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

Memorandum by Urban Space Management Ltd (MARKETS 33)

  Urban Space Management Ltd (USM) is glad of the opportunity to add our comments to the Communities and Local Government Committee Enquiry on Retail Markets.

USM is an urban regeneration specialist with over 35 years experience, both in providing a consultancy service on retail markets to many local authorities and developers throughout the UK, and in the practical management of a wide variety of existing and new markets, including both traditional street and covered general markets (eg Elephant & Castle Market, Gravesend Charter Market, Swindon Market Hall), and specialist arts and crafts markets (Camden Lock, Old Spitalfields Fruit and Vegetable Market, Greenwich Charter Market, Merton Abbey Mills). Our mission from the start has been the sustainable revival of run-down spaces by the creation and promotion of attractive centres for small retail and/or arts-based business, of which a market is often the essential ingredient.

  We are in broad agreement with many of the points made in the memoranda so far submitted, many of which we have found both constructive and encouragingly consistent. Against this background, from our own experience we should like to emphasise and develop a number of practical points for the Committee's consideration:

    1. A main issue discussed has been whether markets are better operated by local authorities or private operators. No one market is the same, and one form of management may suit some, the other the rest. In general, however, (and there are honourable exceptions) local authority management will always tend to be characterised by regulation and enforcement, rather than a flexible entrepreneurial approach which is constantly on the lookout for new opportunities and prepared to invest in them.

    2. This is especially true in London where the provisions of the London Local Authority Act 1990 require the fees levied on traders to be sufficient only to cover the market's running costs. In effect there can be no surplus generated, which means nothing can be reinvested in entrepreneurial activity and, while London boroughs differ in their interpretation of the LLA Act's detail, many take the view that promotion is specifically forbidden. The inevitable result is that a market covered by the LLA Act simply cannot be regarded as a business at all, merely a service—and therefore is no match for its ever-keener retail competitors. The Act, set up for good reasons (eg when the rights of long-established family-run small businesses needed protection), reflects an outmoded view of the trading climate and suffers from the law of unintended consequences. Normal healthy business activity cannot but be stultified.

  Outside London the situation is not much better. While Councils are allowed to make a profit from running street markets, this is seldom ring-fenced for reinvestment in their improvement or promotion, but instead disappears into general council funds. The result is all too often that a market plays a Cinderella role in an area's retail mix.

  3.  Private operators (while some respondents to the Forum naturally view them with suspicion) are altogether less inhibited, with greater flexibility in recruitment of stallholders (for example without pressure to keep a stall franchise within succeeding generations of a family), and are likely to have a better understanding of small business, of working day by day with their traders, and of cashflow and the relationship of the cash coming in to the true costs of the operation (for example, items like rubbish collection can often be hidden or taken for granted in council-run markets). They invariably benefit from less complex layers of management than a local authority, where several departments may be involved, finance (again for unimpeachable reasons) is divorced from the day-to-day operation, and officers are in any case directly answerable to elected members. The latter may naturally be very supportive of a market as a public service, but we have often found this can produce tensions, typically when traders affected by officers' decisions appeal directly to their elected councillor, in effect disempowering the on-the-ground management. This can have a very negative effect on the effective management of a market.

  As stated, there are exceptions; an example we have recently found is the very large traditional market in Chesterfield. Here the preservation and healthy growth of the market is a strategic priority, and entrepreneurial management by the local authority itself is clearly evident from its inclusion within the remit of the Council's own Marketing and Tourism Development Officer, as well as from a close and active relationship between management and traders. The contrast could not be more marked with a London market (which we do not name) where the day-to-day management is constantly undermined by a committee of elected members reacting to traders' complaints, with predictable effects on officer morale and trader discipline.

  4.  Most markets co-exist with shops, and when push comes to shove we believe that either group has to agree that it benefits from its relationship with the other. (Indeed at least one submission to the Forum states that market day is the best day for the surrounding shops—possibly circumstantial, but a fair conclusion). In our experience, where there is a thriving market alongside shops, the market is the main attraction and footfall draw, and the shops should relate to it as complementary to their business rather than competitive. (We have even heard of a local branch of a national multiple which gives a Christmas party for the neighbouring stall traders!). There have always been cases where shops have felt undercut by adjacent stalls, but these are generally resolved by a sensitive management relationship and entrepreneurial approach (and ironically the reverse is now happening, that stalls are complaining they are being undercut by shops).

  5.  Several submissions have stated that markets are underrated as assets, whether by local authorities, national government or developers. In our experience markets do generally represent a missed local development opportunity. A market is a business driver, a positive start-up for traders who, while typically they tend to remain as stallholders, in many cases can and do graduate up the retail hierarchy to a shop and thence to a successful business and local employer. There are many examples of market traders becoming successful shopkeepers, and often multiple retailers. We believe local authorities ignore this potential at their peril, especially in the present climate where new business start-ups have once again become a priority. USM's experience of previous recessions has been that markets are well equipped to survive, not least because their offer is essentially one of bargain price, and the rediscovery of the pleasure of a more personal, community-based relationship in shopping.

  6.  The issue of the fees levied by local authorities within the area of a Charter Market has been touched upon. We believe this time-honoured penalty needs urgent review, as it is not only entirely illogical and irrelevant to the twenty first century, but is unfair and can be very damaging to a neighbouring market's viability.

  A vivid example from our experience (which we do not name) has been a popular and successful market originated by USM in a location six miles from a Charter Market, where the bizarre results of the ancient legislation were (a) that in effect the business rate was doubled, making the market itself virtually unprofitable, (b) that a regeneration project highly prized by the borough in which it is situated was financially penalised by the borough next door, (c) that this fee, quite forgiveably described as "money for old rope", was being levied in return for no municipal service whatever, and (d) that the specialist nature of the market (an arts, crafts and cultural visitor centre) was patently not the kind of operation the original legislation had in mind!

  We would urge the Committee to address the question of a review of the legislation covering a Charter Market's right to levy fees, which while no doubt sensible and justifiable in its day some four hundred years ago is surely past its sell-by date in this day and age.

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