Tuesday 1 October 2019 6:03 am

How business rates reform can thwart the retail apocalypse

Annabel Denham is director of communications at the Institute of Economic Affairs

When businesses like Thomas Cook fail to adapt, they are smited by new technologies with leaner business models and more efficient practices. This is Joseph Schumpeter’s creative destruction in action.

Yet there is something profoundly bleak about boarded-up shops or “clearance sales” posters in the windows of once thriving businesses – particularly as the demise of all high streets isn’t inevitable.

As more and more household names fold, retailers and unions have called for the government to step in and find some way of alleviating retail’s woes. 

Some have suggested a digital sales tax – in essence penalising tech firms for carving out a more efficient business model, one from which consumers benefit in the form of lower prices and added convenience. Jeremy Corbyn, meanwhile, wants to forcibly seize property from landlords and hand it to community projects and coops. Both are wrong-headed. 

But claims of a so-called retail apocalypse mask a hidden truth: there are things we can do to restore some high streets to health. 

Pumping money into the Stronger Towns Fund, however, won’t make a difference, because it ignores why these towns are being left behind and the broader relationship between city economies and the vibrancy of their high streets. 

Nor can the decline of some town centres be blamed on the might of the internet. It’s down to a mix of factors, from housing to transport to the jobs available in certain areas. 

Tackling these issues, by liberalising housing supply and investing in transport links between towns and cities to give people access to the best jobs from a far wider area, will have more of an impact than focusing on high streets alone.

Retailers face myriad challenges and we at The Entrepreneurs Network have long called for business rates reform. Blanket cuts will only benefit the biggest landowners like the Duke of Westminster rather than high street shops or their customers. Instead we need to reassess rateable values upon the underlying land value of a commercial site.

As research from Centre for Cities highlights, not all high streets are struggling. In Brighton, vacancy rates are as low as seven per cent.

Online sales currently make up just 17 per cent of the total British retail spend, and tech giants are themselves moving into physical retailing: Apple has stores across the world, and in June Amazon began opening pop-up shops across the UK.

This demonstrates that online and physical shouldn’t be an either-or proposition. Instead, retailers should look to innovative tech and online shopping to increase sales. The role of physical stores may increasingly be that of a “shop window” or community space. 

High streets need flexibility: if bricks-and-mortar retail is becoming a smaller presence, making change of use – to food, drink, leisure and entertainment – easier is vital.

Indeed, space earmarked for retail doesn’t have to be that way forever. We have vacant shops and a housing crisis: by defending and expanding Permitted Development Rights, which allow change of use, the two can be the answer to each other’s problems.

Yesterday’s boarded-up shop front could be tomorrow’s family home, bringing vibrancy and vitality back to Britain’s high streets without the heavy hand of the state.

Main image credit: Jack Taylor/Getty Images

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