The Retail Sector - Business, Innovation and Skills Committee Contents

Conclusions and recommendations

In the report conclusions are shown in bold, recommendations are shown in bold italics. In this list, recommendations are shown in italics.

Portas Pilots

1.  The Government allocated £2.3 million to fund the Portas Pilots, yet has not been able to provide evidence of how or indeed whether that money has been spent by local authorities. In its response to this Report, the Government should include how much of that money has been spent, as was promised to us by the DCLG Minister in October 2013. There is no readily-available data on the allocation of the funds, and, as far as we are aware, no organisation is auditing the funds. While we appreciate the fact that the Department for Communities and Local Government is responsible for this funding, the Department for Business, Innovation and Skills has the policy lead for retail and must ensure that data is made available on whether and how the Portas Pilot funding has been spent. These are public funds and, therefore, the use of this money needs to be assessed for value for money, and effectiveness. Together, the BIS and CLG Departments must decide how this assessment is carried out. (Paragraph 14)

BIS Retail strategy

2.  We recognise the good intentions behind the Portas Review and the brief Government retail strategies of 2012 and 2013, and the documents have resulted in useful national discussions about the retail sector and, specifically, the demise or otherwise of the High Street. However, the Portas Review stressed the need for a review of Business Rates, while the Government strategies mentioned Business Rates only in passing. Furthermore, the strategies demonstrate a deliberate 'hands-off' approach to many of the issues facing the retail sector, and instead encourage local communities, including local authorities, businesses and organisations, to boost their own local areas. However, this encouragement comes without any meaningful finance or any coherent and effective plan. (Paragraph 21)

3.  We are not convinced that the success of the Retail Sector should be given as a reason for it not needing an industrial strategy. As with other sectors where Industrial Strategies are proposed to build on areas of strength, there is an opportunity to use policy to support even greater success in the future. The Government should include the retail sector in its Industrial Strategy programme, and we recommend that the Government rectifies this omission at the earliest opportunity. (Paragraph 24)

The High Street

4.  With the dramatic rise in internet shopping, retail businesses are no longer locked into one way of working, and likewise, the High Street is no longer just about retail; it is also about creating a leisure experience, including opportunities for visiting cinemas, restaurants etc. However, for community hubs to survive and flourish, the High Street needs support from the Government. We do not recommend that the Government spends huge sums propping up an outmoded way of retailing. However, we support calls for Government to help shops to remain on the High Street, and for new, independent shops to be able to open on the High Street, by reviewing the burden of Business Rates, which are still based on an outmoded pattern of retail. (Paragraph 34)

5.  The United States has a different tax structure, but lessons could be learned from its approach to local taxation and rent. We appreciate that this is complex, but it is something that the Government should explore as an alternative to the current system. The Government should look into encouraging a more flexible approach from landlords, and discouraging upward-only rent revisions. This would will result in a fairer and more sustainable system. (Paragraph 35)

Local Enterprise Partnerships (LEPs)

6.  The Government has placed the 39 Local Enterprise Partnerships (LEPs) at the forefront of supporting the local retail sector, yet many of them lack the necessary resources and influence to succeed. The Secretary of State for the BIS Department acknowledged this to us in evidence. The Government should call on LEPs to develop a strategy for retail, in order to demonstrate their commitment to the Retail Sector. (Paragraph 41)

7.  Given the substantial contribution of retail to employment, we recommend that all LEPs consider appointing a retail representative on their board. For independent traders, this may not be feasible. However, national retail businesses should do more to encourage their local or regional management to participate in LEPs. (Paragraph 42)

General Skills

8.  We recognise the important work that employers, unions, and the Government do in supporting people already in the workforce to continue to work and develop their skills. We were therefore disappointed that the Department did not highlight this work in its Retail Strategy. We recommend that the Department commits to continued financial support for the Union Learning Fund, which enables unions and employers to work together, providing employee training and support. LEPs could provide valuable assistance in this work. (Paragraph 47)


9.  Apprenticeships are being used more frequently in the Retail Sector. They allow retail staff, who often leave school with few qualifications, to gain transferable, interpersonal skills. However, retailing is becoming a much more sophisticated industry, and those who work in the sector need to be more comprehensively trained. We support the work that employers do in training their workforce. The retail sector should be more ambitious about skills training, encouraging more staff to be trained at Level 3 and above. Furthermore, given the importance of tourism to the United Kingdom, consideration 0should be given to developing language skills to enhance the international consumers' retail experience. (Paragraph 51)

Digital skills in the Retail Sector

10.  The changing nature of how people shop needs to be mirrored in the way in which staff are trained, to enable them to provide a more tailored service. The BIS Retail Strategy document published in 2012 made passing reference to skills needed for the retail sector, referring only to the need for a science, technology, engineering and mathematics (STEM) skills gap analysis. In its follow-up document a year later, A Strategy for Future Retail stated that an analysis of skills needed for high level mathematics, data analysis, and general digital skills to be completed by the Spring of 2014. In its response to this Report, the Government must outline the results of BIS's latest STEM skills analysis, and the timeline for the action that it will take. (Paragraph 55)

Business Rates

11.  Both Business Rates and the high costs of rents are issues that affect the Retail Sector. The cost of Business Rates is increasing disproportionately to the cost of rents. The result is causing critical financial difficulties for many retail businesses, especially SMEs. This means that not only are those businesses suffering, and in danger of closing, but that some High Streets are becoming littered with shops that have closed down. This problem is exacerbated when rents do not reflect the economic realities. (Paragraph 65)


12.  The delay in the planned 2015 Revaluation of Business Rates until 2017 has been severely criticised by many in the retail sector. The Government based its decision to delay the Revaluation on a 'high level estimate paper' written by Valuation Office Agency, which many organisations have criticised for its lack of firm evidence. Indeed the VOA itself littered the paper with caveats. The delay in the 2015 Revaluation of Business Rates means that, until April 2017, Business Rates will continue to be calculated on property rents set in 2008, before the recession took hold. In justifying the delay in revaluation, the Government referred to the fact that the retail sector represents only around a quarter of the businesses covered by Business Rates. This may be so, but it is a key quarter for driving the recovery. We urge the Government to ensure that during the time before the next revaluation, it works towards the complete reform of the revaluation system, one of the ambitions of which should be the annual review of Business Rates. (Paragraph 74)

Business Rate link to RPI

13.  We welcome the Government's capping of the inflationary limit of Business Rates to 2% for 2014-15. However, because of the small business multiplier, those businesses in the retail sector that do not qualify for small business relief will see their business rates bills rise by 2.3% next financial year. Furthermore, this cap will apply for one year only. We urge the Government to reconsider this limited timeframe, and to stop permanently the linking of Business Rates to a single month snapshot of the Retail Price Index (RPI). Furthermore, the Government should carry out a review to ascertain whether RPI or CPI is the more appropriate index to which Business Rates should be linked. The 12-month average of the CPI or the RPI in the previous year, with a cap at 2%, is a far more appropriate level at which to set the annual Business Rate increase. This would be consistent with the recent limits on council tax increases, and in line with the Bank of England inflation target. (Paragraph 78)

Business Rate relief - Small business reductions

14.   While we welcome the measures introduced in the Autumn Statement 2013 to help small businesses further in relation to Business Rates, the Government is not addressing fundamental flaws in the way in which Business Rates are calculated. The short-term tweaking of the Business Rates system is building up problems for the future and, instead, the Business Rates system need fundamental reform. (Paragraph 85)

15.  As a start, the Government must study the level of taxation placed on small and medium retail businesses compared with the level of taxation placed on large retail companies. It should also provide clear guidance that Councils are able to, and should be encouraged to, exempt ATM cash machines, in line with arrangements for small business rate relief. (Paragraph 86)

Pilot scheme for empty shops on the High Street

16.  The high costs of Business Rates are preventing new entrepreneurial businesses from appearing on the High Street. We welcome the Autumn Statement's announcement that businesses moving into high street properties that have been vacant for a year or more will have their rates cut by 50% for 18 months. However, we believe that the Government must go further. We recommend a six months' Business Rates amnesty on businesses occupying empty properties. This support would be an economically viable model for the Government, as it would not only support those small businesses, but could also regenerate the High Street by occupying empty shops, and by giving local areas renewed vibrancy as community hubs. (Paragraph 92)

17.  We support the emergence of PopUp shops; they are an excellent example of innovation in the retail sector, but are adversely affected by an inflexible Business Rates structure. In any review of Business Rates, specific attention should be given to PopUp shops, and ways in which more can be encouraged to participate in the High Street. (Paragraph 93)

Other rate reliefs

18.  Charity shops play an important part in our High Streets, by raising much-needed revenue for good causes and by providing a community space for local shoppers and volunteers. However, charity shops benefit from 80% relief on business rates, and this blanket reduction has loopholes which can be abused by businesses purporting to be charities. It also has the potential for charities to threaten other shops, especially bookshops, which have to pay the full amount of business rates. The Government needs to outline tighter definitions on what constitutes a charity shop, and to report on its findings by the Autumn of 2014. (Paragraph 97)

Alternative ways of calculating Business Rates

19.  The pace of change in the Retail Sector means that the Business Rate system, in its current form, is not fit for purpose. The Government must act by carrying out a wholesale review of the current Business Rate system, which is urgently needed not only for the Retail Sector, but for other business sectors that are also being affected. The Department for Business, Innovation and Skills needs to initiate urgent discussions with the Treasury and DCLG, to prepare the ground for a full scale review and reform of Business Rates, which will allow retail businesses, especially small and medium-sized businesses, not only to survive, but to flourish in the current economic climate. The Government has widely praised the Portas Review, yet has not acted on what we believe is a vital recommendation—a review of the basis of the calculation of Business Rates. The Government must review the whole system—involving local government and retail sector organisations—and not simply tinker around edges by reviewing the administrative details of collecting Business Rates. Indeed, the Prime Minister has agreed that a longer-term reform of Business Rates needs to be looked at. The Government's review must include: whether retail taxes should be based on sales, rather than property; whether the retail sector should have its own form of taxation, calculated in a different way from other businesses; and how frequently the revaluation of Business Rates should take place. (Paragraph 113)

Cross-Departmental issues

20.  The BIS Minister, Michael Fallon, was keen to tell us of the regular meetings he attends in relation to the Retail Sector. The BIS Department employs just over 4% of its staff to work on the Retail Sector, and does not consider that retail should be included in an Industrial Strategy. BIS should be leading co-ordinated work with other relevant Departments, in order to facilitate a more practical and direct approach to the issues facing the retail sector, the most urgent and important of which is Business Rates. While the Department for Communities and Local Government has an important role to play in guiding local authorities on parking, pavement furniture, planning, and so on, which all have an impact on retail, the Department of BIS must take the lead in the strategic overview of the Retail Sector. (Paragraph 118)


The Government's retail strategies are full of good intentions, yet they do not seriously address what, to our minds, is the most crucial deterrent to new businesses appearing on the High Street and the most debilitating levy on existing businesses: Business Rates. Fewer Government strategies are needed. Instead, there should be simple, decisive action. Without a wholesale review, resulting in a new way of calculating Business Rates, the High Street—and with it community hubs attached to those centres—will fester. As the Government Strategy states, "This is an exciting—and volatile—time for retail", and the volatility should be kept to a minimum by reviewing Business Rates so that businesses on the High Street can have a fighting chance of surviving and flourishing. (Paragraph 122)

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Prepared 4 March 2014