Market Failure?: Can the traditional market survive? - Communities and Local Government Committee Contents

Memorandum by Michael Felton Associates (MARKETS 05)


    — The difference between local authority markets (the municipal sector) and the non-local authority markets (the private sector).

    — The distinction between covered markets (the "Indoors") and the uncovered or open markets (the "Outdoors").

    — The last 10 to 15 years.

    — Effect of the decline.

    — The specialist markets.

    — The route to stabilisation.

    — Socio-economic effects and their benefit.

    — Future prospects—the next decade.

  It is to be noted that we have directed our expertise to the above subject matters only where it is felt that our comments would assist the committee—not least the background detail in paragraphs B1 to B3 inclusive. The name/location of markets as businesses are set in italics.


1.  Type of market operations—municipal and private

  1.1  The municipal markets both "Indoors" and "Outdoors" are operated by local authorities and are based on custom; royal charter; local acts of parliament passed in the 19th century or under the Food Act 1984. The private sector principally operates in the "Outdoors" arena with the operators being individuals (ex traders or entrepreneurs); charter holders; quoted and non-quoted companies. The bulk of the private sector sites are held on licence or short lease from local authorities who own the car parks; the central squares; the pavements or streets.

  1.2  The industry's broad calculation is that approximately one thousand one hundred separate markets are trading today—roughly some 70% are in the municipal sector and 30% in the private sector. It is thought that some one thousand five hundred traded 12 or more years ago. This statistic is misleading in that the municipal "Indoors" will usually trade five or six days per week whereas the private sector mainly operates "Outdoors" often on a one to three day week. The footfall percentage in the municipal sector is therefore much higher than 70% unit ratio. Therefore the overall footfall volume may be up to 85/90% of total visiting for the municipal sector.


  2.1  The "Indoors" represent the bulk of market trade are almost all owned municipally. Many are in splendid Victorian structures (Cardiff; Halifax; Leeds; Newcastle; Newport, Spitalfields) or in the post war modern period (Birmingham; Bradford; Liverpool, Plymouth; Warrington). The "Indoors" are the significant part of the industry by providing all-weather cover; some element of heating; toilet facilities; a degree of security for the traders; six days or a minimum of three days per week trading; fixed premises for cafes; snack bars; chill rooms; office areas; storage etc.

  2.2  The "Outdoors" are operated in both trading sectors. In the municipal sectors often attached to an "Indoors" unit eg Blackburn; Bury; Oldham or "Outdoors" Cambridge; Newark; Norwich; Mansfield. However, a substantial part of the "Outdoor" sites are operated under licence from the local authority by the private sector. There is scarcely a town in the UK that does not have the benefit of a one or two day a week market—these are too numerous to mention.


  3.1  These differences/distinctions are important to understand their significance to the industry.

  3.2  The profit motive drives the private sector while the municipal is prepared to support its market on social; economic; political; historic grounds. This is not to gainsay that the municipal sector does not have immensely successful outlets and achieves an annual surplus.

  3.3  Notionally a municipal market provides a surplus for the local authority and a margin for the trader. The private sector requires a triple "profit" as the operator also requires one. Paradoxically, the private sector produces a larger percentage of gross income as profit as cost control is strict. Local authority finance rules add back "capital transfers" ie a hypothetical rent on its own property thus reducing any surplus AND a prima facie "undue" (our view) percentage of the central costs ie senior officers time/central costs etc. etc. Our experience is that only their treasurer's departments know how this is calculated.

  3.4  The municipal sector invariably has a hierarchy of council officers at four or five levels. The private sector has immediate decision making as the businesses are relatively small. Local authority control often rests with a members committee which again, in our experience, does little or nothing to improve a market's performance being primarily concerned with attaining a surplus or avoiding a subsidy. It is noticeable that the committees are taking more interest in performance of late.

  3.5  Within our knowledge it is clear that many municipal market traders have obtained security of tenure and therefore subject to the legislation on occupancy. The private sector cannot and will not provide this as their interests are conditioned by a short period of legal occupancy—ie three to 10 years—often subject to a negotiated renewal.

  3.6  Overall, publicity and promotion is more effective in the private sector. Principally because LA (Local Authority) efforts are usually contained within a council's total publicity package and therefore less prominent and less well directed to the public.

  3.7  The phenomenon of Sunday markets is mainly in the hands of the private sector ie Bovington (Herts); Blackbushe (Hants); North Weald (Essex); Ingleston (Mid Lothian); Wembley (Greater London). These can and do achieve a take-up of thousand unit plus. Local authorities say that they do not have the labour available to operate these! The reality is they do not own a sufficiently large area of land for these purposes—ie former aerodromes; farmers lettings; derelict/cleared sites.

  3.8  The object of this paragraph (No. 3) is to demonstrate the variety in market operations, ownership and management and to infer that no single panacea is the answer to the industry's problems.


  4.1  We have deliberately extended the time period as it is our firm belief that the industry's gradual decline is at least 15 years old. We bring to the committee's attention an article we published in the Estates Gazette (14/3/98) which wherein we highlight on page 3 the multiple causes of negative growth (Appendix E.G.) To add to this list we would mention e-bay sales and the use of extensive cataloguing Argos; Freemans; Great Universal; Littlewoods and surprisingly Tesco.

  4.2  These pressures have continued. It is a matter of great concern that the pace and range of competition has increased.

    4.2.1 The supermarkets have grown in number and size well before 1998. The benefits are obvious—substantial parking space (free); indoor comfort; modern toilet facilities; payment by credit cards; provision of trolleys; AND we emphasise the increase in non-food/drinks products—clothing/footwear; household goods/gardening etc.

    4.2.2 In parallel the National Market Traders Federation (NMTF) is likely to point to an increase in membership but we say that this is entirely due to the insurance cover they are able to arrange, encouraging membership

    4.2.3 The discounters—Primark; Poundland; TKMaxx; Wilkinsons are a growing threat—again selling a vast range of goods competing directly with the traditional market and providing a relatively comfortable shopping arena.

    4.2.4 The lack of investment in markets in contrast to the regular refit by chain stores/supermarkets. Local authorities have been unwilling or unable to invest in the markets other than a "tarting up" or essential structural repair. Their markets priorities are (and properly so) at or near the bottom of the list. Unhappily the "cash-cow" is supreme and until fairly recently most market departments have been unable to retain their surpluses which have gone into another "pot".

    4.2.5 The shortage of traders is evident from statistics supplied by LAs retaining us; the number of advertisements in the trade press (Market Trader/Market News) seeking further traders; the unwillingness of the younger generation to follow in their parents' businesses—principally the excessive hours. A successful trader standing in an open market say on four/five days which means daily setting up and taking down stalls will be working a 10 hour day.

    4.2.6 Traders are burdened by an inherent lack of capital and have difficulty in persuading banks—that is the historical position—in assisting them in expansion. That situation will be almost impossible today. While there are many very prosperous traders, their number within the UK market community is insignificant.

    4.2.7 Traders do not have the advantage of powerful block purchasing and rely upon the small/medium wholesalers whose numbers have decreased over recent years.


  5.1  The above subsection 4.2 (not exclusive) simply illustrates the problem of the industry. We have already said that the number of markets (and consequently the number of market days) has declined.

  5.2  The setting up of a new market is a rarity. There are very few centres of population where a market does not exist. The set up costs and an initial subsidy period in both the municipal and private sectors is not one that any operator would wish to risk today. Additionally there is no certainty that a sufficient number of traders would be available.

  5.3  There is a trend for LAs to outsource markets to the private sector by way of short-term renewable licence. We see this trend increasing but fear that some markets will cease trading or more likely become unviable as early as the first six months of 2009.

  5.4  Although this assessment is relatively gloomy, the prospects for various parts of the industry differ. The following comments differentiate between the prospects for range of markets trading today.


  (a)  The large "Indoor" municipal markets that are centrally positioned are not matters of concern. We define "large" as a minimum of 150 stalls/pitches (some have space for 300). Our proviso requires a sufficient mix of users—ideally 25% foodstuffs' 25% clothing/footwear; 25% household goods/materials/gardening; 25% the balance (including some odd ones eg cycle repairs at Cambridge; headgear at Kilburn; tattooing at Coventry). Toilet and seating facilities must be improved AND investment must be available on a continuing basis.

  For the few private sectors large "Indoors" repeat the above.

  (b)  The stability of the medium market (50—100 stalls). Some will lose traders and customers; others will remain on an even keel as long as the location is unchanged and management is positive.

  We consider the critical mass occupancy level is at worst 75-77.5%. Today (2009) the above category achieves 87.5-95%.

  (c)  The smaller "Indoors" (municipal and private) we feel are at risk. We define small as 45-50 stalls or under—often in suburban locations or those where demographic shift is patent. There is always a point where benefit ceases.


  (c)  The large "Outdoors" in both sectors will survive but with reduced trader occupancy and a consequent reduction in footflow.

  (d)  The medium sized (50-100 stalls) "Outdoors" in both sectors are at a degree of risk at the lower occupancy end. A further drop from 2008 figures of 12.5-15% vacancy is a distinct threat.

  (e)  The small "Outdoors"—below 50 units—particularly in the municipal sector is at risk. Almost every small town (10-15K population) in the UK has a single market day per week. The cost to an LA is utterly disproportionate to income. The private sector fares better in that (i) its field management will take charge of several markets in an area each week (ii) traders will follow an operator in a given area (on a weekly round) at location in two or more LA jurisdictions (iii) private sector running costs are extremely tight.


  6.1  In the traditional retail markets—we exclude antiques, second hand materials, arts and crafts, car boots—there are essentially two specialist groupings—farmers and continental.

  6.2  After an uncertain start the farmers markets have established themselves. Much depends on how firmly FARMA (the main organising body) can control these outlets. The essence of "farmers" is fresh local produce. Ideally greengrocers, fruit, flowers, fresh/dried meat, dairy products, bottled food (honey, pickles etc.), confectionery. In practical terms this is not always possible—an element of "buying" in foodstuff from far outside for unseasonable goods. Providing this is minimal then it is bound to be accepted.

  Frequency of trade is a problem—nationwide once or twice a month at a fixed location is the limit of trading for each market to date.

  It often happens that there are, in principle, objections to doubled up users, say by one cheese producer competing with another on market day. Paradoxically this may be beneficial for the customer in that these markets are small—12/15—20/25 units. Part of their success/survival is this trading infrequency.

  In our view they will probably survive if farmers, horticulturalists, nurserymen continue to see a margin in their efforts. As at today it is accepted by LAs that there is no profit for them at all and in some cases a loss (advertisements/cleaning costs)—effectively a site subsidy.

  6.3  Continental markets are a success. Part of this is due to their infrequency. They will trade for two to four days—often in a prime position not always available to the traditional market. The French traders are by far the most creative with smaller numbers from Holland and Germany. Their UK customers are from ABs—Ds; their offer is not cheap—but the excitement they generate for olives/gherkins; vast range of cooked/preserved meats; cheeses; sweetmeats; leather/linen goods; bottled drinks; preserved foods is considerable.

  Their ability to trade afar is helped by the excellence of their purpose built vehicles (never seen in the UK) which are an engineering speciality; and their capacity to resupply from abroad. This enables the traders to stand at a number of locations over a period of weeks.

  Briefly, their impact has been considerable on the UK public—more so on with the ABs. Nonetheless C-Ds patronise these outlets and are known to travel distances for the occasional markets.

  6.4  Whether these resources of both farmers and continental markets can or will integrate with traditional markets remains to be answered.

    6.4.1 As to farmers markets, on the whole after initial "differences" both sets of traders recognise that each benefits the other. But traditional traders are hesitant about the fairness of costs to trade together and the greengrocers (the absolute sine qua non of any market) still resent a rival presence. We suspect there could be considerable trouble if farmers markets become a weekly event. We consider this unlikely at this time.

    6.4.2 As to the continental markets here there is more difficulty. Not only are the continentals privileged—location, subsidised rentals in general; effectively free advertising (by LA). However, the public are very keen on these and the benefit to an area is obvious.

    We are aware of only one such market being held at the same time as the traditional markets. This is St. Albans. The regular market is held twice a week, is highly successful and runs along the north west side of St. Peter Street; the continental market is in a more spacious area on the other side of the street usually with a fine display of French and North African food products (and an "on the spot" mobile bakery!) and local clothing items. Against a very successful operation but no sign of integration.

    6.4.3 We have left out any discussion on the one-off Christmas markets which are unique in themselves.


  7.1  Given the problems above and the pressures on the industry—one asks what can be done? At this point there is a distinct difference between the municipal and private sectors.

7.2  The private sector

  7.2.1  The private sector breaks down into two large organisations; seven or eight medium/medium large businesses; and a fluctuating group of operators with one to three markets—around 10 to 15 in total.

  7.2.2  Capital investment demand is low as "Indoor" units in this sector are few—possibly 10 in all. Profit margins are greater than the municipal sector as a more commercial approach applies. If a market is failing and is increasing in deficit then any decision for action is commercial and quick.

  7.2.3  The private sector has the advantage of a "traders round"—ie the availability of a trader to work at four/five or even six markets at different locations on different days of the week. The locations will often be within differing local authority jurisdictions. The operator's porter/market superintendent will work at each market. The system encourages swift mobility of labour and reduces management costs.

  7.2.4  The heaviest cost today is stall ownership on the "Outdoors" units which as stated are the bulk of private sector operational sites. There is an increasing trend for the private sector to encourage or insist on traders using their own stalls. If the operator owned stalls, it would have to bear the cost and maintenance; transportation from site to site; assembly and disassembly. The increasing trend is for traders to have their own equipment. The expense variation between the sector and the municipal sector is bluntly horrendous (see 7.3.6).

  7.2.5  While it is accepted that the private sector represents a minor share of gross market industry retail/fee turnover, in our view the flexibility and cost and costing method advantages suggest that the private sector on the whole has realistic prospects of steady trading.

7.3  The municipal sector

  7.3.1  The need for capital investment is overriding. Until relatively recently that was either non-existent, very low and only effected at the last resort. The cost of roofing repairs, internal structural work, flooring, stall replacement etc. is patent. Happily (and long overdue) some authorities on their own accord or with developers are reinvesting—eg Bradford; Blackburn; Burnley; Newcastle; Sheffield. The Regional Development Agencies are playing their part in some instances.

  As long as this continue and that attraction within of a city centre is retained then a high level of stability (ie 87.5% occupancy at the lowest) can be expected.

  7.3.2  In addition LAs must accept that some surplus must (we repeat must) be ploughed back in their market without the whole surplus being transferred to other departments. There are signs that internal investment is occurring.

  7.3.3  Although there are a number of first class senior market officers who run tight, successful, profitable markets, all in the larger towns and cities, they are the exception. In the case of the smaller towns then a full time officer cannot be appointed—in consequence the market personnel are multi-functional!

  7.3.4  The internal hierarchy is often too lengthy and officers' proposals can be and are altered or cancelled by members.

  For instance: Market officer (floor level) senior officer (office bound/accounting) property officer (RICS or CA) no. 2 department director members. Our own experience (12 years plus) is that the officers at floor level know exactly what is wanted but the higher a problem rises the less likely it is to be implemented—Q.E.D. !! This regretfully is typical. It often seems overlooked that markets are one of the few sources in LAs income.

  7.3.5  Promotion and publicity must be re-examined. It should amount to 3-4% of gross turnover and controlled by the market section—not centrally where—it is neither understood nor properly directed.

  7.3.6  As pointed out 7.2.4. the cost of stall supply and movement is substantial. Leaving aside the capital costs which are depreciated over a period, the expense of moving stalls—from storage, erect, dismantle, return to storage is at least £6.50/£7 per stall. This is the heaviest charge for operators and may change at sometime with traders being forced to purchase their own equipment—this may take some time.

  For example a small/medium "Outdoors" of 45 stalls operating twice a week on non-continuous days—say Tuesday and Saturday (thus needed to clear site on non-market days)—would incur an annual charge of £33K. A large five/six day "per week operation will remain in situ only incurring an adequate security cost against theft or vandalism.

7.4  What can and should be done?

  7.4.1  For "Indoors" and "Outdoors" the approach to publicity and promotion must be replanned. Most LAs do not seem to appreciate that the retail industry spends millions of pounds on publicity and promotion—much of it national on television and other media while an LA has limited funds and restricted geography so much so that competition is impossible. Promotion and publicity should not be dealt with by a council publicity department. Not only does it become virtually invisible but lacks punch. Promotion and publicity is best controlled by the market sector and properly directed to where it will be seen, read and produce results—ie entry to competitions, discount days, leafleting etc. etc. Additionally a figure of 4% of gross income should be the minimum to be directed to promotion and publicity—this does not happen today.

  7.4.2  Investment, investment, investment. No further explanation needed.

  7.4.3  A less complicated management chain is necessary. This may or may not be possible within LA structures but the need to retain a profitable business and to produce surplus for the authority is paramount.

  7.4.4  Cost definition and control needs completely revising—we have had the advantage over years of seeing many markets annual profit and loss figures—we always ask for four years figures during the course of our retainers—and to paraphrase—"look upon me, ye confused and despair".

  7.4.5  At today (Jan 2009) many small "Indoors" are at risk—low occupancy, overburdened with excessive capital costs, increased local competition, retail shift. Equally so many small/medium "Outdoors" continue to suffer falling occupancy—even by 40% on 2004 figures. As a result markets are being outsourced and licensed markets to a private sector operator at Godalming; Congleton; Sandbach; Waverley. For some years some L.A.'s have outsourced a medium/large "Outdoors" to their benefit of Milton Keynes; Rushmoor; Portobello Road (Northern section).


  8.1  Our overriding view after some thirty years in the industry firstly as CEO of the largest market operator (as it was at the time) and subsequently as an independent consultant is that it would be a social, community, economic, regeneration, heritage and political disaster if markets ceased to exist as an effective force in U.K. trade.

8.2  Social demand

  The need for social intercourse with a market as a meeting place for friends; the relationship between a trader and his regulars; the provision of service as compared with the more clinical approach of many large stores and chains, the provision of underprovided goods—scarce/unobtainable elsewhere eg haberdashery; the excitement—noise, smell, crowds (pizzazz)—does not exist elsewhere in UK retail.

8.3  Economic value

    (a) Fruit, vegetables and salads are available at competitive prices compared to the supermarkets (in effect markets are the only real competition)—(the greengrocers continue to decline in numbers).

    (b) These foodstuffs are fresher spending little or no time in chilled storage.

    (c) Benefit of lower prices for the less well-off is obvious.

    (d) Increased employment as either a whole family is employed or in the case of greengrocers with a four stall unit—six or seven persons will be working on peak market days.

    (e) Increased indirect employment—waste removal, surface cleansing, equipment repair and replacement services.

    (f) Additional footflow to the market area of a town or city on market days—Adlershot; Hinkley; Leek; St. Albans; Salisbury, Sowerby Bridge and benefit to adjacent retailers. This is particularly relevant to a smaller town of 20,000 population (or less) on the weekly market day. It is said that the Monday "Outdoors" at Darlington is the second best trading day that threatens Saturdays.

    (g) Income for the self-employed trader.

    (h) Surplus (profit) for the LA.

  8.4  As and when a market closes or circumstances (retail shift) alter its popularity these benefits (8.2-8.3) cease or are curtailed. The damage to a community and its heritage is considerable—what replaces the market?


  9.1  Markets from Babylonian times; the Agora; the Forum; the Champagne Fairs; charters; local legislation—have obviously survived but can UK markets thrive in today's conditions? In our opinion yes, on the following provisos.

  9.2  (a)  Continuous investment is essential in structure; equipment and management.

    (b) It has to be accepted that markets are not in outright competition with other retailers but are complementary. We define this state as the supply of relatively low cost goods and services; the provision of personal service; the provision of smaller cheaper units than the traditional shops; the benefit of the large range of "offer" in one building or place; a gradual build-up of trader numbers; the need not to upgrade premises too far and turn them into shopping arcades in the hope of AB and more CI custom; where possible the use of credit cards for higher value items; active encouragement by the landlord including increased or properly directed publicity; improved coordination between trader and operator/landlords—a plethora of trading standards.

    (c) We realise that this is a formidable list but effectively is no more than the High Street has to endure. There are some excellent examples—Bury; Coventry; Blackburn.; Oldham; Leeds etc. where the key component is the market officer supported by his LA. These markets are "Indoors". For the "Outdoors" Barking; Cambridge; Newton-le-Willows; St. Albans.

    (d) In our opinion the small "Indoors" and the small/medium "Outdoors" will suffer and some of the latter are likely to close. Overall we see a 5-7% decline in market numbers from the present approximately 1,100 that are trading.

    (e) We doubt whether the present recession will improve market income. While the number of ABs and more CIs will pay more visits regularly, the volume and spend of the traditional CIIs, D & Es will deteriorate.

    (f) Our conclusion is that the market industry will continue to be subject to extreme pressure but if the elements in our paragraph (b) above can be broadly met then the tradition will carry on—even so as the younger (under 40) population will accept that market shopping while not comparable with other retail, has considerable benefits.

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