High streets and town centres in 2030 Contents

1High streets and town centres today

9.Retail has become the dominant activity in high streets and town centres where in the past civic and community functions would have had a larger role. Roddy Bushell, whose role as Estate Manager at Fitzwilliam Malton Estate followed a career in asset and property management, told us “That was the 20th century […] Town centres became places where value could be extracted at this retail party that was going on”.5 Consequently, consumer and economic trends in the retail sector affect high streets and town centres, for the better and worse.

10.In the 1980s and 1990s, supermarkets, megastores (both in- and out-of-town) and retail parks emerged as the first significant competitors to high streets and town centres and were widely blamed for their decline. Professor Alan Hallsworth, who studied the impact of out-of-town shopping on Waterlooville in Hampshire, said that the building of successive superstores and a retail park had detracted from the high street and led to the town being “over-shopped”.6 Although our planning witnesses agreed that out-of-town retail posed less of a threat now than online shopping, Dr Julian Dobson, Director of Urban Pollinators, said “The damage has been done […] [they] are established centres that have become hubs in their own right”.7

11.UK consumers have taken to online shopping with enthusiasm, spending more online (€77.63 billion in 2017) than any other European country.8 Since 2006 online sales have been growing each year, reaching 20% of total retail sales in December 2018 and 21.5% around Black Friday.9 Andy Mulcahy, Strategy and Insight Director at IMRG, described the attraction of internet shopping and the competition it poses to high street shops: “a small shop could stock perhaps 200 products […] and then you have the internet, which provides complete and utter choice nationally and even internationally”.10 Furthermore, goods sold online are often significantly discounted.11 The way people shop has changed, with some visiting a “showrooming shop” to look at an item and then buying it online either at home or on the move, often at a discount.12 Many retailers have become ‘multichannel’, combining physical stores and an online offer.

12.Tony Ginty, Head of Public Affairs at Marks and Spencer, described the growth of online shopping and the accompanying change in people’s shopping habits as a “major structural transformation” in retail and “by far the biggest” challenge faced by the sector.13 This view was shared by Tom Ironside, Director of Business and Regulation at the British Retail Consortium, who called it a “radical transformation”.14 Of course, this has led to major changes in our high streets and town centres, the most visible effects of which are stores closing, empty shops and fewer shoppers. The Local Data Company, which regularly surveys high streets, retail parks and shopping centres, reported in November 2018 that:

13.The Centre for Retail Research monitors the numbers of medium and large retailers going into legal administration. They report that, since 2008, 34 medium and large retailers have gone into administration—8 of which were in 2018—affecting 12,997 stores and 178,576 employees.16 Among these are well-known national chains, such as HMV, House of Fraser, Maplin, Poundworld and Toys ‘R’ Us. As noted, Marks and Spencer and Debenhams, two major and long-established retailers have announced that they will be restructuring and closing 100 and 50 of their stores respectively.17 And profits at the John Lewis Partnership, despite an increase in sales, may well not be sufficient to pay a staff bonus in 2019, the first time since 1953.

14.Furthermore, several retailers—including New Look and Carpetright—have agreed Company Voluntary Arrangements (CVAs) this year. A CVA enables a company in financial difficulties, while continuing to trade, to enter into a legally binding agreement with its unsecured creditors in which the company’s debts are compromised.18 This may involve delaying or reducing payments of debt, capital restructuring or an orderly disposal of assets. Richard Collyer, Chief Financial Officer at New Look, explained why they agreed a CVA: “The simple fact is that New Look would have run out of money […] The CVA […] enabled us to address [our] fixed cost base”.19 The landlords we heard from voiced strong concerns about the misuse of CVAs by retailers who they believed were seeking to reduce rents and end leases.20 They also told us that CVAs were causing nervousness among international investors in the retail property market in the UK which was probably the “worst-performing sector in the market at the moment”.21

15.The type of shops that make up high streets and town centres has also changed, with those offering services that cannot be obtained online faring better. According to The Local Data Company, the only retail category growing in the first six months of 2018 were independent service retailers, including barbers (net increase of 349 units, building on 624 store net increase in 2017), beauty salons (a net increase of 160), shoe repairs (122), tobacconists (vaping) (94) and mobile phones (77).22 Conversely, the declining retail categories in the first six months of 2018 included pubs (a net loss of 692 units), electrical goods (a net loss of 223 units), estate agents (211), women’s clothing (171) and newsagents (160).

16.Mike Ashley, Chief Executive of Sports Direct Group and owner of several town centre chains, gave us a very bleak assessment: “the biggest thing that has killed the high street is not the high street itself but the web. Be absolutely crystal clear: the web has killed the high street”.23 And William Grimsey, Chair of The Grimsey Review and The Grimsey Review 2, two independent reviews of the high street, told us in nearly as stark terms:

The tipping point has arrived. It kicked off the year. We have seen the worst performance in many years for high street retailers, and we have reached that tipping point […] It is quite clear that we are faced with the biggest challenge that we have ever had.24

17.We do not believe that the high street is dead—indeed we outline our vision for the future in the next chapter—but we do agree that a tipping point has been reached. An enormous change has taken place in retail. The traditional pattern of making purchases in physical stores, both in and out-of-town, has been profoundly disrupted by the growth of online shopping. High streets and town centres need urgently to adapt, transform and find a new focus in order to survive. We consider how high street and town centre transformation might be achieved in chapters two and three.

Four systemic issues

18.The structural change in retail has brought to the fore several systemic issues which were less evident when high street retail was enjoying success. Now the market has evolved, these systemic issues appear to be acting as barriers to change. We have identified four main issues which we outline in the remaining part of this chapter, returning to them in the later chapters of this report to consider how they might be overcome.

Too much retail space

19.We were often told, including by retailers, that there was too much retail. There are several different aspects to this. Firstly, high streets and town centres are retail-focused, with retail acting as the “main anchor” in most places.25 Secondly, there is “too much retail space”26—for example, Richard Roe, Corporate Director of Place at Trafford Council, said that Altrincham’s centre had “expanded over time”, resulting in peripheral areas with reduced footfall and empty shops.27 We also heard that some individual shops were now too large; Mike Ashley, Chief Executive of Sports Direct Group and owner of House of Fraser, told us that the 500,000 square foot House of Fraser in Birmingham was “too much and too big”, suggesting that the upper parts could be converted to residential.28 Thirdly, high streets and town centres across local authority areas are in competition, as explained by Mr Roe:

Altrincham is one of four town centres we have. Not only are those town centres competing with Manchester city centre, the Trafford Centre and other town centres within Greater Manchester; they are also competing with each other.29

‘Fragmented ownership’

20.The second issue relates to the complexities of high street and town centre property ownership. Mark Williams, Director of the Hark Group, an asset management company, described the pattern:

In terms of scale, pension funds, insurance companies, private equity owned by pension funds typically own large assets, so shopping centres or part of a town […] Institutions traditionally own single-let high street shops but, over the last 10 to 15 years, they have been reducing that holding in most places, shrinking down to what we would call cathedral towns and cities. The majority of smaller towns and medium towns—probably 75% of the market—are migrating on individual shops with individual owners. It could be in their SIPPs—their pension funds—or individuals such as the local dentist who has bought it […] Large assets, though, are held by what are called professional commercial owners.30

According to the Property Industry Alliance, overseas investors owned 29% of UK commercial properties held as investments in 2016.31 The British Property Federation said that this disparate ownership—often referred to as ‘fragmented ownership’—created “a barrier to a coordinated response” to the challenges faced by high streets and town centres.32 We heard that this was particularly the case in smaller towns where ownership was more diverse: Roddy Bushell, former Estate Manager at Fitzwilliam Malton Estate, said that “finding something that speaks to them all is almost impossible […] It is really difficult to work with them in any sort of cohesive way.33 In contrast, Mr Williams said “when you have single ownership, you can take long views and views in the interest of estate management”.34

21.This situation is exacerbated by the varying interest and involvement of individual landlords in what is happening in the area. Richard Roe of Trafford Council told us:

Whether they are local or national is not necessarily the issue. There are just some landlords that are more interested and engaged and there are some landlords who are less so. We work with landlords who have portfolios across the country but are very active, very engaged and work closely with us. We have other landlords who have smaller portfolios and are less active.35

We also heard that contacting landlords, necessary for example where a property needed to be acquired for redevelopment, could be very difficult.36 The Government’s announcement of a public beneficial ownership register by 2021 is therefore very welcome.37

Retailers’ high fixed costs: business rates and rent

22.We received a very significant amount of evidence from retailers, large and small, about the burden of business rates. We heard that they were “a very significant cost”,38 “very burdensome”39 and, for pubs, “punishing”40 and “crippling”.41 In terms of the proportion of business rates paid by retailers, we were given the following figures:

Kate Nicholls, the Chief Executive of UKHospitality, made the following point:

If we are talking about who is investing in our high street and who is bringing those empty shops back into usage, who is making sure you have well invested night-time economies, they need the headroom to be able to invest. While you hammer them with business rates, they simply cannot do that.45

23.Rents were also reported to be very high. Clayton Hirst, Group Head of Corporate Affairs at John Lewis Partnership, said that they had “a very large rent bill”,46 for Debenhams rent was “very burdensome”,47 and, for Marks and Spencer, it was a “significant cost”.48 For the hospitality sector, rents were “out of kilter with commercial reality […] leading to exorbitant costs”.49 We heard that long leases with ‘upward-only rent reviews’ had caused rents to rise to a level that no longer reflected the market; Kevin Frost, Property Director at Cineworld, explained the “trap”:

It exists at a number of our cinemas where rents have been set at the very latest record rent in the marketplace, but that is not the marketplace tone. If rents fall away, as they have done over the last two to three years, we are then stuck at an artificially high rent level.50

As a result of upward-only rent reviews, two-thirds of Debenhams’ stores had above market rents which we were told was a “big problem”.51 We also heard that very long leases were common to department stores.52 We consider lease structures in more detail in chapter seven.

24.We asked the retailers who gave evidence for their business rates and rent as a proportion of their turnover. These are set out in the table below:

Business rates as proportion of turnover (%)

Rent as a proportion of turnover (%)

Amazon UK



John Lewis


Marks and Spencer





Sports Direct Group

“2.5 or 3”

“If business rates are 3%, rent is 6%”




Lakeland Leathers









New Look



Some pubs

7 or 8

Vue International

21 (combined rent, rates and service charges)

Andrew Goodacre, Chief Executive of Bira, pointed out that, when margins were tight, “you cannot vary fixed costs such as a pre-agreed rent or business rates”.55 Katharine Wynne, Director of Investor Relations at Debenhams, said that the implications of this for the company were that:

If we do not achieve improved terms on what is a very burdensome rent and rates cost base for our stores, which, like every other retailer, are seeing pressure on footfall, up to 50 stores will eventually become unprofitable.56

In the context of our later recommendations on business rates and rents, we note the relationship between the two and that fluctuations in one will influence the other.

25.Mid-way through the inquiry, the Chancellor announced that business rates bills would be cut by one-third for retail properties with a rateable value below £51,000 for two years from April 2019.57 This will benefit up to 90% of retail properties. We welcome this announcement, which follows moves by the Government in 2017 to reduce the impact of rates through Small Business Rate Relief and the switch from RPI to CPI. However, we note the muted response to it by Martin Foster, the Chief Executive of Lakeland Leathers, a 15-store independent retail business:

It saves us £40,000 against the last rateable value increase. In reality, it is about £32,000 so somewhere in the region, against our current rates bill, of about 8%. It is nice to have. It does not change my view as to whether I would open a new store at the moment because it is only hanging around for two years and, to be frank, the cost base of opening a store is high.58

And, as noted by Katherine Wynne, larger retailers like Debenhams “will not benefit at all”.59

Business taxation

26.The fourth issue related to business taxation. Business rates are a property tax, levied on business properties on the basis of their rateable value and the national multiplier.60 Mel Stride, the Financial Secretary to the Treasury, explained that the advantages of the tax were that it was very stable, that because it was linked to property it was “difficult to avoid” and that it has a “very important link between raising revenue from a business in a particular locality and local authority and the purposes to which that tax is being put to use”.61

27.However, we heard from many witnesses that a property-based tax was no longer fit-for-purpose; for example, Tony Ginty of Marks and Spencer said “It […] was designed and developed in the past. You now have a quite different future and [it] is going to be much more digital-orientated”.62 Indeed, in this new ‘digital’ era, business rates are widely seen as giving a competitive advantage to online retailers which tend to have less property at lower rent per square foot and hence at lower rateable value in comparison to high street retailers but, in some cases, much higher turnover.63 This is often also the case for properties in out-of-town retail parks.

28.We asked Lesley Smith, Director Public Policy, UK & Ireland at Amazon UK, to write to us with figures for Amazon UK’s total UK sales and business rates, among other things. Her letter dated 7 January 2019 stated:

Amazon breaks out its total revenue for the UK in its SEC10-K report. For 2017 this figure was $11,372 million (£8.77 billion). This figure includes Amazon’s net sales through our UK website and aggregate revenues from other activities in the UK (such as fees charged to third party seller for listing and fulfilment) before expenses […]

We pay business rates on some 94 buildings and on our locker sites across the country. For 2018 year to date this amounts to £63.4 million.64

Based on these figures, Amazon UK’s business rates amount to approximately 0.7% of their UK turnover.65 The graph below compares Amazon UK’s business rates as a proportion of turnover with the high street retailers who gave evidence to our inquiry.


When we asked Jake Berry, the Minister for the Northern Powerhouse and Local Growth at the Ministry for Housing, Communities and Local Government (MHCLG), whether Amazon UK paid a fair share of business rates in relation to its turnover, he said “it does not seem that that is creating a level playing field to me”.66 We agree. The Government must take steps to level the playing field between online and high street retailers and we set out our recommendations in relation to this in paragraphs 72 to 79.

6 Professor emeritus Alan Hallsworth (HST0005)

8 Centre for Retail Research, Online Retailing: Britain, Europe, US and Canada, 2017

9 Office for National Statistics, Internet sales as a percentage of total retail sales (ratio) (%), release date 18 January 2019

12 Q9

15 Local Data Company, Retail and Leisure Market Update: H1 2018, November 2018

16 Centre for Retail Research, Who’s Gone Bust in Retailing 2010–19?, updated January 2019

18 Company Voluntary Arrangements (CVAs), House of Commons Library Briefing Paper, May 2018

20 Revo (HST0065); Q128

22 Local Data Company, Retail and Leisure Market Update: H1 2018, November 2018

24 Q2

26 British Retail Consortium (HST0029); Savills (HST0025)

31 Property Industry Alliance, Property Data Report 2017

32 British Property Federation (HST0059)

36 Thame Town Council (HST0037)

40 British Beer and Pub Association (HST0007)

43 UKHospitality (HST0075)

49 UKHospitality (HST0075)

53 See paragraph 28 for further details.

54 A 15-store independent retail business located in the Lake District.

57 HM Treasury, Budget 2018, October 2018

60 The rateable value of a property reflects the annual rent that it could have been let for on the open market. The multiplier is set by the Government for England. The basic business rate liability for a property is calculated by multiplying the rateable value of a property by the multiplier.

63 New West End Company (HST0033); Q101

65 This is an approximate figure based on the 2017 total revenue figure and 2018 business rates figure given to us by Amazon UK.

Published: 21 February 2019