The Big Question: What should the government do to stop retail job losses?

This article was first published by Retail Week, 24 July 2020

“It is clear we are in a period of enormous upheaval, which if left unchecked will continue to amplify and accelerate change. There are three areas the government can help reinvigorate the high street:

General Covid-19 policy: the retail sector is one of the largest sectors in the UK with over 4 million people dependent on the sector. Yet, too often the priority and focus for policy making is in other, more high-profile industries. By prioritising the sector when making policy, whilst maintaining safety, the government can build public confidence in returning to  a degree of normality and avoiding cliff edge changes e.g. VAT, clarity on messaging of face masks, use of public transport, supporting small self-employed businesses – these are all key policy areas but it often seems retail is an afterthought, not at the centre of decision making.

Alex McCulloch, Director at CACI

Business rates: retailers consider locations on the basis of total occupancy cost, and in many instances business rates is a huge proportion of this. For example, John Lewis’ Oxford Street store pays 4 times as much in business rates as Amazon paid in UK corporation tax in 2018/19. The temporary suspension of rates is hugely beneficial in preserving occupancy now but without extensive reworking is only delaying the problem if they are reintroduced in the previous form. One obvious improvement is to better tie rates to the total contribution a store makes to turnover (including the online halo and click & collect).

Beware unintended consequences: The current moratorium on eviction has protected retailer occupancy, which is a positive, however in rendering landlords toothless it has significantly impacted rent roll, which has in turn pushed some of the largest landlords to the limit (such as intu). Whilst it is easy to beat up landlords and banks it is usually forgotten that real estate is a previously ‘safe sector’ in which pensions are heavily invested. By putting those businesses at risk the government is materially impacting everyone’s pensions and that will cause far more upheaval when it trickles through to annual pension statements than any PR benefit in making landlords the backstop now has. The solution is more complex, but lies in supporting steps to secure the long-term occupancy of stores, and valuing retail real estate accurately – not in a piece of legislation that is 66 years old and was crafted before most shopping centres were even built, let alone the internet (the 1954 Landlord Tenancy Act by the way).”