The programme was designed and is facilitated by Boots, and is available to all ATCM members. Partnerships thrive when all parties have clear direction and motivation to succeed. National government must offer more strategic direction for local partnerships, providing a crucial national vision to the new localism framework. 2.2 We welcome the government’s support for the retail sector in particular the implementation of Portas Review recommendations and the BIS Retail strategy. These important initiatives are having a positive impact Ev 162 Business, Innovation and Skills Committee: Evidence
on the level of investment in town centres and high streets. To maximise this investment Government should encourage regional economic strategies to consider the impact of the proposals on the retail sector and consider how they maximise their investments to support high street, and broader retail, vibrancy. 2.3 As a major investor and commissioner of services government should consider the potential benefit from the accumulated impact of major investments. Decisions, such as the location of Government offices, can have a positive multiplier effect on high streets and local businesses which encourages investment from other sources. In order to safeguard their future town centres and high streets will need to offer a diverse range of cultural, civic, health, educational and leisure facilities and services so as to generate footfall and attract investment. Boots UK and the Town Teams initiative Boots has provided a senior secondment to work with Business in The Community, initially to support business engagement in the government’s Town Teams initiative, and subsequently to generate a long term business engagement programme. Initial engagement suggests that local stakeholders want this initiative to achieve three clear outcomes: genuine community engagement and an improved local environment; to attract inward investment creating employment, shops and services relevant to their town; and to grow their economy through increasing footfall. This work has told us that business needs to have the confidence to provide three key fundamental principles to local initiatives: 1. Leadership. We believe that relationships can make a difference to local retail environments but we must bring people together to achieve. 2. Being customer-led. Business decisions must be informed by customer insights. 3. Believing in people. We must empower our people to make local important contributions, and their feedback is critical to understanding our business. Our initial engagement has told us that many local stakeholders value the time and experience of local store leaders. As a response we are trying to ensure that Boots operates a business culture that allows staff the freedom to act at a local level. 2.4 We believe that localism should be balanced with a national vision to provide clear direction. The recently established Future High Street Forum will be co-chaired by Alex Gourlay Chief Executive of Health Beauty Division Alliance Boots and the Minister of State for Housing Mark Prisk MP. The forum brings together key stakeholders from local and national government, large retailers, trade bodies and academia. The purpose of the forum is to advise and lead on the development of high streets and town centres and it will meet quarterly. We believe that establishing the forum is a positive development and will go some way to providing this national focus: 2.4.1 We recommend that the Future High Street Forum focus its work on the medium and long term future. The forum should also assess what practical measures could be taken by the retail industry as a whole to integrate the high street with the internet. This will build on recent initiatives established across individual firms. 2.5 However broader government policies must also support a balanced retail sector. This includes the implementation of a fairer business rates regime, a planning policy which acknowledges the complexity of operating in town centre and retail environments, an appreciation of the changing nature of retail and the value of Government programmes in helping to drive investment.
3. Online Retail, Consumer Culture and Changing Behaviour: The Impact on High Street Retail 3.1 With 2,477 stores across the country and as a leading provider of healthcare, beauty advice and services in local communities, Boots is key part of UK retail. Our success relies on expert customer care, ongoing investment in our stores, expanding our store portfolio and enhancing our online offering. 3.2 Understanding our customers and responding to their needs is crucial to our business—we know that customers want choice, value and convenience and this is reflected in our offering in-store and online. 3.3 Boots UK is committed to being local, accessible and convenient for our customers. We are continuing to invest in new Boots stores and are continuing our programme of relocating and refitting stores and optical practices to make Boots more convenient and easier for our customers to shop and get their prescription medicines. 3.4 Choice and innovation are important to our customers: We are continuing to develop and launch innovative new health and beauty product brands, while at the same time enhancing our long established product brands. 3.5 We attribute much of Boots ongoing success to our focus on customer service and care. Each week Boots analyses over 25,000 customer responses to in-store marketing surveys to better understand customers’ evolving needs. We focus on key measures that we know are important to our customers, including “value for Business, Innovation and Skills Committee: Evidence Ev 163
money”, “quick and easy to pay”, “staff available and approachable”, and “time taken to get my prescription”. Collecting this information ensures that we are responsive to our customers and patients and in turn, this drives up standards. These surveys help the business understand what drives the customer and highlights areas for improvement. 3.6 Online retail now accounts for 9% of total retail sales in the UKiv and mobile sales in 2012—online sales through a smart phone or tablet—were up 304% on 2011.v This is a phenomenal shift in customer behaviour and retailers must respond. 3.7 Ensuring quality, choice and convenience is central to our approach to online retail. We continue to expand both the range of products available on boots.com and related online health and beauty advice: 3.7.1 We are continuing to develop boots.com to make it easier for our customers to use at home and with mobile technology. 3.7.2 We are investing significantly in logistics to fulfil online orders more quickly for collection in store or deliveries to customers’ homes. In January 2012, we commenced deliveries from our new boots.com automated logistics facility within the Burton-on-Trent distribution centre, which will support the continuing growth of online sales. “Order-on-line and collect-in-store”, which is available in nearly all our stores across the UK, is increasing in popularity and comprised over 45% of online orders in 2012. This highlights one of the major trends for consumers in combining the convenience of ordering online with the accessibility of Boots stores. 3.7.3 We are further developing BootsWebMD.com, our consumer health and wellness information portal. 3.8 Customer insights means that our offers and communications in-store and online are tailored to our customers—this is best demonstrated through the Boots Advantage Care reward scheme (see below). We believe that this multi-channel experience empowers consumers. Many customers do not regard online and offline experiences to be disconnected; in fact they expect the retailer to ensure the experience is seamless across all platforms. To continue to be relevant to consumers, retailers must continue to offer innovative services and products at competitive prices. Boots Advantage Card: rewarding brand loyalty By 31 March 2012, the number of active Boots Advantage Card members increased to 17.8 million, reflecting its position as one of the largest and most valued loyalty schemes in the UK. Around 90% of active members are women, representing nearly two thirds of the adult female population in the UK. Boots Advantage Card members receive offers by mail or via email, including special promotions and invitations to special customer evenings for Christmas shopping in larger Boots stores near where they live or work. Boots Advantage Card members aged over 60 can also join the “More Treats for Over 60’s” scheme, which enables them to collect 10 points per £1 on Boots branded products and No7 skincare, plus other benefits. Over 60% of Boots retail sales are to Boots Advantage Card members and on average they spend over 50% more per transaction than a non member. Boots has recently upgraded its technology to personalise customer offers, including till generated promotional coupons, and to make the Boots Advantage Card easier to use online. Boots Advantage Card members can also earn points at “Treat Street”, an online shopping service with over 90 well known retail brands. 3.9 Over the next few years up to three billion new consumers from across the globe will be able to access online retail. International retail through the use of new technology across multiple platforms represents a huge opportunity for the UK. 3.10 UK retail is a leading force in the international retail sector and responsible for 11% of global retail internet sales.vi BIS and UKTI are supporting this dominant position and promoting the exportation of British retail attracting investment from entrepreneurial foreign retailers. We welcome this position and would encourage the Government to be more ambitious. 3.10.1 We believe the government should seek to establish retail as core business priority within the EU and ensure the removal of remaining barriers to a single market. Providing leadership for a European retail strategy would be valuable and presents opportunities for large retailers and SMEs in the sector.
4. Skills needed for a Successful Sector 4.1 There is a common misperception that retail is a low skill-low cost sector. The retail sector invests heavily in its staff and provides many people with skills and experience that they utilise throughout their life. The retail sector employs nearly three million people, making it the UK’s largest private sector employer, and employs nearly one million under-25 year olds and 40% of 16–19 years old currently in work. Furthermore retailers spend on average £1,275 per employee on training, more than many other sectors.vii Ev 164 Business, Innovation and Skills Committee: Evidence
4.2 Providing consumers with the best possible care and service has always been essential but the growth of other forms of retail means that high street and town centre retail must evolve and expand its offer. As retail changes and the store-online experience become more seamless and integrated, staff within the retail sector will need to have the skills to operate across multiple platforms whilst still engaging with customers in a face to face conversation. Training and supporting our staff People can enter our business at different levels and for many of our roles no formal qualifications are needed. For many young people a job in retail at the weekend was their first introduction to the world of work. Alex Gourlay, Chief Executive, Health & Beauty Division, Alliance Boots first joined the business as a Saturday Assistant. Although the training for each role is different, Legendary Customer Care is at the heart of what Boots UK does, underpinning the knowledge, skills and behaviours appropriate to each job and each individual’s development. All colleagues have an e-learning account with modules tailored to their particular role and development needs. They can use this at work or at home and last year over 95% of Boots UK’s colleagues had been online to complete at least one module. Boots UK also offers a Work Inspiration two week retail programme for anyone who is interested in working in Boots stores in the future; this programme aims to give young people first-hand experience of the retail sector 4.3 We appreciate that our customers are influenced just as much by what is outside of our store as what is inside. That’s why we are taking a lead in responding to the localism agenda by providing our store managers and other staff with the skills and experiences to make a difference in their local communities. Through internal communication guides, training sessions, and mentoring we are empowering our staff to be a positive part of their community giving them the skills and confidence to shape their local retail and healthcare environments.
5. Barriers to a Competitive Sector 5.1 There are several clear barriers to operating on high streets and in town centres. In addition to the complexity of operating on high streets and town centres, these formats face considerably higher costs than other forms of retail. In order to strengthen the long term vitality and viability of town centres the Government should focus on five key issues: 5.1.1 National government has a key role to play in supporting the effective management of our town and city centres managing the pace of change that some communities are facing. Government policies and initiatives need to be grounded by a larger vision which is consistent, coherent and supported by a credible political and media narrative. There should be a real effort to ensure these plans are supported across the political spectrum. 5.1.2 This vision should be further underpinned by government support for micro-level action. The effective management of our town and city centres requires the creation and maintenance of effective collaborative partnerships, promotion of exemplars and best practice; and the creation of a policy framework through which the partnerships can work and deliver. 5.1.3 Reducing the cost of operating in town centres relative to other retail formats. Removing burdensome and ineffective regulation and costs would provide significant relief for many struggling retailers. Measures such as high car parking fees are a significant deterrent for consumers—these could be lower, planning guidelines can ensure that town planners consider the impact of supermarket expansion of high street vibrancy and diversity, allow commercial properties to be used for residential, cultural, civic, health or leisure activities. 5.1.4 Business rates represent the highest level of corporate tax in the UK and one of the highest forms of local property tax in the EU. We are disappointed with the decision to postpone the recent business rate revaluation; however Government should use the extra two years to implement a ratings regime that supports a level playing field across the retail sector, such as to commit to measuring the annual business rate uplift calculation in line with CPI rather than RPI. 5.1.5 Making high streets and town centres attractive places to invest in. This includes supporting business and consumer confidence through the removal of barriers to development and regeneration, but also through creating an integrated offer on high streets. Intelligent commissioning from national and local government can have a multiplier effect on levels of investment, while strengthened local collaboration can provide a sense of security about the future direction of local high streets and town centres. 5.2 It is clear we will need a concerted effort by all who have a vested interest in seeing a prosperous UK High Street such as local authorities, landlords, residents, tenants and central government. This is a diverse spectrum of stakeholders that will need to be co-ordinated and empowered in the right way if high streets and the retail sector more broadly are to be successful and sustainable. 15 April 2013 Business, Innovation and Skills Committee: Evidence Ev 165
References i Local Data Company (2012) ii Association of Town Centre Management “A Manifesto for Town Centres and High Streets” (2012) iii British Retail Consortium “Retail in Society: Opportunities for All” (2013) iv British Retail Consortium “Retail Stats & Facts: Sector Stats & Facts” (2012) v IMRG-Capgemini e-Retail Sales Index (March 2013) vi British Retail Consortium (2013) vii British Retail Consortium “Retail in Society: Opportunities for All” (2013)
Written evidence submitted by the British Council of Shopping Centres Summary 1. Whereas we planned for retail development expansion over the past 50 years there does not appear to be sufficient strategic thinking applied to planning for a contraction of retail floorspace, the need to do so being driven by technological advances and changing consumer purchasing habits. 2. Single ownership of a town centre, supported by coordinated management and a proactive local council, is likely to provide greater adaptability to the changing occupier market. 3. Government’s decision to postpone the revaluation of business rates will unfairly penalise hundreds of thousands of businesses by requiring them to pay excessive levels of tax for an additional two years in order to subsidise those businesses in more prosperous areas. 13 out of 15 Portas Pilot towns we analysed will be worse of as a result of this decision. 4. The business rate multiplier has risen to over 47p in the pound this year, making it the highest level of corporate tax in the UK, and amongst the highest levels of local property tax in the European Union. 5. We would welcome the Inquiry advocating that Government takes a much more proactive approach to this issue and commits to capping next year’s Uniform Business Rate (UBR) in line with that Bank of England’s target for inflation of 2% as measured by the Consumer Price Index (CPI). 6. Despite being a welcome acknowledgement of the impact of empty property rates on commercial development the current proposals, targeted at new build only and restricted by European State Aid rules, announced in the last Autumn Statement do not go anywhere near far enough. 7. Any changes to permitted development rights at the local level should be fully accompanied by supporting evidence to demonstrate that a change in the rights would not undermine supply of premises for the particular sector concerned. There would also need to be checks and balances and a proper testing of proposals before they become local policy, and the balance between the benefits of a more flexibility and the potential hazards of a totally laissez-faire approach need to be carefully considered. 8. We continue to believe that the Tax Increment Financing (TIF) model could present real opportunities for delivering hundreds of millions of pounds worth of much needed local infrastructure, and associated construction jobs, especially in towns outside the Core Cities where the need is greatest. Government should be persuaded to take a more expansive approach to TIF.
Introduction — BCSC (British Council of Shopping Centres) is the industry body for the retail property sector, representing more than 2,500 property professionals drawn from over 450 organisations. Our membership includes investors, developers, owners, asset managers, retailers and public sector employees. Our members’ properties play a significant and strategic role in the success of town centres, where retail sales still accounted for 42% of total sales in 2011.74 — The retail and retail property industries together play a strategic role in sustaining communities, with 7.6 million people currently employed in the UK in both sectors. In 2008 around £6 billion was invested in the UK by the retail property industry, creating tens of thousands of new jobs. Since 2008, as a consequence of the economic crisis the retail property pipeline has faltered, with many schemes effectively on hold, awaiting a significant improvement in economic conditions before building can commence. Further, shopping centres, and town centres, need constant investment to retain, let alone appreciate value and ensure they are fit for purpose for modern retailer requirements. Asset management, investing in the modernisation of physical space as one example, also generates significant economic activity and improves the appearance of town centre environments. However with excessive property tax, principally as a result of the business rates system and scarce capital available, levels of investment in this area are also significantly reduced. 74 Department for Business, Innovation & Skills/Genecon and Partners “Understanding High Street Performance” (2011) Ev 166 Business, Innovation and Skills Committee: Evidence
— The consequence of a decline in development and asset management activity is that jobs, in construction and in retail, are not being created, public spaces are not being renovated, and many town centres are suffering further degradation and decline. — Undeniably retail is undergoing structural changes driven by advances in new technology and the impact this is having on consumers purchasing habits and the impact of demographic change, particularly those associated with an aging population. But the most significant impact of multi- channel retailing on our industry is the reduction in the quantum of physical space required overall by multiple retailers to reach their desired market, the resultant obsolete space, where this is likely to be located in the retail hierarchy, and how the industry deals with this oversupply. — Given our unique position at the heart of the retail property industry—an industry which has played a crucial part in the urban renaissance of many of our towns and cities, including in recent years Liverpool, Manchester and Bristol—we welcome the BIS Select Committee undertaking this Inquiry into the future of the retail sector and would be pleased to expand on this initial thoughts during the Inquiry’s Oral Evidence Sessions.
Industry Trends — Recent research commissioned by ourselves concluded that 25% of total UK retail sales are estimated to go to online channels by 2020, driven by m-commerce.75 The majority of legacy retailers in the UK will be net reducers of space in the coming decade as UK retail portfolios go through a period of adjustment and rationalisation. This could result in up to 150 million sq. ft. (20%) of current retail space across the UK being surplus to modern retailing requirements in its current form. This contraction is occurring following considerable expansion in retail space over the past 50 years, but whereas we have planned for expansion there does not appear to be sufficient strategic thinking applied to planning for a reduction of retail floorspace, in many locations, and how this can be turned into an opportunity and an advantage. — However physical stores are still, and will remain a key channel in a multi-channel retail business model, particularly with the rise of click and collect. Further, stores also represent an opportunity for brand engagement and inspiration, as well as the key end distribution point. In essence, these channels have to complement each other, rather than compete. — For asset managers, one of the key challenges is around creating the right, adaptable space for retailers in a multi-channel world. They must also attempt to incorporate enough leisure and catering into schemes to create experience and drive dwell time. For local shopping schemes, they must ensure that they are as convenient as possible, with the focus on the ease and cost of access. — Shopping centres have an advantage over retail locations with multi ownership. They have the opportunity to be more creative and flexible with the space available, and over time, to make the right space available if it does not exist. However clearly they are not immune from the difficulties facing the retail market, and indeed we have seen from recent research that in some locations shopping centre vacancies far exceed high street vacancies.76 — Where we see single ownership of a town centre, supported by coordinated management and a proactive local council, there is often more chance of adapting to the changing market. This may require some form of intervention to make change happen, which will probably come from local councils and central government, supported by private sector finance and expertise.
Implementation of the Portas Review — BCSC welcomed many, but certainly not all, of Mary Portas’ recommendations, and indeed worked closely with her and her team during the passage of her Review. Whilst supporting the concept of Portas Pilots and town teams, through for example a mentoring programme that we established with the British Property Federation (BPF) and free membership of our organisation and subsequent access to research and our education programmes, we are focussed on the need for Government to recognise the structural changes occurring in the retail market and the need for strategic policy intervention to ensure that the retail and retail property sectors continue to add to local economic growth. — As such our focus has been on the property related issues associated with distressed, or declining, towns. This could be as a result of ownership, affordability, design, level of debt, demand or quality of stock for example. 75 BCSC / JLL “The Rise and Rise of Multi-Channel Retailing” (2012) 76 Local Data Company Shop Vacancy report “More Clicks, Less Bricks” (2012) Business, Innovation and Skills Committee: Evidence Ev 167
— We believe that badly managed property is a visible symptom of the struggle some town centres are facing. There is a need to consider ways of getting investment into failing or indebted town centre properties, with the ultimate aim of helping to address issues of physical degeneration, falling footfall, reduced investment and associated social decline in those towns. The underlying problems are complex and the challenges in tackling these issues are significant. As such they can only be effectively addressed if the right organisations and the right people come together and make it happen. In our response to the Portas Review, we announced our intention to work with an industry led Taskforce to look at a broad range of issues which have an impact on bringing commercial property into use or attracting investment to improve the prospects of high streets and town centres. The Taskforce is private sector led with Government officials in attendance as observers. It includes a range of public and private sector stakeholders with knowledge of mechanisms that might be used to encourage investment into failed retail property assets using private sector resource and expertise and local councils’ legal and regulatory powers. We aim to publish our thoughts by July 2013, and would be willing to share with the Inquiry our initial thinking.
Regulation and Costs
Business rates revaluation — Government’s decision to postpone the revaluation of business rates will unfairly penalise hundreds of thousands of businesses by requiring them to pay excessive levels of tax for an additional two years in order to subsidise those in more prosperous areas. This will harm businesses in regions and sectors of the economy that have underperformed relatively since 2008, and so will have a particularly devastating impact on struggling high streets. — We called on Government to amend the Growth and Infrastructure Bill in order for there to be an open and evidence-based debate on the implications of the delay for towns and cities in England and Wales. Despite the level of opposition to the change, and the lack of any public support, Government did not accept our recommendations and have forged ahead with this damaging policy. — The purpose of rating revaluation is to achieve fairness of tax liabilities by ensuring rateable values are based upon up-to-date rental values and therefore to redistribute liability in line with relative movements in property values since the previous revaluation. As a consequence, revaluations create winners and losers, with those whose properties/locations/sectors have performed less well relatively since the previous revaluation benefitting from lower bills. Delaying the revaluation creates unfairness by requiring struggling businesses to subsidise those that have fared relatively better.
Winners and losers — The Government has attempted to justify postponement by claiming that “800,000 premises would see a real-terms rise in their rates bill, where only 300,000 premises would see their bill fall”, and further alleges, without any evidence, that “smaller and medium firms are likely to be harder hit”. — Independent evidence and the work of rating specialists outside the VOA cause us to be extremely sceptical about the Government’s statements.
The impact on retail — Rental data shows that some of the sharpest rental falls have been seen in high street retail, particularly in towns and regions that have struggled since 2008. Forcing these areas to pay artificially high business rates for an additional two years will undermine much of the welcome work that the Government has done to try and arrest the decline of the high street, through the Portas Review and other initiatives. Indeed, independent data from the surveying firm Colliers shows 15 towns that have been selected as “Portas Pilots” are affected by this, and that 13 of these will be worse off as a result of the postponement. — The collapse in retail rents outside of the capital’s prime retailing locations is endemic. Analysis of major retail centres reveals the following rental value changes between March 2008 and September 2012: Leeds -31%, Nottingham -27%, Bristol -25%, Sheffield -21%, Manchester -19%, Newcastle -18%, Birmingham -11%, London West End +10%. Of these cities just London and Birmingham would have expected have seen higher rates bills following a 2015 revaluation. — PwC data shows that in the 12 months to September 2012, the retail sector experienced 1,743 insolvencies, up from 1,600 the previous year. Notable casualties in 2013 have included HMV, Blockbuster and Jessops. Not only will postponement force many retailers to pay artificially high bills until 2017 leading to further retail insolvencies and lost revenue to Government, but also exacerbate the significant hurdles that already exist to investing in struggling high streets. Ev 168 Business, Innovation and Skills Committee: Evidence
Annual business rates uplift — The business rate multiplier has risen to over 47p in the pound this year, making it the highest level of corporate tax in the UK, and amongst the highest levels of local property tax in the European Union. Government Ministers have the power not to increase the business rate by the maximum possible as measured by September’s Retail Prices Index (RPI), which in 2012 was 2.6%, following increases of 4.6% and 5.6% in the previous two years. These rises taken together have added around £500 million to the retail sector’s rates liability. — The link to RPI means that every year, with or without revaluation, the Government takes out of the property sector more tax by way of business rates. Real property represents a declining proportion of the total economy and it makes little sense to keep increasing the tax take from it. — Once again Ministers did not invoke this power, and we would welcome the Inquiry advocating that Government takes a much more proactive approach to this issue and commits to capping next year’s Uniform Business Rate (UBR) in line with that Bank of England’s target for inflation of 2% as measured by the Consumer Price Index (CPI).
Empty property rate relief — Government should introduce a more expansive policy on targeted relief on empty property than is planned. We have for some time been calling for the relief to be targeted where there is intent to make a significant investment in redeveloping or refurbishing property. This would ensure the relief is used as a force for good, an incentive to invest in the fabric of our towns and cities and create all the associate economic benefits this would bring. Despite being a welcome acknowledgement of the impact of empty property rates on commercial development the current proposals, targeted at new build only and restricted by European State Aid rules, announced in the last Autumn Statement do not go anywhere near far enough.
Planning
Use Class Order (UCO) reform — We welcomed the objective behind suggesting reform of the Use Class Order (UCO) to make it easier to change use from retail to other more economically viable uses. It should perhaps be recognised here that the UCO is not supposed to be restrictive but permissive. However there are of course some conditions attached to that support. The issue is to understand and respond to structural changes highlighted above. For example the loss of HMV and Jessops from the high street would not be addressed by changes to the UCO—allowing, and planning positively for, some town centres to contract and allowing alternative uses fill the void might however increase footfall and subsequent consumer expenditure in a town, ultimately benefitting retailers’ turnover. — The focus of any reform should therefore be on how local planning authorities in consultation with stakeholders including property owners forecast both demand and supply and understand what is then best, and realistic, for a centre. Our members come across a large number of local planning authorities that cling onto out of date policies that seek to protect A1 uses. In many smaller centres if the high street contracts by changes of use and redevelopment on their peripheries, where some floorspace may be outdated and obsolete, complementary uses could be brought forward and help underpin the viability of what is left. — However this policy is not without its consequences. For example a move to allow retail to residential as a change to all permitted development rights may lead to some local landlords evicting retail tenants and selling the units to residential developers to gain a quick profit where the differential in land values make this economically rational behaviour. Without an element of control therefore this measure may actually contribute to the dissolution of town centres unless planned for, ie sites where this change is possible are clearly identified in response to an obvious oversupply of retail. It should also allow for change from retail to other uses, not just residential. — Therefore any changes to permitted development rights at local level would have to be fully accompanied by supporting evidence to demonstrate that a change in the rights would not undermine supply of premises for the particular sector concerned. There would also need to be checks and balances and a proper testing of proposals before they become local policy. — In summary we believe the challenge is how do you avoid this driving up retail rents and make sure it is the peripheral retail units that change and not the central ones, where the detrimental impact on footfall and vitality of the high street would be greatest? Perhaps this needs to be linked to public funding to help small retailers relocate from peripheral units (which can then change to residential or office etc.) to more central high street units. Business, Innovation and Skills Committee: Evidence Ev 169
Tax Increment Financing — Over the past five years commercial property development has all but collapsed, our own data showing that no new town centre shopping centres opened in 2012 for the first time in around 30 years.77 We have campaigned for a more widespread use of Tax Increment Financing (TIF) to bridge the viability gap between making a new town centre investment a possibility or not, and generating significant economic benefit and new, redeveloped, buildings that provide the premises that modern retailer, and other occupiers, need to expand their businesses from. However we remain disappointed that Government has not utilised TIF to its full effect, including in particular by not supporting a workable developer led Pay As You Go (PAYG) model. We continue to believe this model could present real opportunities for delivering hundreds of millions of pounds worth of much needed local infrastructure, and associated construction jobs, especially in towns outside the Core Cities where the need is greatest. — The benefit of PAYG is that, in our view, there does not need to be any additional public borrowing to deliver infrastructure. The model allows for the risk to be entirely transferred to the private sector, where appropriate. The public infrastructure expenditure that is a necessary condition of development can be financed from the developer’s own resources, equity or debt—on the basis that the developer is then repaid out of uplift in the tax generated from increased business rates. The construction risk and the risk that the tax increment will fall short of expectations are therefore fully transferred to the developer. — There are a number of “shovel ready” urban projects—with planning permissions, anchor tenants committed and investment funding—ready to go but prevented from starting because of the financial obligation to cover all the cost of public infrastructure in a manner established in the “financially exuberant” 1980s period and incapable of being supported in current conditions unless an imaginative approach like PAYG TIF is used. 15 April 2013
Written evidence submitted by the British Property Federation 1. The British Property Federation (BPF) is the trade association for the property investment sector. We represent larger investors in property; companies and pension funds who invest in all forms of property for the benefit of their shareholders and UK pensioners. 2. Our members have about 15% of their retail property holdings in the high street and have other high street interests including leisure facilities and offices. Members’ holdings of high street retail premises have generally reduced over the past couple of decades as the sector’s retail investment has diversified into shopping centre’s and retail parks, which our members can more easily control the ambience of and that suits the floor space demanded by modern large retails. 3. We welcome the opportunity to respond to the Committee and have tried to address each of the questions in turn for the purposes of this investigation. 4. We do not require this submission to be kept confidential.
Implementation of the Department’s Action Points Contained in the Retail Sector Strategy Document 5. The BPF is supportive of the action points put forward in the Retail Sector Strategy document particularly in relation to Local Enterprise Partnerships and Business Improvement Districts. We agree that retailers should be at the forefront of these initiatives driving them forward, but, and particularly in respect to BIDs, we also feel that landlords have a big part to play in how high streets can be improved and managed. 6. BIDs are widely regarded as being important vehicles for tackling local issues and enhancing an area. The BPF has been fully supportive of BIDs but we believe that landlord involvement is a key area which is still being underrepresented. In working to enhance areas and making them more attractive to both retailers and property owners, BIDs can contribute to regeneration of previously declining areas which in turn makes these areas more attractive to prospective tenants and thus helping to increase retailer activity. 7. Currently landlord involvement in BIDs is purely on a voluntary basis. Whilst this may work for some, this can lead to situations where landlords, who do not wish to contribute to a BID, are still able to take advantage of the positive effects at the expense of those who are contributing. We therefore maintain that landlord involvement should be subject to the same rules as occupier involvement, where a ballot is held and is binding on all. 8. We believe BIDs could also perform greater strategic functions aside from their daily maintenance duties. This could include creating an infrastructure by which to manage high streets, much like that of a shopping centre, provide support for start up businesses and take an active role in local planning decisions. 77 BCSC / Lunson Mitchenall Shopping Centre Pipeline (2012) Ev 170 Business, Innovation and Skills Committee: Evidence
9. Primary legislation via the Business Rates Supplement Act 2009, allows for the formal participation of landlords in London, but secondary legislation is still required in order to formalise this requirement. The Department for Communities and Local Government has conducted an informal consultation on landlord BIDs but against a backdrop of other local government finance reforms, progress has been very slow and any formal consultation has been delayed until the middle of the year. The BPF strongly believes that BIDs would be further strengthened by formal landlord involvement, both through providing another source of funds for BIDs, and tying landlords in to a mutually agreed business plan for BID areas.
Progress made in Implementing the Recommendations of the Portas Review 10. The Portas Review acknowledged the significant challenges facing high street retail, some cyclical, but others significant structural changes in the way people shop. Mary Portas herself recognised that, for some areas, retail was beyond resurrection but for others, a renewed focus and shared effort could help turnaround decline. The creation and implementation of the 27 Portas pilots has proved successful in bringing together key stakeholders and focusing attention, finance and resources on some of the nation’s high streets. The national pilots meetings have allowed the representatives of the pilots to learn new ideas and share best practice. Much of the initial focus has been on the short-term and arresting decline but we feel a lot more work is needed to realise the long term aspirations of the pilots and town teams. 11. As a key industry stakeholder, the BPF has been engaged with the pilots from the early stages and has worked with other industry bodies, including the British Council of Shopping Centres, to provide pilots with free support and advice. However, take up of advice has been sporadic largely due in part to the unpreparedness of the town teams and a lack of understanding on how to translate their ideas into a strategic business plan which considers the short, medium and long term vision of the area. A freedom of information request by the Independent newspaper indicated that only a small proportion of the £1.2 million awarded to the pilots has been spent and whilst we agree that the emphasis should be placed on communities harnessing and combining their energies, we do feel that it highlights a lack of clear planning and support.78 12. It has also been evident from our meetings with the pilots that many have experienced difficulties in engaging their local authority leaders. Local authorities are not only best placed to understand the needs and requirements of their local community they also have certain powers which could help pilots implement their ideas and add weight to business plans. Their involvement is, therefore, vital and if not fully on board can act as a barrier to recommendations getting off the ground. 13. Centrally, the roll out of the Portas recommendations has been hampered by instability, the creation of a number of Forums which have then been disbanded, Ministerial change and high staff turnover. These issues have been further hindered by the fact that work on the implementation of the Portas recommendations has been cross-departmental and as such continues to lack a central delivery driving force.
The Impact of On-line Sales and Direct Sales on High Street Retailers 14. The combined impact of the recession on retail spending and changing consumer habits, has longed been blamed for the decline of the high street, resulting in a surplus of not only secondary retail, which is no longer fit for purpose, but also multiple retailers. In a report compiled by the Local Data Company for PWC, multiple retailers have, for the second consecutive year, shown a decline in their numbers from -0.25% in 2011 to -2.7% in 2012.79 In their analysis, PWC claimed that failed chains shared two common issues, too many stores and too little multi-channel activity.80 15. Primary retail has remained relatively strong with some of the best shopping malls boasting a vacancy rate of 1% or less. Tertiary locations, primarily small parades of shops located close to housing estates and which serve a specific catchment area and are able to take advantage of passing footfall, have also been able to withstand the impact of changes in shopping habits. 16. However, secondary retail, particularly around peripheral high streets areas, has seen significant decline which has led to blight where units cannot be filled. In cases such as these, the BPF has called for greater action to be taken to assist with the transition of secondary retail to other uses such as residential and or community uses likes doctors and dentist surgeries. We have voiced our support of the government’s proposals to make it easier for commercial properties to be converted to residential uses but feel that that these proposals could go beyond the conversion of office and light industrial to also include retail units. This would not only serve to shrink and reposition the high street, creating an area that is commercially viable, but would also help alleviate the shortage of residential property. 17. PWC’s report emphasises that retailers need to not only reflect on the traditional functions of retailing but, in age where the consumer is able to shop in store and online via a variety of mediums, the omni-channel retail experience needs to be given greater attention with retailers linking their physical store formats to their online presence. 78 Independent February 2013 79 LDC Press Release, February 2013 80 LDC Press Release, February 2013 Business, Innovation and Skills Committee: Evidence Ev 171
The Skills needed for a Successful Sector
18. Retailing should be an exciting and rewarding sector, but the demands and pressures of the current climate can often overshadow this energy, particularly for independent retailers. The BPF is acutely aware that independent retailers need robust support from larger organisations on issues such as marketing, finance and HR. Good examples of retailer mentoring can be seen from the likes of Tesco, but we believe that the field is still wide open for more work in this area.
The Regulations and Costs Affecting the Sector
Business rates and business rate escalator
19. The Government’s policy on both aspects of the business rate system is of increasing concern to our members. The annual uplift, linked to RPI, has had a severe compounding effect on what businesses pay, with rates bills in most parts of the country increasing far more rapidly than rents and by over 200% since 1991 overall. Such an escalator has meant that the tax taken from business rates has risen significantly and now ranks as the fourth largest contributor of revenue to Government, amongst all taxes. The constant tweaks Government has to make to relieve the burden on small businesses also raises questions about the basis of this tax. To some extent the rates burden should self-adjust at times of revaluation, redistributing the load between those prospering and those suffering decline.
20. The Government’s decision to postpone the business rates revaluations has therefore been strongly criticised by the industry. Whilst businesses have traditionally been supportive of the system which has provided certainty over their liability, current values continue to reflect 2008 rental values, which, being at the peak of the market, no longer represents accurate rate values for the current market. The BPF and other industry bodies have called on Government to reconsider its decision to postpone the revaluation of business rates until 2017 citing that any postponement risks hampering the future of struggling high streets.
21. Delay of the revaluation of business rates also serves to indirectly benefit online retailers who are not subject to such costs. More needs to be done to create an even playing field between internet retailers and high street retailers in order to help the survival of the high street.
Empty rates
22. The empty rates tax has been a key issue that the BPF has campaigned on. Empty rates ultimately drive money away from where it is most needed in helping to maintain and regenerate the high street and is instead steered to fund other Government spending. Empty units not only mean lost revenue for landlords but the double costs of empty rates with loss of rent, has meant that savings, which otherwise would have been reinvested back into units, are being eroded away to pay this tax. Research conducted by RICS indicated that 89% of their membership felt that empty property rates was restrictive to economic growth and had a negative effect on investment across the sector.81
23. Further research released by the Taxpayers Alliance revealed that for the year 2011–12, more than 1.1 billion was paid in empty property rates.82 This amount was an increase of 19% from 2009–10. The empty rates regime, rather than encouraging landlords to let their properties at a time when tenants are difficult to find, has led to some landlords choosing to demolish their properties in order to release them from the rates burden. Empty property rates are also an added burden for pensioners who have commercial assets as part of their pension pot but who are finding their savings being eroded away in order to meet this tax.
24. The BPF cautiously welcomed the Chancellor’s Autumn Statement which committed to exempt newly built commercial property completed between 1 October 2013 and 30 September 2016 from empty rates for the first 18 months. However, this and the three and six months empty rates relief for commercial and industrial 81 RICS Empty Properties Research 2013 82 Taxpayers Alliance April 2013 83 RICS Empty Properties Research 2013 Ev 172 Business, Innovation and Skills Committee: Evidence
properties, no longer feels relevant and the industry has called for greater incentives to be offered to maintain stock levels and encourage development.84 15 April 2013
Written evidence submitted by British Retail Consortium Overview 1. The BRC is the voice of the whole retail sector, from small independent stores to very large multiple retailers operating internationally. Our role is to lead the way in discussions across governments and stakeholders to create the conditions for a vibrant and growing sector. Retail employs three million people— the UK’s largest private sector employer—and generates over £300 billion of sales each year.85,86 2. The BRC and our members welcome the recent increase in focus on the retail sector. This Inquiry, the BIS Retail Strategy, the UKTI International Action Plan, the European Commission’s Retail Action Plan, the Portas Review and the Future High Streets Forum all indicate the importance of the sector in the UK. The BRC is focusing efforts on working with governments to achieve our goal of harmonising these strategic approaches, focusing our efforts and making sure we achieve our desired outcomes. 3. Our industry is undergoing a structural transformation on a scale that we have not seen in the past. Consumers have proved themselves very adaptable to new technologies and hungry for the new ideas from our sector that are improving and enhancing the experience of shopping. Critically, this on-going development of digital technology and the explosion of different ways to satisfy consumer demand are having a monumental impact, not only on the sector but the shape of our communities and society. This represents a very significant increase in the impact of commercial decision-making beyond the boundaries of business, into the shape, structure and culture of where we live and work. 4. The retail sector and central and local government have already come together to begin to develop frameworks to successfully manage these changes. This is the right approach and we believe that the Select Committee Inquiry is a good place to examine the work of all the partners in this space, share excellent practice and further the opportunities to shape and model the retail of the future around the goals of consumers and their communities. 5. We also believe that the Select Committee has provided a unique opportunity to influence the quality of future discussion. There is a tendency among some commentators to set different parts of the retail sector in conflict and then make generalisations, for example, that the development of large scale retailing or the expansion of online sales are entirely responsible for the closure of shops in high streets. Retailers and every part of government can bring influence to bear on the public discussion so that social change around retail and the full range of factors and partners involved in finding whole-community solutions is well-understood.
Section 1: Implementation of the Department’s Action Points Contained in the Retail Sector Strategy Document 6. The BRC welcomes the core aims of the BIS Retail Sector Strategy and International Action Plan and we have been working with the Department’s Retail Team to progress key elements. Our views in relation to each of the four strands of the strategy are set out below. We look forward to working with BIS, UKTI and others in Government to achieve our joint aims. 7. International: An important part of the international strategy is getting Government agencies to link up and work together to help remove barriers to retail trade and investment in non-EU markets. We would like to see the removal of unjustified and protectionist measures in place in some non-EU markets that currently make it difficult for retailers to invest freely. Convincing decision makers of the wider societal benefits that investment from UK retailers would bring to these countries will be key. Addressing tariff barriers in non-EU countries that inhibit the ability of UK retailers to sell goods directly to customers in other countries will also be crucial. The reduction or removal of these barriers can give a significant boost to cross-border e-commerce retail sales from the UK. 8. The strategy places strong emphasis on promoting British brands and in particular luxury brands. It is important to remember that these brands represent only one element of the sector. There are other parts of the industry that, while they could operate successfully internationally, also face the regulatory barriers to establishing their operations overseas. 9. Europe: There remain significant barriers to achieving a true Single European Market including in the areas of consumer rights and payments systems. The BIS Retail Sector Strategy strand relating to the European Union is an important milestone and a very positive step. We welcome the formation of the new group,87 led by BIS, to bring together retailers and officials from across Whitehall to create a better understanding of the 84 RICS Empty Properties Research 2013 85 UK Retail: Leading Globally, Serving Locally. Oxford Institute of Retail Management & BRC 2012 86 Appendix one: The UK Retail Sector 87 UK Retail Group (Europe) Business, Innovation and Skills Committee: Evidence Ev 173
impact of a range of EU policies on the retail sector. The group should focus in the first instance on how best to implement the actions identified in the European Commission’s Retail Action Plan. If this approach is successful, we would like to see the remit of the group expanded into other policy areas. 10. National: The focus on Better Regulation and enforcement issues mirrors our priorities. We believe that there remains significant scope to expand the Primary Authority scheme and that the One-In-Two-Out approach to deregulation could be strengthened by creating a clear link between the sectors affected by the ins and outs. This would help to develop stronger business endorsement. We have expanded on specific policy areas later in this submission. 11. Local: The Government’s continued focus on tackling high street challenges is welcomed by the BRC— we have provided further details of our priorities later in our evidence. We continue to work closely with the Gloucestershire Local Enterprise Partnership, GFirst, to support its activities as the Retail Pathfinder LEP.
Section 2: Progress made in Implementing the Recommendations of the Portas Review 12. The BRC supports many of the Portas Review findings, including the introduction of Portas Pilot towns. We are a long-standing advocate of effective local partnerships, such as Business Improvement Districts (BIDs), which can play a vital role in the development and delivery of tailored solutions to local challenges. We have supported many of the Portas Review findings but much of the report is yet to be implemented by Government. Momentum must be maintained to support and drive investment in high streets as they transition from twentieth century models into the digital age. The BRC is committed to the newly-formed Future High Streets Forum and looks forward to working in partnership as it goes forward to ensure delivery across a range of policies which can make a real difference to high streets in all locations. 13. It must also be acknowledged that bricks and mortar retailing is going through a period of consumer-led structural change as the lines between online and physical retailing are blurred. The growth of mobile technology has empowered consumers both in terms of purchase location but also in price and service. It is clear that the multichannel experience will play a growing role and destination centres will continue to attract consumers. High streets must therefore offer a unique experience, the right retail mix and good reasons to spend time and money. The precise nature of what is needed could differ considerably from location to location but effective management, a vision for future development, secure and safe locations, and accessibility will all be essential in achieving success. We should not seek to recreate an idealised historical high street but enable these locations to compete effectively. 14. Some recommendations put forward following the Portas Review required action by central government or other parties and action is still required in the areas are highlighted below. 15. Reforming the Business Rates Multiplier: The Government has committed to review the mechanism for increasing the Business Rates Multiplier when fiscal consolidation plans have been implemented. Although this commitment is welcome the BRC is disappointed that Business Rates reform could not come sooner. The existing approach of using a single month’s RPI snapshot creates uncertainty for property-intensive sectors such as retail. Moving to a CPI-based escalator using a longer run average will provide greater affordability and certainty. 16. Improving accessibility: Improved accessibility is a key issue for many town centre retailers. We strongly support the Portas Review proposal to introduce parking performance league tables. Progress with this recommendation requires central coordination and Government action to achieve efficient cost transparency and comparability. 17. Strengthening BIDs and local partnerships: As noted above, effective local partnerships can play a crucial role in improving the prospects of a town or city centre locations. We support the Portas Review recommendation to create Super BIDs, by allowing landlords to play a formal role in these partnerships and enabling them to take on a broader remit. This could include taking a greater role in developing the strategic direction of the areas in which they operate. 18. Facilitate a better relationship between landlord and tenant: Rents, service charges and the changing requirements of tenants are integral to any future high streets discussion. The Portas Review recommended a contract of care between landlords and commercial tenants by promoting the Leasing Code especially for small businesses. The BRC fully supports innovative lease structures and therefore, in partnership with RICS, we have created a model lease specifically designed for SMEs. This SME lease will help to simplify the complex leasing negotiations between landlords and tenants to enable swifter uptake of vacant space on our high streets—delivering benefits for both parties. We strongly recommend that Government and local interests support and encourage further take up of the new lease. 19. Use classes and changing shape of the high street: A commitment to review and monitor use classes could help encourage appropriate investment as town centres continue to evolve in the future. There has been limited action so far following a consultation in 2012 with restrictions relaxed for flats above shops. Budget 2013 committed to consult on allowing further flexibilities between use classes to support change of use from certain retail uses to increase responsiveness within the planning system. Many town centres are going through significant structural changes and further exploration in this area is timely. Ev 174 Business, Innovation and Skills Committee: Evidence
20. In spite of this, use class relaxation is not an end in itself and should not lead local planning authorities to overlook the need to develop viable futures for their town centres. Local authorities have a responsibility to ensure high streets have a clear vision, are well managed and have the right retail and leisure mix.
Section 3: The Impact of Online Sales and Direct Sales on High Street Retailers 21. The future of the high street, along with all other forms of retailing, will be shaped by the consumer. Retail responds to changing consumer trends, as competition drives innovation. The best retailers meet consumer needs, whatever way customers choose to shop. 22. Online sales are the fastest growing area of retail in the UK. Recent data shows that the internet accounts for more than 10% of all sales in the UK and that we are the third largest online market globally, equivalent to the combined online sales of France and Germany. Customers clearly value the choice and convenience that online retailing frequently provides. However, at the same time, for many customers factors such as the quality of customer service and the ability to touch and feel a product remain significant. 23. How retailers respond to these different considerations will dictate whether or not they are successful. The key is to make it as easy as possible for customers to access the goods and services that they want, in the way that best suits them. The future is not a conflict between shopping on the high street and shopping online. The best retailers will offer true customer choice and flexibility, achieving a complementary cross-channel experience that best suits their customer and their business model. 24. At the same time, it is important that policy makers are not tempted to take a view that blocks one channel or artificially supports another, which risks damaging both. What Government can ensure is that the right framework is in place to give consumers, businesses and the wider community the opportunity to maximise the potential of every high street and, at the same time, competition continues to drive innovation. 25. E-commerce provides commercial opportunity. It expands markets from the immediate geographical area to the global marketplace. Most importantly it gives the consumer an unrivalled level of choice. Unconstrained by opening times, location or availability, e-commerce makes it cost effective to supply tailored products to a virtually unlimited audience. Policy and regulation can support UK retailers looking to export their goods and services. 26. Successful high streets will become places people visit for a wider experience, encompassing more than just shopping. The retail offer must work with, and complement, the omni-channel experience. Many locations are indeed already doing this with successful local partnerships driving innovation, fostering the optimal retail, social and municipal mix. For many the focus will be on marketing, accessibility and ensuring there is a shared local vision for the retail centre.
Section 4: The Skills needed for a Successful Sector 27. As the UK’s largest private sector employer, retailers are uniquely placed to offer a wide range of job and career opportunities at different levels and for those with different skills. As well as providing employees with broad career and development opportunities, retailers invest in their people, offering a wide range of training, up-skilling those with few—or even no—formal qualifications or building on skills already acquired elsewhere. This investment is equivalent to £1,275 per employee each year.88 For retailers to maintain this investment it is vital the Government delivers a skills system which is simpler, more flexible and employer led. 28. Apprenticeships: The retail sector strongly supports apprenticeships, recognising the clear value that they provide to both employees and employers. In recent years many retailers have committed to increasing the number of apprenticeships they offer; helping give more people the opportunity to gain a recognised qualification and to progress their career. Alongside the growth in the number of retail apprenticeships, retailers are committed to ensuring the quality of the schemes they offer. 29. The apprenticeship system is extremely complex. We welcome recent activity to identify ways in which red tape and bureaucracy can be removed from the system and look forward to further work on changes to ensure employers’ concerns are addressed, in particular, in relation to the issues faced by small and medium size businesses (SMEs). 30. Apprenticeships which are flexible, fit-for-purpose and able to adapt to changes in the economy, in technology and in the labour market will ensure the greatest possible uptake. The BRC welcomed the Richard Review recommendation that employers need to take a greater role in leading and shaping apprenticeships and would add that we need to recognise the varying needs and demands of different sectors. 31. Traineeships: The retail sector strongly supports ongoing efforts to help young people who are keen to work and require additional training to develop the skills and experience they need to move into apprenticeships and forward in their careers. The BRC believes traineeships can provide one effective way to address this issue if they have the flexibility to meet the needs of individuals and different sectors. While education/training providers will take the lead in this area, employers can be engaged in the development of traineeship programmes to ensure their needs are reflected. It should be made straightforward for employers to offer work 88 National Employer Skills Survey Business, Innovation and Skills Committee: Evidence Ev 175
placements as part of these programmes, including through a simple and effective funding model. More clarity is also needed on how the proposed traineeships work alongside the apprenticeships currently offered by retailers. 32. Skills for the future: As a customer-facing sector, communication and customer service skills remain essential for success. Our members have told us that such fundamental skills are frequently lacking in recruitment candidates. This feeds into a broader perception that many potential employees, particularly school leavers, are not “work ready”. This can mean a lack of “soft” skills such as time-keeping, personal presentation and work etiquette which then need to be developed by the employer. 33. Members have also identified a lack of STEM skills and this was highlighted in the Government’s Retail Strategy Report, published in October 2012. By way of example, changes to technology mean that skilled multichannel staff are in high demand but they are in short supply. Teaching young people core IT skills will become as vital for a career in parts of retailers’ operations in the future as other core customer service skills are at present. Furthermore a reduction in practical skills, such as cookery and home improvement knowledge, has been noted. 34. These skills gaps not only have implications for employers who need to assist their staff to address them, but for the country more widely. The BRC would therefore welcome a clear focus on the importance of employability, STEM and practical skills within the classroom.
Section 5: The Regulations and Costs Affecting the Sector 35. Impact of regulation: Retail is subject to a wide range of regulators/enforcers. One large retailer has identified as many as 65 different enforcers and regulators which may potentially interact with it in the course of its daily business. It is therefore important that regulation and enforcement should be as joined up as possible. 36. Given the wide range of regulators that have an impact on retail, Better Regulation approaches have, to some extent, helped reduce the impact of regulatory costs. These include the Impact Assessment process and the need for sign off by the Regulatory Policy Committee. The One-In-Two-Out approach is welcomed, though the potential for the greatest benefits are reduced by the failure to link the sector impacted by the “in” to the sector advantaged by the “out”. 37. The Red Tape Challenge has still to realise its potential for the retail sector. The Cabinet Office recently reported that 64% of retail specific regulations identified for simplification or removal have been addressed. However, 98 of these 165 regulations relate to obsolete “Trading with the Enemy” measures. It has resulted in some small changes such as the reduction in the age for the sale of Christmas crackers and the end of the requirement to advise the TV licensing authorities every time a television was sold. However, it has been disappointing on greater challenges such as the simplification and consolidation of the legislation on Age Restricted Sales. 38. Co-ordinated enforcement: Retail is a strong supporter of public, rather than private, enforcement. Public enforcement plays a vital role in the creation and maintenance of a level playing field while protecting consumers. In recognition of the need to act efficiently we fully support progressively increasing the co- ordination of enforcement activity, especially through the Primary Authority scheme. We welcome its extension and believe that it should be extended yet further to include, for example, age-related sales of alcohol and knives and fire safety. The scheme is beneficial for both businesses and local government because it releases resources from enforcing authorities to concentrate on traders who are not in such schemes and, indeed, to focus on rogue traders. Moreover, when allied to earned recognition (where retailers own, often very costly due diligence procedures are recognised and taken into account by enforcers) there is a capacity for the Primary Authority to assess these procedures and save money for the public purse. 39. Costs: Recent independent research by Oxford Economics89 shows that, despite the continued very challenging trading conditions, retailers’ operating costs have grown significantly throughout the recession. Taking labour, property, utilities and other costs together, input costs for retailers increased by 21% between 2006 and 2012. Retailers faced input costs totalling approximately £116 billion in 2012, according to Oxford Economics’ estimates, up from just over £96 billion in 2006. 40. Over the same period retailers have increased Gross Value Added by just 12%. So an extra £20 billion in non-merchandise costs have had to be absorbed at a time of weak consumer spending growth and industry- wide structural change. 41. Certain elements of retailers’ cost bases, notably aspects of Government controlled costs, have grown particularly rapidly despite the recession. The indexation of Business Rates’ liabilities has become ever more challenging for property intensive retailers to absorb. Business Rates have increased from just over £5.5 billion in 2007 to over £7 billion in 2012, with over £0.5 billion added since 2011. The impact is particularly stark when considered as a proportion of retail’s rent bill. Rates are equivalent to about half of rent values currently— an unprecedented high. 42. Recent measures to support business, such as rate relief for SMEs and the Budget 2013 announcement about national insurance have been welcomed by BRC members as useful contributions to creating a more 89 UK Retail: Leading Globally, Serving Locally. Oxford Institute of Retail Management & BRC 2012 Ev 176 Business, Innovation and Skills Committee: Evidence
positive environment for retail. A Government focus on providing improved affordability and certainty for retailers in relation to centrally driven costs will provide stability and a more positive environment for growth.
43. Environmental taxes also fall disproportionally on the sector. Measures such as the Carbon Reduction Commitment are moving funds from investment in energy saving and instead producing onerous administrative and compliance costs. We would like to see a harmonisation and simplification of the policy landscape in order to unlock the potential within the retail sector to maximise its contribution towards the UK’s climate change targets. There is a body of opinion that the tax system requires a complete restructure and elements of it, such as business rates, are now becoming an economic disincentive to opening stores instead of an accepted cost of doing business (as with other taxes). There are differing views on what is a viable outcome and further work is required. 15 April 2013
APPENDIX ONE
THE UK RETAIL SECTOR
1. Retail and the Economy Retail sales totalled £311 billion in 2012, equivalent to around c.20% of nominal UK GDP. Retail contributes c.5% of UK Gross Domestic Product. Retailers purchase around £180 billion worth of goods for resale, supporting £47 billion of output from other sectors. 9% of all VAT-registered businesses in the UK are retailers, with the total number currently at 189,280. In 2012 there were 287,100 retail outlets in the UK.
2. Internet Sales Online retail sales c. £29 billion in 2012. Online approximately 10% of total sales in 2012 (8% in 2011).
3. Employment Three million retail worker in UK. Largest private sector employer (10.5% of total employment). Retail employment is far more flexible than most other sectors—the sector has a much higher proportion of part-time workers—55% of our employees are part time. 60% of our employees are women compared with 49% in the whole economy. Retailers account for over 12% of the total training spend in the UK. Retailers invest £1,275 in training per employee per year, compared with just over £800 in the financial sector and £1,200 in manufacturing.
4. Contribution to the Public Purse The retail sector pays £17.5 billion per year, 9% of the UK total, of the four largest taxes. Around £5 billion per year (28% of the total) is spent on Business Rates.
5. Investment 14% of all UK investment made by large non-financial sector firms is made by large retailers. Retailers pay out £4 billion every year in dividends to shareholders, around 5% of the UK total. UK consumers currently pay around 5% less for their basket of goods than citizens of the Eurozone.
6. Productivity Labour productivity in the UK retail sector rose by over 40% from 1995 to 2007, compared with less than 10% in France and Germany.
7. International Expansion UK retailers’ international sales increased from an average of 34% of total in 2006 to 45% in 2011 (based on a sample of UK based large international retailers). 27% of the sample intended to consolidate UK exposure while expanding overseas. (Oxford Economics, 2011) Business, Innovation and Skills Committee: Evidence Ev 177
Supplementary written evidence received from the British Retail Consortium (BRC)
1. Over recent months there has been an unprecedented level of discussion about business rates in the media and in Parliament and the British Retail Consortium has been at the forefront of proposing that Government lead a review of the existing system.
2. The debate about business rates is essentially the debate about the future shape of our cities, our town centres, our high streets and our communities. Whilst retailers are a central player in all of these, there are many partners, large and small, and all have views about what needs to be done.
3. The BRC believes it is essential to identify the barriers to future growth and development and the drivers for decline and then offer proposals and solutions—backed up by sound research, evidence and data—to central and local government that can be delivered together.
4. To this end, the BRC has recently appointed tax experts EY to support a rigorous process of examining the options for reform of the business rates system and would like to provide the BIS Committee inquiry with details of the research and process.
5. One of the welcome benefits of the recent high profile discussions has been an increased level of information and informed argument in the public domain and so the BRC intends its ongoing contribution to be transparent, to invite debate and discussion and to be informed by partners’ contributions.
6. The outcome of this work will be a solid evidence base that can support good quality analysis and recommendations for changes to business rates that will contribute to UK economic growth, reinvigorate high streets and town centres across the country, and secure new retail jobs.
7. The list of problems with the system and possible solutions is very long indeed and has been well- rehearsed in recent months. Broadly, these break down into four areas: (a) Business rates are extremely high compared with other corporate taxes and are less competitive than property taxes in competitor countries. (b) The current business rates model does not respond adequately to economic and property market changes. (c) The current model is acting as a further disincentive to invest in secondary or non-prime centres that already find it hard to attract investment. (d) The digital transformation occurring within the retail sector has resulted in the business rate system further exacerbating cost divergence between traditional and digital retail platforms. Retailers’ decision making is being increasingly driven by tax advantages as the cost of operating on the high street is now increasingly out of sync with the economic reality and changing consumer preferences.
8. The BRC is very clear that at the start of this research project all of these areas have equal emphasis and will receive equal consideration.
9. The BRC understands the principal of fiscal neutrality from a Treasury perspective and the research will be very mindful of this. However, the research will not be restricted to looking at property taxes; it will also seek to understand the impact of changes in property taxes on employment levels and income tax and NI.
10. The BRC does not expect parliamentarians and Treasury experts to simply accept its word that business rates require reform and the first stage of the research will provide a model of what will happen in the economy, to town centres and to employment levels in the retail and related sectors if the present system continues without reform.
11. The BRC will explore and examine the options in each of the four areas identified and present the potential benefits and downside risks of each and will then be in a position to understand costs, sector impact, international comparisons, plus economic, commercial and political impact assessments and draw some conclusions about the preferred options which will be developed further.
12. The BRC research team will then run a series of economic forecasting models for the shortlisted options and focus on the beneficial second round effects such as employment, investment and subsequent tax receipts.
13. The research and proposals for reform are expected to be presented in March 2014.
14. The BRC will continue to engage with the Government and Treasury experts using the research to underpin the case for reforming the business rates system. 28 October 2013 Ev 178 Business, Innovation and Skills Committee: Evidence
Written evidence submitted by The Co-operative Group 1. About The Co-operative Group 1.1 From our first co-operative shop opened on Rochdale’s Toad Lane in 1844, The Co-operative Group now operates over 4,800 retail trading outlets, employs more than 100,000 people and has an annual turnover of more than £13 billion. We have a Co-operative Food store in every postal area in the UK. 1.2 We are the UK’s largest mutual business, owned not by private shareholders but by over seven million members. We are the UK’s fifth biggest food retailer, the leading convenience store operator and a major financial services provider. 1.3 Among our businesses are the number one funeral services provider in the UK, the largest commercial farming operation and over 750 Pharmacy branches, the vast majority of which are located on high streets close to a doctor’s surgery. 1.4 Investing in and maintaining the health of the UK retail sector is an important priority for the Group. High streets across the country are home to our food stores, bank branches, pharmacies, travel branches and funeralcare homes. We have traditionally traded in primary or secondary retail outlets close to high streets rather than out-of-town developments. We believe that this offers convenience and choice to our customers, as well as helping to support local high streets. 1.5 We also believe that the Group makes an important contribution to local communities, both in terms of finance, such as jobs created and income generated for the local economy and wider social benefits, such as our support for local voluntary and community90 groups and individuals. 1.6 The Co-operative Group is a member of the Confederation for British Industry, the British Retail Consortium, the Association of Convenience Stores and Business in the Community. We are also a member of the DCLG Future High Streets Forum.
2. The UK Retail Sector 2.1 The current tough economic environment has undoubtedly created severe challenges for retailers in the UK and for the customers and communities we serve. Since 2008, our customers have had to contend with a deep economic recession followed by sluggish growth, rising unemployment, wage stagnation and rising inflation, particularly within the food sector. Moreover, an uncertain employment market and a desire for households to pay down personal debt has led to lower consumer confidence and spending. Peter Marks, the Chief Executive of The Co-operative Group, has described recent trading conditions as “the toughest I’ve ever experienced in my 45 years of retailing”. 2.2 Although recent high profile events such as The Queen’s Diamond Jubilee celebrations and 2012 Olympic Games were able to generate short term economic growth, underlying economic trends have had an increasingly detrimental impact on consumer confidence, spending and retail trading. 2.3 The Co-operative Group understands the need for the government to tackle Britain’s national deficit and to introduce measures that balance the national budget. However, a programme of austerity has undoubtedly led to a drop in consumer demand. 2.4 We therefore welcome the decision of the BIS Select Committee to hold this enquiry into the UK Retail Sector. We also sympathise with the Committee’s task as there is unlikely to be a “silver bullet” to solve the many challenges currently facing the sector. However, in this submission document are a number of observations and recommendations that we believe could help to maintain and grow the retail sector and contribute to future economic growth.
3. BIS Retail Sector Strategy Paper 3.1 We welcomed the publication in October 2012 of the BIS Retail Sector Strategy paper and in particular its commitment to working with other government departments, local authorities and individual retailers to build better partnerships. 3.2 We support the strategy’s recognition of the role that retailers play in creating employment opportunities, developing skills and providing an anchor for local economies. It is sometimes felt within the retail sector that adequate recognition is rarely given for the contribution the sector makes in these areas. The retail industry provides jobs for three million people and makes up approximately 10% of all employment in the UK.91 It directly accounts for 5.3% of UK gross added value and is a key route to market for other sectors of the economy. The sector should therefore be at the forefront of government thinking when it considers how best to promote enterprise and economic growth. 90 The Co-operative Membership Community Fund is our grant scheme that helps local communities throughout the UK. Since we started the initiative in 1997, thousands of clubs, community groups and self-help organisations have benefited. By the end of 2012 we will have donated £15 million to thousands of community projects. 91 Retail in Society: Opportunities for All publication produced by the British Retail Consortium in 2012. Business, Innovation and Skills Committee: Evidence Ev 179
4. Local Enterprise Partnerships 4.1 We particularly welcome the commitment to a closer working relationship between BIS and the network of Local Enterprise Partnerships (LEPs) in England. The Co-operative actively participates in a number of LEPs and we are keen to see how the groups develop over time. We believe, though, that it is paramount that LEPs are furnished with the level of resources they will need to succeed. 4.2 We believe that currently LEPs do not yet have the capacity, both in terms of funding mechanisms and powers, to deliver substantial economic growth. However, we welcome the announcement made by the Chancellor in the 2013 Budget, to establish a Single Local Growth Fund as part of the decentralisation of funding to the regions through the LEPs. 4.3 These proposals could ensure that LEPs take a lead role in promoting economic growth, particularly if they are allocated an appropriate level of funds and responsibilities to drive policies on skills, apprenticeships, transport and to promote investment projects to support the economy. The proposals could represent a “game changer” in terms of the strength and influence of LEPs and we look forward to examining the full proposals once they are published by HM Treasury. 4.4 The enhanced relationship between BIS and LEPs demonstrates a compelling need for local leaders and local businesses to present a clear and credible case for their LEP region in order to promote economic growth through collective action. We look forward to working with partners at a national and local level to deliver this.
5. Regulation 5.1 We support the aims set out in the strategy to reduce costs and burdens on retail business through better regulation. However, we are still concerned that the government is not making enough progress in streamlining business regulation, despite initiatives such as the Red Tape Challenge and a commitment to “one in, one out”. 5.2 Indeed, research by Oxford Economics for the BRC92 shows that retailers’ operating costs have increased by a fifth since 2006 and it is centrally-driven costs that have risen most rapidly. We therefore support the call by the BRC to apply a “one in, two out” rule to regulation and to ensure the regulations being scrapped benefit the same sector that is suffering the new rules being imposed. In addition the government should apply a “growth test” to new regulation to stop growth-inhibiting regulation.
6. Sunday Trading 6.1 Although the BIS strategy document does not address the issue of Sunday Trading, we appreciate that the BIS Committee may wish to consider the issue during this inquiry, particularly in light of the brief relaxation of the Sunday Trading Act during the 2012 Olympic Games. It is an issue that divides the retail industry; however we are extremely concerned that the government might seriously consider a further, more permanent, relaxation of the law. 6.2 There is currently no compelling evidence to demonstrate that extending Sunday trading hours would increase or encourage retail growth. As a measure it is also opposed by the majority of the public and many employee representatives and religious groups.93 Deregulating opening hours for large out-of-town stores is also unlikely to help small shops in local high streets.
7. Building on the Portas Review 7.1 The Co-operative welcomes the fact that the government has made the health of high street, and the businesses that trade on it, a priority since 2010. We welcomed the appointment of Mary Portas to lead a review into regenerating high streets in England and have worked closely with her and her team throughout the process. We have also contributed to similar reviews undertaken by the Scottish, Welsh and Northern Ireland administrations. 7.2 The Portas Review was a detailed and useful initiative that set out a number of practical recommendations to breathe new life into high streets across England. We are pleased that the government has provided investment to create 27 “Portas Pilot” areas, as well as offering financial assistance to the 370 areas that were unsuccessful in their pilot bids and we hope that this support will help to build on a number of innovative Town Team projects. 7.3 Despite this, we are disappointed that the government has failed to implement more of the review’s recommendations. In particular we would have liked the government to take forward proposals to introduce “Super-Bids”; to review the calculation of business rates, to level the playing field on out-of-town parking and to examine the merit of the Secretary of State “exceptional sign off” for all new out-of-town developments. 7.4 The Co-operative Group remains committed to supporting the Portas Pilot scheme. In many areas it has helped bring retailers together with local authorities and the communities they serve. In particular we have agreed to be the “lead retailer” in three pilot areas, Liskeard, Newbiggin and Stockport as part of the BITC High Street Heroes campaign. This role involves The Co-operative working with Town Teams in each area to 92 UK Retailing: Leading Globally, Serving Locally, Oxford Economics (2011) 93 A 2010 Gfk/NOP public poll found that 76% of those asked said that they wanted the Sunday Trading laws to stay the same. Ev 180 Business, Innovation and Skills Committee: Evidence
assess how the Portas funding is being spent and how to better engage other corporate representatives in the process. It also provides an opportunity to represent the interest of local businesses in discussions with the local authority. 7.5 However, in some areas there exists a lack of coherent joint working between local authorities and Town Teams. Elected councils, with their democratic legitimacy, can sometimes be concerned that responsibilities usually held by a local authority are devolved to unelected Town Teams. For example, it is the responsibility of a Town Team to decide how the £100,000 Portas Pilot grant is spent (although representatives from the local authority can, and do, sit on the Town Teams). This concern is understandable but can, on occasions, create friction between members of the community involved in the Portas Pilots and their local authority. 7.6 Furthermore, whilst the £100,000 grant is important and welcome, the primary benefit of the pilot areas has been to unleash a wide range of innovative and imaginative ideas and solutions to supporting local high streets. They have also been a catalyst for better partnership working between high street retailers, associations such as local Chambers of Commerce, local authorities and members of the community. 7.7 We urge the Department of Communities and Local Government to undertake a full review of the pilot areas and promote the positive work that has been undertaken so far. We also hope that funding can be allocated for a third wave of pilot projects.
8. Parking and Out-of-town Shopping 8.1 Whilst the Co-operative Group supports moves to encourage people to reduce their carbon footprint by using public transport, we also recognise that many of our customers rely on the convenience and necessity of car travel to access our retail outlets. 8.2 We have welcomed the government’s signal of its intention to remove some of the restrictions allowing councils to establish greater parking spaces in their town centres.94 We believe that such initiatives will be welcomed by consumers, but that further measures may be required. As the Portas Review highlights, out-of- town parking is primarily free and plentiful, whereas in-town parking is often “run-down, in an inconvenient place, and most significantly really expensive”.95 8.3 We believe that town centre car parking charges are a significant barrier to attracting people into shops and increasing sales. In addressing this, we feel that government should examine two options: abolish charges in town centres or achieve parity by imposing charges on out-of-town centres. 8.4 We also believe that the spectre of out-of-town shopping has haunted high streets since planning laws were relaxed in the 1980s to allow the growth of large scale retail outlets. Such outlets can provide a valuable function to many local communities and often bring together a large number of retail outlets, allowing customers to do their shopping more conveniently. They can, however, rightly be criticised for driving business away from town and city centres and only being accessibly by road, often meaning that those without a car cannot easily get to them. For example, 84% of out-of-town shoppers tend to use the car as a means of transport, while 31% of in-town shoppers typically use the bus for their shopping trips.96 8.5 Out-of-town outlets also generally enjoy greater space and therefore can usually offer a generous amount of parking, most often free of charge. However, due to limited space, local in-town parking facilities often need to charge a fee. Therefore we support the call97 by the Commission for Integrated Transport to introduce parking charges or a “notional rental charge per space” for out-of-town retail outlets. By levelling the playing field and ensuring that both areas have to adhere to the same rules, high street stores would have a fighting chance of competing with their out of town rivals. Secondly, revenue from the parking charges could and should be used to invest in town centres. The money could be used to pay for more park and ride bus schemes to allow people easily and conveniently to access the centre without having to drive into its heart. Such a subsidy for out-of-town retail development could be removed by introducing a retail parking levy, using powers introduced by the 2011 Localism Act.
9. Business Rates 9.1 We are concerned and disappointed that the government has not sought to do more to reform the calculation of Non-Domestic Business Rates (NDBR) or to reduce the burden of cost faced by businesses following two years of above inflation increases. From April this year, retailers will face an estimated 2.6% increase in business rates, which will add £175 million to their bills and comes on top of increases of more than £500 million in rates over the past two years.98 9.2 We support calls from both the British Retail Consortium and the Association of Convenience stores for either a freeze or cap of 2% in the NDBR for 2013. We were disappointed that the Chancellor did not accept either of these recommendations in the 2013 Budget. Reducing the burden of rates would have sent a clear 94 See DCLG press release: Parking space limits for new homes and higher parking charges guidance scrapped, 3 January 2011. 95 P.27, The Portas Review: An independent review into the future of our high streets (2011) 96 P.15, Town Centre Futures, Experian (2012) 97 Sustainable Transport Choices and the Retail Sector, Commission for Integrated Transport, (2006) 98 See BRC press release: Scale of business rates blow revealed by inflation announcement, 16 October 2012 Business, Innovation and Skills Committee: Evidence Ev 181
signal of confidence to the retail sector that already pays a disproportionate amount NDBR compared to other industries. It would have protected retail jobs and encouraged investment in additional employment and infrastructure. 9.3 We will continue to make the case for a reduction in the rate and will urge the Treasury to urgently alter the way that NDBR is calculated, in order to use the Consumer Price Index instead of RPI and by taking the inflation rate into account over twelve months rather than simply on the rate in September. 9.4 In addition, the current uniform business rate, set at national level, provides certainty and consistency for national retailers. The localised business rate system was scrapped in 1990 because it created huge inconsistencies in rates and left businesses open to excessive and unpredictable rate hikes. As a retailer with a stake in local economies throughout England, we hope that the localisation of business rates is not introduced by the government.
10. Business Improvement Districts 10.1 The Co-operative Group supports the government’s ambition to put business at the heart of local decision making and to enhance the relationship between local authorities and local businesses, particularly in the retail sector. 10.2 We support the principle of Business Improvement Districts (BIDs) in delivering an improved trading environment for local communities. We consider that BIDs can be a useful way for businesses to work with other community partners to improve their local area and address issues of real local concern. 10.3 We believe that investment in a BID must provide an immediate positive impact on the profitability of that location, providing a clear business rationale for the proposed costs. 10.4 Proposed levies should also be proportional to other costs, particularly when judging investment across multiple sites. Rents and rates are linked to the profitability of a location and additional costs will be viewed in comparison. 10.5 Moreover, with a growing number of new BID proposals and proposals for renewal being brought forward across the UK, it has become even more important to ensure that the people involved in their development have a clear understanding of the priorities for businesses like The Co-operative Group. 10.6 We would like to see DCLG giving serious examination to the Portas proposal for “Super-Bids”. These enhanced BIDs could allow local retailers to have a much greater influence over local infrastructure and the make-up of the local high street.
11. The Changing Nature of the High Street 11.1 Town centres are a social and economic centre for everyday life. However, this position is increasingly under threat. Brought into sharper focus by the recession and the 2011 riots in many English cities, the picture is one of decline. As the governing social and economic conditions of the British high street have changed, the effect has been significant and visible. 11.2 The nature of current problems facing the High Street is driven by multiple factors and its effect varies across regions and relate to both long-term and short-term issues. Over the longer term, the rise of out-of-town shopping centres, large chain stores and the internet have fundamentally altered the retail market in the UK and diverted resources away from the high street. 11.3 As a community retailer, The Co-operative Group recognises that the modern day high street has changed markedly in recent times. Whilst town and city centres cannot be expected to remain in aspic forever, primary high streets are struggling against a backdrop of shop closures. 11.4 Part of the solution must be to respond to customer demand and changes in habits. We have begun to offer our customers banking and postal facilities in some of our Co-operative Food stores, which in particular have enabled rural or isolated communities to retain key local services, particularly if other banks have pulled out of the area or the Post Office has closed down. The Co-operative Bank has opened five in-store bank branches within high street food stores and if the project is successful there could be scope for an even greater number of in-store banks to be rolled out across the UK. In addition, some of our Food store offer free delivery on the purchase of goods over £25 and we have also rolled out an innovative partnership with Amazon, where customer orders can be delivered to a local Co-operative store for them to pick up.
12. Planning Policy 12.1 We very much welcomed the firm commitment in the 2012 National Planning Policy Forum (NPPF) towards a “town centre first” planning policy. 12.2 The policy was established in England in 1996, following concerns about the number of out of town retail developments and the effect they were having on high street retail. Ev 182 Business, Innovation and Skills Committee: Evidence
12.3 The importance of the policy cannot be underestimated. Research shows99 that the proportion of new development in town centres has increased from less than 25% in 1994 to 42% in 2006 through this policy, demonstrating that it is having a clearly beneficial impact on building in-town areas.
12.4 Despite this, some local authorities are still favouring planning applications for out or edge of town retail developments, without examining town centre options or examining the potential impact on in-town retailers. Below are two recent examples of where this has happened:
Newport
There is the potential prospect of two large format food stores in out of centre locations here, the combined size of which far exceeds the total amount of convenience floor space in the centre of the town. One scheme has been approved on appeal and the other is subject to the ongoing inquiry—but is supported by Newport City Council, who own the land of the site.
Both The Co-operative and another food retailer operate in-town food outlets and we both believe that the two schemes will be seriously harmful to retailers in the town and that there is the potential that we would have to close our store if the developments go ahead.
Mablethorpe
A planning application for a large out-of-town store has been recommended for approval and supported by members of Mablethorpe Town Council. This is despite previous council-commissioned studies which recognised that the town centre was vulnerable and had advised against supporting schemes that weren’t well related to the centre.
We therefore urge the government to more vigorously promote the primacy of the town centre first policy and to seriously examine the proposal for the Secretary of State for Communities to have “exception sign-off” rights for out of town developments.
We also urge the Government to look closely at whether Local Plans and Neighbourhood Plans will be sufficient in generating long term planning strategies for local areas. With the abolition of Regional Spatial Strategies, we are concerned about the lack of appropriate cross-boundary strategic planning (including transport infrastructure) and a lack of resources for Local Planning Authorities to ensure that they can undergo their work to a high standard.
13. Skills needed for a Successful Sector
13.1 As one of the largest private sector employers in the UK, The Co-operative Group recognises the need for a skilled workforce that is able to offer excellent communication skills, good standards of IT, numeracy and literacy skills as well as analysis and problem-solving skills.
13.2 We are also committed to creating opportunities for new people to enter the retail sector. Last year, The Co-operative launched our Apprenticeship Academy, which aims to provide 2,000 new apprenticeship opportunities over the next three years in our ten businesses. Our apprenticeships will enable young people to gain quality work experience at one of our businesses, work towards a recognised national qualification and have the opportunity to progress into our management training scheme.
13.3 We also offer ad hoc unpaid work placement for up to a maximum of two weeks if an individual is looking to gain work experience. We do not offer unpaid internships for longer periods as it is not fair to expect someone to work for a longer length of time without payment.
13.4 If someone is looking for a longer periods of work to gain experience we have an established placement scheme. This is paid work for a period of 12 months and is designed to offer work experience without being exploitative. These placements are not just open to undergraduates and anyone who is interested is invited to apply.
13.5 In addition, The Co-operative Group graduate scheme is open to both graduates and current employees. Current employees can apply without being required to have a degree as we believe that prior experience gained with us is a good indicator of an individual’s suitability for the programme. 15 April 2013
99 Need and Impact: Planning for Town Centres, report by the House of Commons Communities and Local Government Select Committee, 2008–9. Business, Innovation and Skills Committee: Evidence Ev 183
Written evidence submitted by the National Skills Academy for Retail
1. Executive Summary
The National Skills Academy for Retail wishes to bring to the attention of the Committee some key issues relating to the skills needs of the UK retail sector. These issues relate to three of the areas for which the Committee has requested evidence: — Progress made in implementing the recommendations of the Portas Review The NSA for Retail has created a Town Centre Improvement Programme focusing on the skills needs and business support for small and independent retailers in high streets and town centres. This programme can complement government initiatives to support the high street. — The impact of on-line sales and direct sales on high street retailers The impact of “multi-channel” retailing has given rise to significant new skills needs in the retail sector. The NSA for Retail is currently developing new national occupational standards (NOS) in this area and is working with Gloucestershire University to conduct research on future skills needs in this area and it proposes to co-ordinate an integrated response from the skills system — The skills needs for a successful sector The NSA for Retail and People 1st are supporting an Industrial Partnership across the retail, hospitality, tourism and passenger transport sectors to take end-to-end responsibility for skills needs.
2. Background: The National Skills Academy for Retail
The NSA for Retail was established in 2008 and received government development funding (matched by business) for the first three years of its operation. Since 2011, the NSAR has been self-sustaining. Since October 2012 the NSA for Retail has been a wholly-owned subsidiary of People 1st.
The NSA for Retail was created as a response to the retail Sector Skills Agreement (2007–10), in which retailers identified a lack of high quality training provision which could be delivered consistently across the whole of the UK as a key priority of the retail sector. The NSA for Retail now delivers a range of learning opportunities focused on employees and employers through its partnership network of 53 retail “skills shops”. Skills shops are training centres located in major retail centres across the country such as Bluewater, Kent, Westfield Stratford City in East London and Meadowhall, Sheffield. They are based on local partnerships of retail stakeholders such as shopping centres, town centre management, local authorities and retailers. They provide specialist training provision for retailers of all sizes in particular: — Pre-employment training for people seeking to work in retail. — WorldHost customer service training; business courses aimed at small businesses. — Work-based learning including Apprenticeships.
The NSA for Retail has established a number of initiatives to support skills and employment in the retail sector: — A Retail Apprenticeship Scheme, delivering training through the skills shops network supported by a dedicated national Retail Apprenticeship Training Agency (RATA). — A business mentoring service for small retailers. — A retail ambassador programme aimed at attracting young people to careers in the retail sector.
In November 2012, the NSA for Retail, in Association with People 1st and the Hospitality Guild, was successful in a £500,000 bid to develop an innovation centre of excellence in North London. This will provide a central facility for the service industry that will drive customer service and skills training across the retail and hospitality sectors. The Centre is planned to open in the summer of 2013.
3. Background: Key Facts and Figures for the Retail Sector — 2.9 million employees, one in 10 of the UK’s working population. — 284,200 business units across the UK. — 54% of workforce in sales and customer service related occupations. — Population growth: 54,800 to 2020, majority (41,700) in managerial positions. — An additional 873,100 people will be required to meet employee turnover. — 17% of employers report skills gaps versus 13% across the economy as a whole. Ev 184 Business, Innovation and Skills Committee: Evidence
4. Industrial Partnership for the Visitor Economy
The creation of the NSA for Retail was a big step forward in the drive to improve skills and skills provision in the retail sector. However, new challenges have emerged due to changes in technology and as a result of the economic downturn. The key skills priorities for the retail sector are: — World-class customer service skills to meet increased expectations following the Olympics and maintain UK’s enhanced customer service world ranking. — New skills due to rapid changes in technology, customer trends and more sophisticated supply- chain management. — Step change in store management skills with increasing demand for higher level skills. — Improved career pathways so more young people choose retail as a career.
Responding to these challenges under the existing skills system has proved problematic for retail employers due to the complex nature of the UK skills system and equally complicated funding mechanisms. In addition, some employers that have engaged in recent government initiatives have been subject to adverse publicity in the media (eg http://www.bbc.co.uk/news/uk-politics-17116473).
Employers across the visitor economy (retail, hospitality, tourism and passenger transport) now propose an Industrial Partnership to address these issues and have submitted an outline bid for funding under the Employer Ownership Pilot. The bid has been developed with the support of People 1st and has the support of over 100 employers. The Industrial Partnership would enable employers to take control of the development of the skills to meet their needs.
The Industrial Partnership will operate across the four sectors as each of these four areas interconnect as part of the visitor experience where consumers increasingly demand similar and constantly improving levels of customer service. Whilst the Industrial Partnership would ensure synergies across the four areas of the sector, it would also ensure that specific skills issues are addressed.
Employers are proposing that the partnership would: 1. Establish and promote career pathways to reflect the jobs & skills needed to attract people with the right skills, probably made up of relevant qualifications, apprenticeships & kite-marked in- house training. 2. Set up, recognise and support quality training delivery that shows career pathways into the sector. 3. Quality assure training, including more demanding apprenticeships that reflect jobs and help accreditation with relevant professional bodies and higher education institutions to develop a professional framework for managers where there are none. 4. Find training providers who meet our sector’s delivery standards. 5. Promote career opportunities through employers’ and partners’ actions and an interactive career portal that showcases roles. 6. Work with partners and intermediaries to target and support specific pools of jobseekers to develop skills to work in the sector. 7. Work with local partners to increase the sector’s effectiveness and productivity and to increase its impact on local growth and regeneration. 8. Support SMEs to get skills to compete effectively, increase their performance and reduce the risk of closing. 9. Produce quality, practical research for the sector to use to increase the effectiveness of employers’ recruitment & training investment and to inform the IP’s focus, such as the location and return on investment of training models.
To help test and pilot parts of this work employers are committing to: — promote careers in the sector in schools; — offer work experience to school and college students; — deliver pre-employment training to job seekers without having to go through a separate learning provider; — interview and recruit jobseekers that have done specific pre-employment training the employer wants and delivered by third party partners; — offer a set number of structured work experience places that form part of a new Traineeship; — pilot a set number of apprenticeships for specific occupations at levels 2 or 3; Business, Innovation and Skills Committee: Evidence Ev 185
— pilot a set number of apprenticeships in seasonal businesses, such as visitor attractions and tour operations; and — put staff through a management and leadership programme that combines short management qualifications with higher education and internal training courses. Recommendation: the government should support the Industrial Partnership for the Visitor Economy as the best way to address the skills issues for the sectors.
5. Town Centre Improvement Programme The Portas Review highlighted the issues facing high streets as a result of the current economic downturn. A key aspect of this challenge is to improve the skills of people working in the retail sector and those running small retail businesses. In response the NSA for Retail has established a Town Centre Improvement Programme—a package of business support and training designed to help town centre businesses become more successful and sustainable. The programme provides: — Training: — WorldHost Customer Service Training. — Guide to Successful Retailing—business courses for small businesses. — Business Support: — Business mentoring. — Retail Data Benchmarking Tool. — Employment Support: — Retail Ambassador programme. — Retail Apprenticeship Scheme. — Pre-employment training for young people and NEETs. — Research and Analysis—to assist towns in understanding: — Market intelligence. — Mystery Shopping. — Street Interviews. — Town centre assessment. The NSA for Retail has worked in partnership with Cheltenham Borough Council to pilot the programme. Independent retailers in Cheltenham have been helped to drive sales through training and business support provided under the programme. Training sessions have been run through the local skills shop as part of the £100,000 High Street Innovation Fund grant secured by Cheltenham Borough Council. The aim is to reinvigorate Cheltenham’s shopping districts and give independent retailers the training and support needed to thrive and grow. Seventeen businesses and organisations in the Regents Arcade, Beechwood Shopping Centre, Montpellier District and Bath Road have already taken part in the programmes. Martin Quantock, Manager of Cheltenham Business Partnership, said “We are very pleased with how the training programmes have gone so far and have received excellent feedback from the retailers currently taking part. The programmes started being delivered in September last year and after a break over the busy Christmas and New Year sales period, we are ready to go with a new round”. “We felt it was important to give independent retailers high level training opportunities that they might struggle to fund, removing barriers by making them free of charge and holding them in local venues.” “The quality of training from the NSA for Retail is excellent and can give independents a real competitive advantage. They face extremely tough competition from big brands and online retailers—one thing they can beat them on however is personal interaction and customer service.” “Cheltenham Business Partnership and the borough council have been very supportive and have worked hard to encourage participation. There is a great mix of retail and hospitality businesses in the area, from flagship stores to high-end fashion shops and wine bars to butchers and bakeries.” “We can see that the independent retailers have very good customer loyalty and people in Cheltenham like to buy locally—these training courses are all helping these businesses to further enhance their customers’ shopping experience.” The Town Centre Improvement programme could provide a template for towns and high streets all over the UK to assist them in weathering the current economic difficulties and adapt to new retail realities. The Cheltenham project has already been adopted by the Gloucestershire LEP through its Retail Pathfinder and the NSA for Retail is now working closely with the Association of Town Centre Management to promote this model more widely across the UK. Recommendation: The government should support the Town Centre Improvement Programme alongside its other initiatives to support the high street. Ev 186 Business, Innovation and Skills Committee: Evidence
6. Multi and Omni-channel Retailing The economic downturn is changing customer values and behaviours and is giving consumers permission to seek out both value and quality. The UK retail customer is now amongst the most sophisticated in the world becoming increasingly knowledgeable and well informed, using the internet and social media as a vehicle to research and engage with brands. As a result online sales now account for 10% of all retail sales in the UK and this is likely to be 25% by 2020 “Shoppers are becoming visitors; retail space must provide experience; technology is key to ensure physical space is relevant” (BCSC The Rise and Rise of Multi-channel Retailing, 2012). To respond to these changes, retailers must be increasingly willing to engage with customers across multiple channels, combining traditional bricks and mortar and online presences, with the single objective of enhancing the customer experience. This has profound implications for shops and for those who work in them—click and collect will become commonplace and returning goods will become a major issue. There will be major changes in the way retailers use physical space and technology. This trend has two major impacts on skills for the retail sector: — Retailers need to upskill their customer facing workforces to be able to deal with customers who are increasingly willing to shop across a variety of channels. In many cases the customer is ahead of retailers’ ability to respond. — Many small businesses have not yet embraced the technology due to their lacking the technology skills to get their businesses online. A major initiative to upskill the owners and managers of small businesses is needed if we are to retain the diverse range of retailers we currently have. New skills in this area have emerged so rapidly that the UK education and skills system is struggling to respond. Ocado—one of the UK’s largest online retailers—recently opened a technology development centre in Poland as it cannot recruit suitable qualified staff in the UK. In addition, FE colleges and Universities are responding in an ad hoc fashion. The NSA for Retail is working with retailers to develop new National Occupational Standards in this area. These will inform the development of new qualifications. Effort will need to be made to build capacity in our education and training providers to deliver new skills. The NSA for Retail is also working with Gloucestershire University on a research bid to ESRC to understand what the implications for the professional development of retail managers will be brought about by changes in customer behaviour as a result of multi and omni-channel retailing. Recommendation: the government should recognise the skills and employment challenges presented by the rapidly developing area of “multi” or “omni-channel” retailing and support for an integrated response in the skills system. 15 April 2013
Written evidence submitted by Rural Shops Alliance 1. Introduction The Rural Shops Alliance is a trade Association representing the views of about 7,500 rural retailers in England. Many of these shops are vital to the communities they serve and are a hub of local activity. As an organisation, we pride ourselves on being in close contact with our members and understanding and helping them with the day-to-day issues of running a shop. This is a key part of what we do. The issues facing small retailers in urban areas are sufficiently similar for us to believe that our experience, although in a particular part of the retail sector, is applicable more widely. We would be very happy to discuss the evidence below in more detail as required, in person or in writing.
2. Implementation of the Department’s Action Points Contained in the Retail Sector Strategy Document (October 2012) We are only in a position to comment upon the action points relating to the UK and our expertise only extends to retail.
2.1 Better regulation This is a very important area for small retailers in particular. Large companies have specialists who can cope with the raft of regulation that can apply to retailers, whereas independent retailers usually have to be their own expert on every aspect of their business. In this, there can be a very clear difference between what large companies desire and what is good for smaller operators. Small retailers by and large do not appreciate regulations that require expert interpretation Business, Innovation and Skills Committee: Evidence Ev 187
or leave grey areas, whereas large businesses can find this lighter touch approach easier to work within. Usually the attitude of small businessmen is that if government tells them what is needed, they will do their best to comply. Clarity makes it easier for the owner of a small shop to meet requirements. The Primary Authority initiative is one way that uncertainty can be reduced and we would look for this approach to be extended as quickly as possible. One of the areas that affects retailers most is the field of employment law. Retailers typically employ relatively large numbers of staff in relation to turnover, often employing part-timers for shift patterns that can change from one week to the next. Hence their payroll situation and administration is quite complex, particularly in relation to the number of hours worked. At start of the new tax year 2013–14, HMRC have introduced a completely new way of reporting wages through the Real Time Information (RTI) scheme. This involves all employers reporting payments as they are made and includes even small amounts paid, for example, to paperboys and girls who are unlikely to have a national insurance number or to be within the scope of the tax system. Some shopkeepers who have in the past carried out their own payroll administration have now contracted out to specialists. Others have had to purchase new computer software in order to comply. This one change largely negates all other attempts to reduce the regulatory burden—very disappointing.
2.2 Knowledge transfer The BIS strategy document mentions knowledge transfer between various stakeholders, research into assisted living products and a skills gap analysis. These disparate approaches fail to address more mundane needs that would nevertheless have a large impact on the quality of retail management in the UK. Independent retailers often enter the profession after a career elsewhere. The barriers to entry into the retail industry are fairly low and it is possible to run a shop with very few retail skills. There is a massive need for specialist consultancy and training support for small independent retailers. This need is prosaic and is not likely to attract headlines. However, suitable programmes can be delivered very effectively on relatively small budgets. For example, in the south-west region a project called Store is the Core is providing a mix of training sessions, one to one consultancy advice and basic training on DVDs. The cost per client is low but in many cases the results are significant in making the small retailers involved far more viable. This program was originally set up with the support of the South Western Regional Development Agency, since inherited by DEFRA. This particular project is to the benefit of rural shops, but the basic principles could and should be applied on a national basis. Knowledge transfer does not have to be cutting-edge. For many small retailers, being able to use EPoS data effectively, to display stock according to established principles or to have the right shop opening hours is all it takes. To our knowledge, no LEP is working in this area.
2.3 Local The major output from Gloucestershire LEP, as the first LEP retail pathfinder, has been a report under the Successful Town Centres—Developing Effective Strategies banner, subtitled “Understanding Your High Street”. This is a quite interesting academic approach, albeit one based on traditional hierarchy of shopping centre models. However, it delivers few ideas on how to actually address the problems it discusses. It is perhaps pertinent that of the 20 main contributors only one, Boots the Chemists, is an actual retailer. The techniques used hardly seem cutting-edge and based on the published documentation, seems to lack the rigour employed, for example, by the sophisticated geodemographic mapping models employed by major multiple retailers. The number of multiple retailers that have ceased trading in the last couple of years, including such high- profile casualties as HMV, Jessops, Clinton Cards, Comet, JJB, La Senza, Blacks and Peacocks highlights the urgency of decisive action to stop the haemorrhaging. More actionable points produced more quickly are needed.
3. Progress made in Implementing the Recommendations of the Portas Review The review made 28 major recommendations, some of which are very difficult to evaluate objectively. For example, “making high streets accessible, attractive and safe” (recommendation 10) is almost impossible to judge. We intend to comment on a couple of key areas.
3.1 Planning policies Two recommendations in the Portas report relate to national planning policy. Recommendation 14 is to provide a presumption in favour of town centre development in the wording of the national planning policy framework, whilst recommendation 15 suggests the introduction of Secretary of State “exceptional sign off” for all new out-of-town developments and to require all large new developments to have an affordable shops quota within them. However, according to the CBRE Grocery Planning Pipeline, the vast majority of grocery retail developments in the planning stage are for out-of-town sites. It would appear that much more needs to be done if government is serious about the town centre first policy. This must be based on guidance, as suggested in the Lord Taylor Planning Review, on how to implement NPPF rules in order to achieve a town Ev 188 Business, Innovation and Skills Committee: Evidence
centre first outcome. This needs to be backed up by robust use of call-in powers as necessary. The figures do not suggest that the Portas Review has had the desired impact.
3.2 Business Rates Business rates are the subject of recommendations 6, 7 and 8. The current system was established when high streets were faced with very different trading conditions and quite simply the system is trying to extract more money from the retail sector than is reasonable for it to afford, despite rebates. Business rates are increased based on the value of RPI inflation, at a time when many retail costs have been increasing faster than this. This whole area needs reviewing.
3.3 General comments Many of the specific recommendations within the review have not been implemented. If you were to ask question as to whether the High Street is in a better or worse state than when Mary Portas reported, then a disinterested observer would have to conclude that the situation has deteriorated in the last 18 months. They would also conclude that the retail situation has changed even in the time since she produced her report. The last of the Portas recommendations was to “run a number of High Street pilots to test proof of concept”. A lesson from Sir Terry Leahy’s recent book, “Management in 10 Words” is that much of Tesco’s success when he was chief executive stemmed from trying new ideas in a small way, seeing if they worked and refining them, before rapidly rolling them out across the entire estate. In this respect, Mary Portas’s recommendation number 28 was probably the most important but the one most difficult for managers from a non-retail culture to carry out.
4. The Impact of On-line Sales and Direct Sales on High Street Retailers Retailing is a very fast changing environment and already this may not be the right question to be asking. Many leading retailers see the integration of brick stores and click retailing as being an important goal. This can take several forms. For example, Argos, John Lewis and other retailers achieved considerable success last Christmas through customers ordering goods online but then collecting from their shops. Another rapidly developing approach comes from companies such as PayPoint Collect plus and UPS Access Point, which allow customers collect their home deliveries from a local convenience store or garage forecourt. Conversely, companies such as Apple are content for customers to browse the shop to physically handle their products but then to order them online. Supermarkets can arrange for customers to pick up their own selections in store but then have their bags delivered to their home. There are no apps on mobile phones that track the location and highlight to the owner special offers from the store they are passing. Stores such as Littlewoods use on-line sites like EBay to clear damaged stock or end of ranges. The crossover between different channels is developing very fast and becoming very sophisticated. Smaller retailers are at a distinct disadvantage in this environment. There are significant economies of scale to be gained in the online ordering and fulfilment processes, as well as in the ways customer data can be used. We are aware of two companies trying to create a virtual high street. They have both tried to provide a service to smaller retailers that enables them to trade online at an acceptable cost in conjunction with other local businesses, whilst at the same time encouraging visits to their bricks and mortar store and to generate customer loyalty. Myhigh provides a website on which small retailers in particular towns can showcase their wares within part of the site dedicated to that town, competing most directly with companies like Amazon. There are about 140 retailers signed up to this site. Openhighstreet was set up with the help of funding (to its credit) from BIS, aiming to create a food home delivery service by combining the offers of a number of specially retailers and providing a shared delivery service. Despite a significant budget, this project never really took off and has never really addressed the key logistical issues or to date provided a model that is in any way self-sustaining. This service, comparable with a supermarket home delivery service, has largely lapsed. Nevertheless, it does show a possible way forward. Details of Myhigh.st can be found at http://myhigh.st, whilst the Openhighstreet details can be found at www.openhighstreet.com.
5. The Skills needed for a Successful Sector We append a list of headline skills and knowledge that the operator of a small retail outlet should possess. Very few retailers come into the profession with this portfolio of skills. The basics have to be acquired quickly but the more managerial ones are sometimes never gained. For example, good store layout may seem like common sense but all multiples have experts who do nothing else but plan new shops. It is actually a science. Many of these higher level skills need to be trained in, in a format that a retailer working very long hours in the shop can cope with. This bottom-up approach can have significant impact. Although high streets can be seen as an organic entity, as implied by the Gloucestershire LEP approach, they can also be seen as a collection Business, Innovation and Skills Committee: Evidence Ev 189
of individual businesses with considerable synergy between them. For example, if the local butcher is not good, then customers may well go to the supermarket to buy their meat and of course buy their bread and vegetables at the same time. The failings of the butcher have a significant impact on the baker and the greengrocer. The impact of poor management is at its greatest in rural areas, where the community may depend on just one or two shops. For the elderly and those without cars, the rural general store is a lifeline, without which their lives would be less easy to live. It is for these social reasons that in the past government agencies have provided training support for retailers in rural areas. This approach was inherent in the work of the Rural Development Commission and its successor, the Countryside Agency. Both operated schemes on very low budgets but with considerable success. There are rural shops thriving today that would have closed without the support provided by these agencies. When the economic functions of the Countryside Agency were taken over by the RDAs and Business Links, most saw their priorities elsewhere and only two, the south-west and south- east RDAs, were very active in supporting rural retailers. Many county and district councils tried to fill the gap but inevitably with cutbacks in local authority funding, many of these schemes have folded. There is far more support for rural retailers in Wales and Scotland than there is in England. In England, there are very few rural petrol stations left except on major through roads. Rural pubs have declined massively numbers. A training programme centred on the needs of the proprietors of small retail businesses would be a very cost-effective way of preventing a significant number of communities losing their sole shop. And such a scheme would have enormous benefits to small shopkeepers in market towns and cities as well.
6. The Regulations and Costs Affecting the Sector The two key costs in retail, other than the purchase of goods for resale, are premises and staffing. Landlords are often very unwilling to reduce the asking rent on properties, even if the alternative is to leave the building empty. The reason is, of course, that the capital value of the asset is related to the rental income, and so reducing the rent leads to a paper loss. There has been a mind-set that commercial property will always retain its value and that rent reviews can only be upward. Both of these assumptions need to be challenged. In particular, the disincentive for landlords to reduce rents should be neutralised through the tax system. The nature of town centres has changed rapidly over the decades. In times past, there have been periods of rapid expansion of retail selling space, which has involved in many cases the conversion of residential properties into shops. The reality is that retail sales are unlikely to rise markedly in the current economic climate and whilst out-of-town shopping and online sales continue to grow, the prospects for retailers in traditional high-street locations is not going to be bullish, almost irrespective of local initiatives. Under the circumstances, it would seem sensible to make it easier and more beneficial to the owners to reconvert buildings back to residential use rather than keeping them empty in the hope of finding a retail tenant, or even adopting the “sticking plaster” approach of encouraging pop-up shops. The hassle and cost for a small business to employ staff seems to increase each year. The general thrust of legislation in recent years has been to give employees more holidays, more benefits and more control over the precise hours they work. All inevitably have a cost to the employer. There is a balance to be drawn between making the workplace as civilised as possible and ensuring that staff costs are not prohibitive. Again, large organisations with professional human resource departments can cope with new legislation far more easily than a sole proprietor managing their own shop.
7. Key Recommendations 1. Provide support for the socially vital rural shop network as well as larger town centres. 2. Support pilot schemes to assist retailers to participate in the brick and click revolution, rather than trying to resist it. It is happening now. 3. Ensure that commercial property costs in aggregate reflect current trading conditions, not the past. 4. Implement Portas’s recommendation 28 with vigour. If this recommendation had been made to the board of a UK multiple retailer, the chances are that trials would have already been completed and if successful a national implementation would be about to start. 11 April 2013 Ev 190 Business, Innovation and Skills Committee: Evidence
APPENDIX SOME RETAIL SKILLS Management accounts Business plan/budget Profit margins Profit & loss account Cash flow forecasts Working capital targets
Opening hours Keeping under review
Staffing Recruitment of volunteers Supervisory role of manager Induction training for new staff Allocating staff to jobs Refresher training Staff scheduling and rotas Dealing with problems, eg staff theft
Banking Procedures (floats, cashing up etc.) Managing customer accounts Credit and debit cards
Bookkeeping Daily records VAT Invoice retention and filing Till receipts and audit trail
EPoS Use of data at store, department, product group and line levels Staff scheduling
Customers Who are they? What do they want? Balance between community and commercial objectives Dealing with customer complaints Market research
The Competition Who are they? What do they offer? Why do customers use them? What are our strengths and weaknesses? How do we maximise our opportunities, minimise the threats?
Principles of store layout The science of space utilisation and store layouts Circulation space versus stock space DDA Security
Ranges Balance between categories Line selection Introducing new lines Discontinuing poor sellers Big brands versus local products—the balance Business, Innovation and Skills Committee: Evidence Ev 191
Cleanliness and hygiene “Safer Food, Better Business” Date codes Shelf cleaning schedules Store cleaning Refrigeration checks etc.
Buying Negotiating Sourcing goods Requirements from supplier Payment terms Local purchasing Wholesaler(s)
Marketing Local news media/ leaflets/newsletters/website/Facebook/Twitter Introducing new lines Price Promotions Use of promotional space
Merchandising Basic rules of display
Stock control Service levels Reorder timing and quantities Stock rotation Stockroom layout/procedures News/magazines specifics
Keeping up to date Trade magazines Representatives Customers Cash & Carry Competitors
Legal issues Duties towards volunteers H&S Age-related sales Food hygiene Emergency procedures
Written evidence submitted by TalkTalk Group
Summary of Main Points TalkTalk believes that the UK could be a world-leading digital nation where every individual and business is able to experience the benefits of the internet. We already have one of the best markets in the world where the internet contributes more to UK GDP than in any other country and UK consumers spend more online than anywhere else in the world. However there is a real and pressing need to improve the digital skills of UK citizens, particularly SMEs, to ensure they have the knowledge and skills to be able to get the maximum benefit from the internet. Currently only a third of SMEs sell products and services online. We believe that there is a collective role for Government, industry and the third sector to work collectively to ensure the funding is being directed in the right way to ensure the internet is maximised and where possible businesses are buying and selling online.
About TalkTalk TalkTalk is the UK’s leading value for money provider of phone, broadband, TV and mobile services to consumer and business users. In 2006, we revolutionised the broadband market by offering “free broadband” which has dramatically lowered prices right across the sector and driven uptake. Today, TalkTalk serves four million customers under the TalkTalk, AOL Broadband and TalkTalk Business brands. We have invested over Ev 192 Business, Innovation and Skills Committee: Evidence
£600 million in building a Next Generation Network, which extends to over 2,700 exchanges and covers over 95% of UK households. — TalkTalk and Online Safety. In May 2011 TalkTalk launched HomeSafe™, the UK’s first and only network level parental control service and was the first UK ISP to implement the Bailey Review recommendation that parents should be offered an “active choice” about whether to use parental controls. — TalkTalk in the Community. TalkTalk employs approximately 2,500 people across the UK and is committed to investing in the communities in which we work and operate. — TalkTalk and Digital Inclusion. TalkTalk supports and runs a number of initiatives to help bridge the digital divide, such as our Digital Heroes Awards, offering free broadband to offline families, and is a founding partner of Go ON UK, the new charity that aims to make the UK the most digital nation.
TalkTalk Response to BIS Select Committee’s Inquiry: “UK Retail Sector” The UK’s Retail sector is large and includes a wide range of products from a large number of varied retailers. Following the recent reported decline in high street retailers and the Government’s review of what it can do to support growth, including implementing the recommendations from the Portas review, we believe now is the time to recognise the benefits of online retail for businesses, particularly SMEs, and UK consumers and to ensure that we have a nation with the digital skills required to exploit the opportunities the internet affords. The UK has a thriving online economy; it leads the world in the economic contribution it delivers through the internet, and this is continuing to grow.100 The UK has the highest per capita spend online in Europe; UK citizens spent £68.2 billion on online shopping in 2011 making it the second highest country in the world, behind South Korea, to purchase goods online.101 There is clearly an appetite with British people to buy online, and to buy from British businesses. In TalkTalk’s most recent Digital Price Index Report (DPI), the Centre for Economics and Business Research (CEBR) found that prices of goods from domestic e-retailers are four times cheaper than those based abroad. This is the fourth consecutive quarter in which prices online, as measured by the DPI, have been falling year on year. Therefore this is positive not only for the British consumer but also the UK economy. The UK is actually already in a very strong place when it comes to digital so we have the foundations in place needed to be truly great. The UK’s broadband market is world-leading with high levels of choice, take- up, innovation and low-prices. 68% of adults aged 16+ accessed the internet everyday in a three month period in 2012102 and 64% of SMEs have a website, although 15% of those have no functionality beyond simply finding out information.103 In 2012 the total broadband penetration of households was 76%.104 It also seems that many UK businesses are aware of the opportunities the internet offers. TalkTalk Business recently published a report titled “Geared for Growth” which found that an incredible two thirds of Small Business owners are expecting that their company will grow next year despite the current economic climate.105 The report also found that effective use of the internet is a crucial part of their growth, with four out of five saying they believe technology is vital in helping them serve larger markets and make efficiency savings. It is clear that use of the internet can not only aide SMEs in their business but also help them grow. SMEs who are high web users—for example those who have transactional websites—grow around five times faster than SMEs who don’t use the internet. A recent report by Booz & Co found that the annual turnover of UK SMEs could be boosted by £18.8 billion if all of these firms marketed and sold online.106 The internet also opens up fantastic opportunities for UK businesses to trade internationally as well as domestically. However there are still significant challenges to overcome. The Booz & co report also found that half a million SMEs say they lack the digital skills required to make the most of the opportunities that the internet has to offer and only 14% of SMEs sell products and services online. TalkTalk therefore believes that improving the digital skills of UK businesses, especially retailers, should be a priority for Government and will require collaborative working between organisations who have the expertise and network to improve the digital skills for individuals and businesses. This is why TalkTalk became a founding partner of Go ON UK, a cross-sector charity established in 2012 to encourage and support people, businesses and charities to enjoy the benefits of being online. Go ON UK’s vision is to make the UK the world’s most digitally skilled nation and is calling on leaders from across public and private sector to support this ambition. With Go ON UK we are also building a national digital skills 100 The Connected World; The Boston Consulting Group, January 2012 101 “imrSmart Knowledge Base UK,” IMRG, 2012, http://theknowledgebase.imrg. org/publicdashboard/country- dashboard?countryid=198&sc=0 102 Frequency of Internet Use 2006–12; Office for National Statistics, February 103 Britain’s Digital Opportunity; Go ON UK and Lloyds Banking Group, February 2013 104 Ofcom, 2012 105 Geared for growth: What makes companies grow?; Economia and TalkTalk Business, April 2013 106 “This is for everyone” The Case for Universal Digitisation; Booz & Co, 2012 Business, Innovation and Skills Committee: Evidence Ev 193
delivery programme, aimed at both individuals and businesses, beginning with a pathfinder in the North East in the Autumn and have recently announced £15 million of BIG Lottery funding to support this. We believe the UK is well placed to become a truly digital nation that can compete internationally. Whilst it is absolutely right that we are focused on building the best broadband network to support our future growth, it is equally important that we are focused on driving take up and use of the internet. Specifically we believe there are three things that Government should be doing: 1. Invest funding into digital skills. The government are making a considerable investment into building infrastructure but an insignificant small amount on making sure people are able to use it. Northern Ireland has around 95% superfast broadband coverage already today yet around 24% of the population have never been online; the highest level of exclusion in the UK. The Government is about to spend £150 million on broadband via its Super Connected Cities programme and currently it looks like a significant portion of that will go to fund broadband connection fees for SMEs. TalkTalk believes this funding would be much better invested in skills programmes and initiatives like funding UK online centres. 2. Do more to embed digital skills in existing programmes. For example ensuring all Jobseekers have digital skills and incentivising Work Programme providers to deliver digital skills to the long-term unemployed, as well as ensuring that Government departments themselves also invest in building digital skills, amongst both their employees and end users. 3. Talk more about the importance of digital skills. We believe the more Government talk about it, the more motivated the private and third sector will become to take steps to change behaviour. The internet connects, educates and informs and TalkTalk strongly believe that working to close the digital skills gap is essential for the UK’s economic growth. To conclude, we believe the UK Retail Sector would benefit greatly from greater, more widespread use of the internet for business, and integration of e-commerce within their existing offline business strategy. To make this happen, we believe we need to collectively tackle the skills gap, improve the basic digital skills of the 16 million people who are still lacking these, and most importantly focus on teaching businesses how to use the internet for their business and highlighting “digital business champions” who are showcasing best practice. We look forward to the Committee’s forthcoming report and recommendations following its Inquiry into the UK’s Retail Sector. 20 June 2013
Written evidence submitted by USDAW 1. Usdaw’s National Presence and Work in the Retail Sector Usdaw is the UK’s fourth biggest and fastest growing union. Our overall membership currently stands at 427,000 up by 27,000 over the last two years. We are the major union organising in the retail sector. Our retail membership currently stands at 343,000 up by 20,000 over the last two years. We have a significant presence in the food retailing sector with major agreements with Tesco, Morrisons, Sainsbury’s and the Co-op all of which continue to increase in membership. We also have a presence in the non-food sector of retailing which has given us first-hand experience of what has been happening in this sub-sector of retailing. We have seen major retailers such as Woolworths and TJ Hughes go into administration with our members employed there being made redundant. At the same time, however, we have seen success in the sub-sector as reflected by our increasing membership at Poundland. Usdaw has a consistent approach regarding the ever-changing retail sector. We are engaged in ongoing recruitment and organising work in the retail sector among our major agreements, as well as seeking out new agreements wherever possible through targeted recruitment activity aimed at boosting membership levels. Our overall experience of operating in the sector should be of significant interest to the inquiry.
2. The Retail Sector Strategy In October 2012 the Department of Business, Innovation and Skills issued a Retail Strategy Report and comment on some of the recommendations were invited. We would like to comment on the plan for an awareness raising campaign for a new code of practice for regulatory delivery in respect of age restricted products for retailers. We welcome and support this awareness campaign. Under age sales is a big issue for Usdaw,asitis the shopworker who is the one on the frontline, and who could be fined for the sale even if it was by mistake. Ev 194 Business, Innovation and Skills Committee: Evidence
We believe that this awareness campaign should be focused on companies, reminding them of their legal obligations and the need for training and support for their staff, and the general public, by making them aware of the various age restricted products.
3. The Portas Review Comment is invited on the progress of the Portas Review. We would like to express our disappointment at the poor take up of the £10 million government fund set up in 2012 to help bring empty shops back into use. Recent reports have revealed that only 7% of the money has actually been spent. As over 100 councils, with the largest number of empty shops on the high street, have actually got the money something clearly needs to be done to get them to use it. Usdaw believes action to halt the decline in the high street is a matter of urgency and suggest a number of additional measures should be considered to get councils to release the Portas money. These include: — New measures to reduce wherever possible, or limit any parking charge increases in town centres as these limit the number of shoppers coming into town. — Extra funds to boost the availability of Park and Ride schemes into town centres. —Anempty retail property law which forces landlords to rent out their properties at a “reasonable” rent. —Anoccupied retail property law that limits any future increase in rents to one linked to CPI inflation. —Anempty shops initiative using vacant and boarded-up shops for community or charity interests. — Introducing a Small Business Saturday, replicating an idea that has worked well in the US, championing small businesses and promoting shopping on the high street on a specified Saturday in December.
4. The Impact of Online Sales on the High Street There is no doubt that the growth of online sales has had a big impact on the high street. Last year they grew by 8.1% and accounted for 10.8% of all retail sales. If we remember that in 2007 just 3% of all retail sales were being done online it shows clearly an industry in change. This growth of online sales is a problem that individual retailers need to respond to because if they do not they could well fail. The encouraging sign for the high street retailers who do this effectively is that they can boost their sales and performance. This is clearly seen in some of the performances over Christmas for those retailers having a high street, online, and click and collect service. The likes of House of Fraser (online sales up 49%), Debenhams (online sales up 39%) and Next (online sales up 11%) show what can be achieved. The Government should consider measures, such as a specific development fund, aimed at getting more retailers, and particularly the smaller high street retailers, to establish and build up an online service.
5. The Skills needed for a Successful Sector The acquisition of new skills is vital for retailing to remain a successful sector. This acquisition needs to be from a variety of sources including in-house company training, pre-apprenticeship courses aimed at upskilling, apprenticeships, vocational qualifications at level 2 and 3, management training courses and graduate trainee entry schemes. This is a varied and demanding approach to upskilling which all involved in the sector should not only support but do all they can to deliver. That is why we ask the Government to consider encouraging a more involved role for Union Learning Representatives in the delivery of things such as vocational training and apprenticeships. Usdaw does all it can in the agreements we have with companies in this area, but Government acknowledgement and support of the value of Union Learning Representatives, could help further upskill workers in the retail sector more generally. In addition more active support for those losing their jobs in the retail sector should be provided through a skills retraining programme, developing skills and competencies that can take advantage of the new online, multi-channel, forms of retailing, which is clearly going to be a future growth area. Business, Innovation and Skills Committee: Evidence Ev 195
6. The Regulations and Costs Affecting the Sector Usdaw believes the regulations regarding trading hours should be maintained and welcomes the fact that the UK Retail Sector Strategy of October 2012 specifically mentioned that Sunday Trading was not part of the review. We do have sympathy with the BRC when they argue for a business rate freeze in 2013 rather than a rise. This is an increase that their online competitors such as Amazon will not face. We feel that there should be stronger tax avoidance legislation and an increase in HMRC work specifically in the area of enforcement of the new law, aimed at those multi-nationals, such as Starbucks, who use current tax loopholes to legally minimise their tax burden by registering overseas. This currently puts British based retailers paying UK tax at a direct disadvantage. More aggressive action against piracy and illegal downloads is also needed which is taking an estimated £1 billion out of the retail market. However, the biggest help for the high street would be in a bold tax cutting move. A reduction in VAT from 20% to 17.5% would, as was proved when the last Labour Government did it, boost consumer expenditure and lead to a more prosperous high street. John Hannett General Secretary Fiona Wilson Head of Research and Economics Usdaw
Letter from Brandon Lewis MP, Parliamentary Under Secretary of State, Department for Communities and Local Government to the Chair Further to my appearance before your Committee on 29 October, I am writing to inform you of the package of measures the Government is announcing today to help high streets and town centres across the country. You will be aware of the Chancellor’s Autumn Statement yesterday which included the biggest package of business rates support in over 20 years, providing approximately £950m benefit to all businesses in England, of which approximately £500m will benefit retail in England. In addition we are announcing: — a review of Business Improvement Districts. — consultations on new permitted development rights. — changes making it faster for local authorities to implement Local Development Orders. — clarity on retail land reviews. — consultation on local authority parking. — a freeze on parking penalty changes. — a call for evidence on red tape. — a competition for digital technology on high streets.. Further details can be found in the press notice and supporting document at the following links: https://www.gov.uk/government/news/eric-pickles-launches-package-of-support-for-local-shops https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263915/Supporting_ High_Streets_and_Town_Centres_Background_Note_FINAL.pdf I am also pleased to let you know that I am establishing a new private sector led Task and Finish Group on digital high streets, reporting to the Future High Streets Forum. Group membership will be announced once I have appointed a chair for the Task and Finish Group, and once we have had an opportunity to consider suitable organisations to involve. This will be done in time for the group’s intended start in the new year. I consider these measures to be significant steps forward in helping local authorities, town teams and all those working tirelessly in their town centres address the challenging and changing environment for high streets in the 21 Century. 6 December 2013
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