Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Memorandum by CB Hillier Parker (SC 19)

THE ENVIRONMENTAL IMPACT OF SUPERMARKET COMPETITION

CB HILLIER PARKER

  1.  CB Hillier Parker is part of CB Richard Ellis, the largest global real estate advisor in the world. In the UK, CB Hillier Parker advises the public and private sectors on all aspects of retail agency, investment, planning, development and research.

  2.  The firm's Planning and Public Sector Group is closely involved in the planning and development of new foodstores. The firm has advised most of the major food retailers on a range of property and planning matters and regularly acts for a number of retail developers across the UK. CB Hillier Parker has also acted for more than 250 local planning authorities throughout England, Scotland and Wales, and advised on the effects of in excess of 50 new stores or store extensions in the last few years.

  3.  CB Hillier Parker was responsible for preparing the research into the Impact of Large Foodstores on Market Towns and District Centres on behalf of the DETR which was published in September 1998, and is currently engaged on a research project into the effects of the sequential approach on retail development, commissioned by the National Retail Planning Forum. The results of this research will be published early next year.

  4.  Dr Brian Raggett is a Senior Director of CB Hillier Parker, and is head of the firm's Planning and Public Sector Group. He is also currently the President of the Royal Town Planning Institute. Chris Goddard is a Director of CB Hillier Parker, and is responsible for the firm's retail planning consultancy advice. He was the principal author of the DETR Market Towns research.

  5.  The views expressed in this Memorandum are the personal views of the authors.

SCOPE OF EVIDENCE

  6.  This evidence focuses on the planning issues raised by supermarket development.

  7.  The evidence summarises the growth of large foodstores and the decline in local independent and co-operative grocers over the last 30 years, and identifies more recent trends, including the continued pressure to create larger stores through store extensions, and the introduction of smaller local "convenience" foodstores by the major retailers.

  8.  The evidence reviews the general principles and specific policies for the planning of new foodstores contained in Planning Policy Guidance 6, and concludes that the central thrust of planning policy guidance is not to regulate competition between retailers or different retail formats, but to focus new development into the most appropriate locations.

  9.  Finally, the evidence summarises the effects of large foodstore development, and the role which such developments play within town and district centres, and considers whether there is any case to suggest that the current planning policy guidance framework for assessing proposals for new or extended foodstores should be reviewed.

SUPERMARKET GROWTH

  10.  The growth of large foodstores and the main multiple operators are described in our research into the Impact of Large Foodstores on Market Towns and District Centres.

  11.  Research undertaken by Verdict quoted in our Market Towns research shows that the proportion of total grocery spending attracted by superstores (conventionally taken to be stores with in excess of 2,500 sq m sales floorspace) increased from 29.9 per cent in 1987 to 53.7 per cent in 1996. Total grocery superstore turnover grew from £9,188 million to £34,055 million over this period (in current prices).

  12.  This growth went hand in hand with the development of new superstores over this period, incorporating a wider range and diversity of products (ie fresh meat and fish counters), catering particularly for those undertaking bulk food shopping by car.

  13.  Concurrent with the fall in market share of independent grocers and the growth of multiples, there has been a more general decline in the number of outlets. Research quoted in our Market Towns study indicates that the total number of grocers fell from 147,000 in 1961 to only 58,070 in 1980. The number of multiples, co-operatives and independents were all in decline long before the major period of food superstore development in the late 80's and early 90's.

  14.  In terms of absolute numbers, the independents have witnessed the most closures, falling from 116,000 in 1961 to only 20,900 in 1997. However, there has also been substantial rationalisation amongst the multiples and Co-ops of their older smaller stores. This is consistent with analysis undertaken by Goad, which shows that the number of convenience retailers as a proportion of total town centre units (as defined by the Goad Plan) fell from 12 per cent in 1990 to approximately 9 per cent in 1997.

  15.  Although store numbers have fallen, the average size has increased significantly to accommodate a broader range of products. Our Market Towns study quotes research suggesting total grocery superstore floorspace increased from about 1.6 million square metres in 1987 to about 3.6 million square metres in 1996. Over this period, the proportion of all grocers outlets accounted for by superstores grew from 24 per cent to nearly 40 per cent.

  16.  Modern grocery superstores increasingly include a wide range of non-food products such as clothing, health and beauty, housewares and home entertainment. Many include services such as a pharmacy, opticians, post office, dry cleaners, photo processing and cash point banking facilities. Improvements to supply chains have reduced the area needed for storage, and this has been replaced by more sales space with a wider range of goods.

  17.  Since the introduction of the 1996 version of PPG6, the pace of new superstore development has slowed markedly. This in part reflects the current planning climate, which makes it more difficult to pursue proposals which do not accord fully with Government guidance. It also reflects some major retailers re-appraisal of their trading formats.

  18.  Retailers like Sainsbury and Tesco in particular are pursuing smaller store formats. Tesco developed its Metro format before the publication of PPG6. These typically locate in urban areas, for example Covent Garden, and cater for lunchtime and top-up trade, and an affluent, young urban catchment fuelling the demand for a different type of retail offer from the conventional family oriented superstore.

  19.  Outside the conurbations, the Tesco Compact format, typically comprising stores of 1,400 square metres sales space has been developed in smaller centres, eg Hook, Princes Risborough. Sainsbury's has also developed "Country" and "local" store concepts. After the success of pilot local stores, such as Fulham Palace Road in London, Sainsbury recently announced plans to open 200 new convenience stores of about 300 square metres each, in suburbs, small towns, and public transport interchanges.

  20.  Another illustration of the major retailers change of focus towards the "convenience" end of the market is forecourt shopping. The major superstore operators have secured a significant share of petrol sales, traditionally sited alongside superstores. However, the development of forecourt food sales has moved on, to include the development of freestanding forecourt/convenience stores, eg Tesco Express and joint ventures, eg Somerfield/Elf, replacing the traditional role of the "corner shop".

  21.  While attention has focused on the dominant position of major food retailers like Tesco and Sainsbury, the last 10 years has also seen the growth of discounters like Aldi, Lidl and Netto. These have injected significant price competition in the core convenience goods sector.

  22.  At the other end of the spectrum, Tesco has developed its "Extra" format, typically comprising stores of circa 10,000 square metres, selling a wider range of goods including clothing, books/records. These stores are akin to the Sainsbury's "Savacentre" format, and the larger Asda stores which have traditionally sold a wider range of non-food goods, eg the "George" clothing range.

  23.  Notwithstanding the reduced pace of new superstore development over the last three years, most food retailers have continued with ambitious store expansion plans. Tesco, for example, is particularly active at the present time in pursuing extensions to existing superstores, which are promoted on the basis of the need to improve congested and over-crowded conditions in such stores, and/or in order to extend the range of goods sold, for example to include clothing or other comparison goods. Most of the other major food retailers are promoting similar extensions.

  24.  While the number of consents granted for new edge of centre or out of centre large food superstores has fallen, there is evidence that retailers in partnership with local planning authorities are continuing to secure opportunities within town centres, or within existing or as part of proposed new district centres. However, despite the Government's advice to encourage such development, practical difficulties and planning concerns relating to highways and design issues continue to present obstacles to new foodstore development, and proposals to extend existing town centre supermarkets.

  25.  Recognising the key role which large foodstores can play as an anchor in smaller centres, there seems to have been a small increase in the number of authorities that are using their compulsory purchase powers to assemble suitable sites for large foodstores as part of a regeneration strategy for their centres. A good example is Eccles.

THE POLICY POSITION

  26.  The first version of PPG6 (Major Retail Development) published in January 1988, afforded limited guidance as to the role or the preferred location for new foodstores. The generally "laissez faire" policy approach at that time provided a clear presumption in favour of new development, unless it would be likely to cause harm to interests of acknowledged importance.

  27.  A more substantive version of PPG6 was published in 1993. This advised that the planning system should facilitate competition between different types of shopping by avoiding unnecessary regulation, and stressed the need to secure a suitable balance between town centre and out of centre retail provision.

  28.  The guidance acknowledged that retailing is constantly adapting to changing conditions, and highlighted the trend towards larger shops to increase efficiency and extend the range of goods available on one site, offering the potential to pass on benefits to the consumer in convenience, choice, value for money and comfort.

  29.  Acknowledging the difficulties of accommodating larger stores within centres, the guidance indicated that the role of large foodstores both in and outside town centres was well established and understood. This is borne out by looking at the scale of superstore development which took place prior to the publication of PPG6. By 1993, superstores accounted for just under half of total grocery sales, and represented 35 per cent of total grocery floorspace.

  30.  The 1993 guidance restated the general prinicple that it is not the function of the planning system to preserve existing commercial interests or to inhibit competition between retailers or between methods of retailing. The guidance advised that retailing should generally be able to respond to consumer needs and demands and enjoy the benefits which may flow from competition provided by new retail developments, (with the proviso that such competition should not be such as to deny access to retail facilities for significant sectors of society).

  31.  As commercial competition as such is not a land use planning consideration, the guidance stated that the effects of new retail development on existing individual retailers would not normally be a relevant factor. Impact considerations were confined to effects on the vitality and viability of any nearby town centre as a whole. However, food supermarkets in smaller towns and district centres are acknowledged as playing a vital role in maintaining the quality and range of shopping, and the guidance advised local authorities to consider carefully the effects of new development on such stores.

  32.  The current version of PPG6 published in June 1996 maintains the Government's objectives to secure an efficient, competitive and innovative retail sector, and ensure the availability of a wide range of shops and other facilities. The principal change of emphasis is the objective to focus new development on existing centres, by the introduction of the sequential approach, (foreshadowed in PPG13) and deleting the reference to securing an appropriate balance between town centre and out of centre development.

  33.  Within town centres, the current guidance gives clear continued support for the important role which large foodstores perform. It recognises that large foodstores and supermarkets often play a vital role as the anchor store in maintaining the quality and range of shopping in smaller towns and district centres, and are essential for less mobile members of the community. As the major retailers have developed more efficient distribution networks, they have been able to reduce the size of store needed to provide a full range of convenience goods, enabling more flexibility.

  34.  More qualified support is given to edge of centre stores. The guidance acknowledges these may be the best solution in many small centres, particularly in historic towns, provided the links between the store and the rest of the centre are strong.

  35.  Our market towns research highlighted the critical importance of linkages and effective integration. We have suggested that the current guidance should be clarified, to emphasise the need for effective integration between "edge of centre" development, and to consider the impact of such proposals on the economy and environment of the town centre. We have also highlighted the need for more research into the functional linkages and relationships between town centres and edge of centre stores arising out of our current research into the sequential approach on behalf of the NRPF.

  36.  The guidance recognises the role of supermarkets in district centres. It refers to district shopping centres as "groups of shops, separate from the town centre, usually containing at least one food supermarket or superstore, and non-retail services such as banks, building societies and restaurants". In practice, following the incorporation of additional services within large modern superstores in many cases, such stores can legitimately be argued to perform the role of a district centre in themselves. In commercial terms, of course, the potential to achieve competition between retailers within the centre is lost.

  37.  The guidance qualifies the role of supermarkets in district and local centres. Local authorities are advised to encourage "appropriately sized" local supermarkets and seek to retain post offices and pharmacies. No indication is given as to what constitutes an "appropriate" size. If the development can be physically integrated properly within the centre in question, in our view, there should not normally be grounds for concern about the impact on other retailers within the same centre, provided that there is no real risk that the food retailer will be able to establish a monopoly position.

  38.  The impact of new foodstores within town and district centres on neighbouring town, district or local centres may be a legitimate planning issue. However, there is little guidance on the circumstances where it is relevant to take account of the impact of new development in one town centre on any neighbouring centre(s). This comment applies equally to non-food retail development.

POLICY RECOMMENDATIONS

  39.  We consider that current PPG6 correctly focuses on the location of new development, rather than regulation of the scale and form of development, (for example, to regulate the size of foodstores or to reduce competition with other town centre retailers). We do not consider it is desirable, or practicable, to use land use planning powers to regulate supermarket operators, or any other town centre retailers to restrict competition within existing centres.

  40.  We have highlighted, particularly in our Market Towns research, the need to ensure that where new edge of centre development is promoted, both the physical links and functional relationship between the new development and existing centre require careful consideration. A poorly located edge of centre store is unlikely to offer any benefits to the nearby town centre.

  41.  Where development is proposed outside existing centres, the guidance sets out a range of tests, including requirements as to accessibility, effects on travel and car use, and the environmental effect. Detailed consideration of these issues falls outside the scope of this evidence. However, our Market Towns research demonstrates the vast majority of shoppers using out of town superstores arrive by car, and that town centre stores generally attract more shoppers arriving on foot, or by public transport, and achieve a higher proportion of linked trips. This analysis clearly supports the continued preference for town centre development.

  42.  Three key tests are applied to proposals for new and extended foodstores:

    —  Need—evidence of a need for the development is a requirement when seeking a Local Plan allocation, and, as clarified by the Minister on 11 February 1999, is also a requirement for the grant of planning permission for proposals outside existing centres which are not provided for in the Local Plan.

    —  Sequential approach—the onus rests with the applicant to consider central locations for the proposed development having regard to their suitability, viability and availability. Recent Ministerial clarifications confirm that this approach applies equally to store extensions.

    —  Impact—including cumulative impact ie the effect on existing town and district centres.

(i)  Need

  43.  We broadly welcome the Ministerial clarification that the need test should apply to applications as well as Local Plan allocations. This addresses an inconsistency in PPG6 as currently drafted.

  44.  The key issue is how need is defined. The Minister has to date declined to provide further guidance on what constitutes need, although he has indicated that commercial demand, or theoretical capacity, do not in themselves, constitute "need".

  45.  In principle, we concur with the view that what constitutes need is best left to the local decision maker. However, we would welcome some clarification. We believe that qualitative shortcomings in the existing provision, limited choice, and evidence of significant "leakage" of expenditure are all indicators of retail need.

  46.  There may be circumstances where the imposition of the need test can run counter to the Government's desire to see competition in the supermarket sector; for example, where a single operator secures a dominant, in effect, monopoly position in a small town or District Centre. Provided an existing retailer meets the "need" as defined, the guidance may have the effect of inhibiting competition—at least from any edge of centre or out of centre store.

  47.  The need test should help prevent the environmental consequences of wasteful competition; in its simplest form, developing two stores where only one is required. However, if the threat of competition is reduced, the guidance should make it clear that the responsibility rests on local authorities and retailers in established town centres to continue to invest and modernise.

(ii)  The Sequential Approach

  48.  We endorse the principles of the sequential approach, and the general onus on the developer to consider alternative sites. However, as PPG6 makes clear, we believe local planning authorities have a critical role to play in the identification and assembly of sites of new town centre supermarket development. In this respect, the current review of the use and effectiveness of these measures, and how the process can be streamlined is timely.

  49.  Of all the provisions of the June 1996 version of PPG6, the sequential approach has given rise to the greatest level of confusion and uncertainty. Our ongoing research on behalf of the NRPF points to clear inconsistencies in the interpretation of what constitutes "town centre" and "edge of centre". While the introduction of the sequential approach has had an impact on the way both local authorities, developers and retailers are considering proposals for foodstores, the early indications from our research for the NRPF are that the approach is being applied inconsistently.

  50.  For the most part, those promoting new food supermarket development appear to acknowledge that the onus rests on them to demonstrate that they have thoroughly assessed all potential town centre and edge of centre options. The confusion arises when deciding which sites should properly be considered as being "suitable, viable and available within a reasonable timescale", taking the criteria set down in PPG6.

  51.  The question of suitability is normally taken by supermarket operators and developers to mean suitable for the size of store which they wish to develop. Local authorities, on the other hand, typically highlight a need for compromise and flexibility, and, quite reasonably, require the applicant to consider sites which may be suitable for a smaller development which may suit some, but not all, food retailers. In our view, the clarification of the "need test" should go some way to resolving this issue, by first defining what type of development is needed.

  52.  The debate on the suitability issue broadly falls into two different interpretations of the guidance. The stance taken by developers and retailers is to adopt the "built form" approach ie, the size of unit required to meet the retailer's own commerical and operational needs and aspirations. Local planning authorities generally favour the "range of goods" interpretation, which considers the extent to which the proposed development can be broken down into its constituent parts eg, foods sales, clothing sales, etc.

  53.  The "built form" approach enables retailers to set their requirements as the basis for the sequential approach. Given the dominant position of the major superstore operators, and their continuing strategy to extend their offer well beyond their traditional convenience goods function, if the built form interpretation of the sequential approach is accepted, it will be seen as offering superstore operators a significant competitive advantage in the sale of a wide range of non-food goods over and above traditional specialist town centre retailers. Our concern is that this interpretation will only encourage retailers to develop larger less flexible store formats in order to justify out of centre sites. It must therefore be questionable as to whether this would be consistent with Government policy to "put town centres first".

  54.  The second aspect of the sequential approach which gives rise to significant uncertainty is the question of availability. We do not advocate the interpretation adopted by some that the suggested alternative site should be immediately available. However, nor do we consider it is appropriate to oppose new development on the basis of a more central alternative location unless there is some realistic prospect for that site coming forward for the proposed development within a reasonable period of time.

  55.  We would suggest that what constitutes a reasonable period of time depends on the urgency of the need as defined. However, if a local authority intends to rely on an alternative more central site as a basis for opposing new supermarket development, we consider that as a minimum, the authority should be able to demonstrate its in principle support for development on the site in question. It should also be able to indicate what support it is prepared to offer in the land assembly process, using its CPO powers if necessary.

  56.  The final aspect of the sequential approach which is causing significant uncertainty and controversy at present is the way in which it is applied to proposals to extend foodstores. The Minister has confirmed that the sequential approach applies to store extensions. Advocates of the "built form" interpretation of the sequential approach argue that a store extension is indivisible from the existing store, and therefore the sequential approach cannot apply to such proposals.

  57.  We do not support this interpretation. In circumstances where a supermarket or superstore performs an important local or district centre function, and an extension is required in order to meet the specific needs of its catchment, there is unlikely to be any justification to consider alternative sites. However, in the case of proposals for significant extensions to stores, serving an extensive catchment overlapping with nearby centres, we consider the analysis of alternative sites will be justified. Many of the current proposals for store extensions are advanced on the basis of the overcrowding and overtrading in existing stores. Clearly, the development of a new competing foodstore, or extension of existing facilities within a nearby town centre offers an alternative solution to overcrowding in out of centre superstores, which is likely to be more consistent with the underlying objectives of PPG6.

  58.  In circumstances where superstore operators propose major store extensions in order to extend the range of goods sold, we consider the same underlying principle should apply. If the effect of such store extensions is to create retail floorspace which would not otherwise have been permitted, having regard to the related tests of need, the sequential approach, and impact, we do not consider that any distinction should be drawn in policy terms to store extensions.

(ii)  Impact

  59.  The relevance of the impact of out of centre superstore development on established town and district centres has always been recognised in policy. Our market towns research was the first major research project to quantify the effects of such developments, and their consequences for the vitality and viability of nearby town centres. This suggested wide variations in the level of impact, and its consequences, in different centres.

  60.  We consider there is a need to improve further the consistency and objectivity of retail impact assessments, for example, by the more extensive use of up to date survey material. We would also welcome the introduction of compulsory, post-opening surveys, based on a consistent methodology, to measure objectively the impact of new stores, and to assist retailers, developers and local authorities to identify the likely consequences when planning new developments.

  61.  There remains a clear need for accurate, up to date information on floorspace and retail turnover; the data available at present is wholly inadequate in some cases. We welcome the efforts of the DETR to assemble reliable data on floorspace and turnover, although without a comprehensive Census of Distribution this task presents major practical problems.

  62.  Leaving aside these practical measures, we do not consider that there is any justification for reviewing the Government's Planning Policy Guidance relating to the economic impact of large foodstores. This has been refined and developed over time, and is well understood.

  63.  The final aspect of policy which we consider warrants clarification is the role which superstores can and do perform as district centres. Provided stores are well located relative to the catchment they serve, and are readily accessible by alternative means of transport, we consider there is a case for considering designation of such stores as district centres, (or stores in conjunction with adjoining facilities), with all the policy consequences that such designation infers ie "legitimate" protection from out of centre competition and support for further investment.

  64.  We consider this support should also apply to appropriately located new large foodstores where they offer the potential to create a new district centre which meets the needs of a particular catchment which is poorly served at present. Local authorities should be required to consider which stores or developments do now or could in the future fulfil such a role.

CONCLUSIONS

  65.  We believe that superstores and large supermarkets perform an important role, which has been consistently recognised in Planning Policy Guidance. Such stores often provide one or more of the anchors in smaller town centres, may provide a catalyst for new development and investment to sustain the quality of the environment, and can, in their own right or in conjunction with other stores, provide the nucleus for appropriately located district centres.

  66.  The principal adverse impacts which have arisen from supermarket development have occurred where inappropriate development has taken place outside established town centres, where by nature of its scale and cumulative impact, it has led to a reduction in economic activity, and prejudiced the potential for new investment, or led to dis-investment in existing high streets.

  67.  We consider Planning Policy Guidance should continue to focus on the key issue of location for new retail development, as a legitimate land use planning consideration, rather than to regulate competition between large supermarkets and other forms of retailing. Where tension exists, it is a consequence of pressure from superstore operators to extend further the scale and range of their operations to a point where they are unable to locate satisfactorily within existing centres.

  68.  The sequential approach recognises and applies itself to this tension. It places on the one hand a responsibility on local authorities to take a positive approach towards identifying and assembling town centre sites, and on the other, urges retailers and developers to be flexible about their requirements. There is evidence that most retailers and developers and their advisors are heeding this advice.

  69.  The decision by a number of retailers to develop smaller town centre stores should be welcomed. We do not consider there is any legitimate ground to oppose new town centre supermarket development in planning terms, even if such regulation was feasible and enforceable.

  70.  Overall, we consider that PPG6 and subsequent Ministerial clarifications provide a coherent and relevant policy basis for considering proposals for the development of new food supermarkets and superstores, subject to further clarification on the related issues of store extensions, need, the sequential approach and the role of district centres.

  71.  We consider there is justification for giving more explicit acknowledgement to the role which superstores can perform as district centres in their own right, provided developments are well located relative to their catchment, accessible by alternative means of transport, and consistent in scale with the needs of their catchment.

  72.  We recommend that local authorities should be positively encouraged to use CPO powers so as to regenerate declining centres and to plan positively for new retail provision. Councils should, especially in identified Urban Priority Areas, be afforded assistance by way of additional funding support, perhaps via an appropriate regeneration "bank", to expedite the land assembly and the urban regeneration process.

  73.  As advisers to retailers, developers and in particular, local authorities, and authors of the DETR Market Towns research, we are very familiar with the negative economic and environmental aspects of superstore competition. However, we consider that a balanced analysis of this issue should also recognise the vital contribution which such development has played in many town and district centres, and the role which such developments should continue to perform provided they take place in the right location.

Brian Raggett, Senior Director

Chris Goddard, Director

October 1999


 
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