High streets and town centres in 2030 Contents

Conclusions and recommendations

High streets and town centres today

1.We do not believe that the high street is dead 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 (Paragraph 17)

High streets and town centres in 2030

2.We are convinced that high streets and town centres will survive, and thrive, in 2030 if they adapt, becoming activity-based community gathering places where retail is a smaller part of a wider range of uses and activities. Green space, leisure, arts and culture and health and social care services must combine with housing to create a space that is the “intersection of human life and activity” based primarily on social interactions rather than financial transactions. Individual areas will need to identify the mix that best suits their specific characteristics, local strengths, culture and heritage. Fundamentally, community must be at the heart of all high streets and town centres in 2030. (Paragraph 38)

How we get there

3.Achieving the large-scale structural change needed for our high streets and town centres to survive will require an intervention led by the local authority, using all its powers and backed by cross-sector collaboration. However, given the financial pressure faced by local authorities, central government funding will be needed for this, as well as significant private sector investment. (Paragraph 54)

4.The Future High Streets Fund aims to kick-start this sort of intervention and, although the results have not yet been evaluated, based on the evidence we received, we believe it reflects the right approach. The requirement for bids to demonstrate local stakeholder support, strategic vision and, above all, transformative, structural change, as well as its focus on high streets and town centres that are facing the most significant challenges, are to be commended. We recommend that strong local leadership should be one of the key criteria by which bids are assessed. (Paragraph 55)

5.However, given the scale of the challenge and the fact that local authorities are unlikely to able to contribute much of their own resources to this work, a total of £675 million with a maximum grant of £25 million per applicant will inevitably mean that the vast majority of high streets and town centres will miss out on the funding they need to adapt for the future. Funding for the next round of the Fund needs therefore to be enhanced and we recommend that the Government considers using revenue generated from the reforms that we recommend to business taxation for this purpose. (Paragraph 56)

6.Further, given that planning teams have been particularly affected by local authority spending reductions, we recommend that the funding is made available to resource the planning stages of the project which may require additional staff and expert help. (Paragraph 57)

7.Successful applicants should be supported by the Future High Streets Task Force in bringing their vision to fruition. We recommend that the Task Force takes on a more proactive, ‘enabling’ role than is currently envisaged and set this out in more detail in chapter eight. (Paragraph 58)

8.But the Future High Streets Fund is only one part of the solution. Local intervention, while essential, needs to be accompanied by further action by central government and at local level, as well as by retailers and landlords, to create the conditions for high streets and town centres to flourish in the future. (Paragraph 59)

Central government action

9.Business rates, a property tax in a digital world, as currently designed are increasingly outdated and far from ideal, and we heard many calls for complete review and reform of the system. We note that the Government undertook a fundamental review of the business rates system in 2015–16, concluding that business rates should remain. However, given the rapid changing retail environment, we welcome the Treasury Committee’s timely inquiry into the impact of business rates on businesses. (Paragraph 72)

10.Notwithstanding the forthcoming findings of the Treasury Committee’s inquiry and the Government’s response to it, we recommend that the complexity surrounding rate reliefs and the administrative burden they create for retailers should be addressed and the suggestion we received for an allowance, similar to an income tax allowance, should be considered. (Paragraph 73)

11.The burden of business rates falls unfairly. High street retailers are paying more than their fair share of tax, while online retailers are not contributing enough. We welcome the fact the Government has attempted to reduce the burden with rates discounts for retailers and the move from RPI to CPI but more needs to be done. (Paragraph 74)

12.The Government announced the introduction of a Digital Services Tax in April 2020 to address issues related to historic avoidance of corporation tax. However, this does not address the imbalance between online and high street retailers. The Government needs to go further and move faster to level the playing field between online and high street retailers. This is essential to securing the future of the high street and the retailers which will always be an important part of it. (Paragraph 75)

13.We believe that a change in the current tax system is needed to do this and recommend that the Government conducts an assessment of the main proposals that we received in evidence:

14.In conducting this assessment, the Government should have particular regard to the connection between business rates and local areas and the Government’s wider devolution agenda. In addition, we note that each of these proposals would have the benefit of building on the existing business rates system, as opposed to requiring the wholesale reform of business taxation. We request that the Government reports to us with its findings by October 2019. (Paragraph 76)

15.We recommend that the Government explores how an online sales tax could be designed, including undertaking the full legal and factual analysis needed, to ensure compliance with State Aid rules. Whatever tax solution is found, it is imperative that it is implemented at speed to provide fast relief to high street retailers. (Paragraph 77)

16.We recommend that the revenue raised should be used to support the high streets in the following ways:

17.In due course, there may be a need for the Government to undertake a wider review of business rates and business taxation, which should consider complete alternatives to business rates. (Paragraph 79)

Planning

18.Planning is crucial to high street and town centre transformation. Given this, the Government should ensure that planning powers are fit-for-purpose, sufficiently responsive and up-to-date. To this end, we recommend that the Government undertake a comprehensive review of planning as it pertains to the high street, focusing in particular on the following elements: Compulsory purchase orders, the ‘town centre first’ policy, use classes and permitted development rights.

Local action

19.Change is happening at a rapid rate in high streets and town centres and, as currently formulated, Local Plans cannot keep up. We note that if online sales continue to grow at their current rate, they could account for around 30% of all retail sales by 2030. A Local Plan created five years ago will therefore be completely out-of-date and, quite simply, useless. (Paragraph 106)

20.Local Plans, which we urge all local authorities to adopt, must be living documents, regularly updated to capture and reflect changing trends, and must be forward looking, anticipating what will happen in five years’ time. We recommend that they should also be supplemented with dynamic strategies covering specific high streets and town centres. In addition, we recommend that all local areas develop an overarching vision setting out the direction for the future of their high streets and town centres. Successful applicants to the Future High Streets Fund bids must have a bold, visionary strategy prepared in consultation with the community. (Paragraph 106)

21.Whatever form it takes, the strategy for the high street should be formed around local characteristics, strengths, culture and heritage and, most importantly, it should have the backing of the public, private and community sectors. In addition, local areas should develop their plans in consultation with the areas around them and consider how high streets and town centres can complement one other within a wider spatial hierarchy. (Paragraph 107)

22.Local authorities should consider the long-term benefits for their high streets and town centres of providing targeted support to local traders with business rates discounts and other schemes. We were particularly impressed with Stockton’s Enterprise Arcade which supports fledging retail businesses with a view to them diversifying town centre retail once established. We believe that a similar scheme could be successful in many towns. However, we recognise that for many local authorities such spending may not be a priority given the financial pressures under which they are operating and the necessity of prioritising statutory services. (Paragraph 111)

23.We agree with the MHCLG Minister that some free parking is bound to have a positive effect on high street footfall. It would also enable towns to compete more effectively with out-of-town retail centres. However, parking is very place specific, depending also on the public transport available. We believe that local authorities should test the impact of different levels of parking charges on footfall and collect data, as well as consulting with local businesses, to understand which interventions will be most effective for that particular place. (Paragraph 114)

24.Wide community collaboration is essential to high street and town centre regeneration and, in many local areas, place partnerships will be a key vehicle for this. We are concerned that a truly collective vision will be hard to achieve in areas where they do not exist. While we welcome the recently announced 11th tranche of the Business Improvement District (BID) Loan Fund which could have an important role in enabling BIDs to develop in new locations, we believe the Government should take further steps to encourage wider coverage of place partnerships. To start with, we recommend that the Government creates a register of BIDs and undertakes a census of place partnerships to identify areas without one in place. The Future High Streets Task Force should then play a role in helping areas to establish such a structure. (Paragraph 122)

25.In addition, we recommend that the Task Force facilitates the creation of a local authority-wide network of BIDs and encourages them to share resources, knowledge and expertise with each other. Particular effort should be made to encourage well-funded BIDs to share resources with less well-funded BIDs nearby. (Paragraph 123)

26.We were attracted by the idea that BIDs should be replaced with community improvement districts but recognise that legislative changes might be needed to implement this. We encourage the Government to consider how this might be done and, in the interim, recommend the appointment of community representatives to BID panels in order to encourage a wider, more balanced approach in their work. (Paragraph 124)

Retail

27.The closure of a shop, particularly a long-established ‘anchor’ store, can be crushing for the community and blight the wider high street or town in which it is situated. Such effects are particularly stark in smaller towns where large chains often decide to make closures first. We believe that such smaller towns, which lose stores to neighbouring large towns, cities and out-of-town retail parks, are particularly affected yet less well placed to respond in terms of their resources, capacity and their ability to attract redevelopment. (Paragraph 132)

28.Retailers clearly need the flexibility to respond to the significant changes in the industry by closing and restructuring stores and, from what we heard, these decisions are never taken lightly. While a focus on redeploying staff is absolutely correct, we encourage retailers to consider that their corporate social responsibility extends beyond this to helping to find a future for the empty property they have left behind. (Paragraph 133)

29.We believe that retailers considering closing a large long-established ‘anchor’ store should contact the local authority as soon as possible and explore with them, the landlord and the Business Improvement District or place management partnership whether a creative solution can be found for its future. This might include finding a new use for the empty property or putting together a plan to save the store which might require reducing its size or converting it partly to residential accommodation. (Paragraph 134)

30.Retail will always be a part of high streets and town centres in the future. But to remain competitive, attract custom and add to the vibrancy of a place, we encourage retailers to consider how they could update their practices. (Paragraph 144)

31.Retailers should make an asset of their physical retail space and their staff by creating opportunities to interact with customers that cannot be found online. In addition to being well-stocked with interesting products, this could include providing personal shopping services, advice and consultations, using social media and investing in staff training and the store itself. Of course, we recognise that this is only possible if retailers have some headroom to invest which is why we have recommended that business rates for high street retailers be reduced. (Paragraph 145)

32.In many places, store opening hours do not reflect the fact that many people need and want to be able to shop at the end of the day after they have left work. If they cannot shop on the high street at their convenience, they will shop online or at an out-of-town retail centre instead. Retailers should conduct research with shoppers to find out whether their opening hours are meeting people’s needs and adjust them in accordance with the results on a local, shop-by-shop basis. (Paragraph 146)

33.In addition, we encourage more retailers to offer and host click and collect, providing their customers with convenience while supporting high streets and town centres through increased footfall. We were attracted to the idea of turning empty shops into an ‘inventory hubs’ where people could collect parcels at their convenience and we encourage local stakeholders looking for new uses for such properties to consider whether this might be appropriate for their local area. (Paragraph 147)

Empty properties

34.The reasons why some high street properties remain empty for extended periods of time appear to be complex. This is an issue which merits further investigation. We recommend that the Government commission research into why some high street properties remain vacant for long periods of time or have rapid turnover of occupants while some are refilled quite quickly. This should include an assessment of the impact of empty property rates and exploration of other measures which would encourage landlords to find new tenants, such as retail reoccupation relief. The Government should report its findings to us by October 2019.

Landlords

35.Landlords are often the least visible stakeholders in high streets and town centres but are among the most important. While there are many active and engaged landlords who take an interest in their tenants’ businesses and are involved in high street and town centre transformation, there are equally many who do not. We encourage all landlords to recognise that the retail property market has changed and to take an active approach, providing their tenants with good quality properties on a flexible basis and investing in and reconfiguring properties for new uses. Further, we encourage them to fully engage in local partnerships working on high street and town centre transformation and to consider the potential for further investment to help bring plans to fruition. (Paragraph 156)

36.We recommend that, in the next twelve months, the Government task the Law Commission with reviewing the Landlord and Tenant Act 1954, Part II, assessing in particular whether the law as it currently stands is impeding the emergence of a landlord tenant relationship which is more appropriate for the current retail environment. (Paragraph 157)

37.Many retailers are burdened by high rents which, in addition to business rates, are causing them significant financial distress. Upwards-only rent review clauses in long leases have artificially increased rents to a level that no longer reflects commercial reality. We recommend that, given the change in the retail sector, the Government should consult again (as it did in 2004) on outlawing the use of upwards-only rent reviews. While new leases are likely to reflect the current market better, it is important that consideration is given to whether the practice should be curtailed. In the meantime, we recommend that the Government sets up a conciliation service, similar to that provided by ACAS, to facilitate negotiations between retailers in financial distress and landlords who are proving reluctant to engage in discussions or compromise on reducing rent. (Paragraph 158)

38.We heard competing evidence from both retailers and landlords about the use of Company Voluntary Arrangements (CVA) and the CVA process. While we were not able to delve deeply into the issue during the course of this inquiry, we believe that it warrants further consideration by the Government. We ask the Government to provide us with its assessment of the effect CVAs are having on the high street and any consequential reforms that may be necessary. (Paragraph 159)

39.The Government’s announcement that property-owner Business Improvement Districts would be legislated for in the Local Government Finance Bill, which fell as a result of the 2017 general election, was met with enthusiasm. Such a body could play an important role in bringing landlords into local discussions about high street and town centre transformation. We recommend that the Government revives the legislation relevant to this at the earliest opportunity. (Paragraph 160)

The Future High Streets Task Force

40.We welcome the creation of the Future High Streets Task Force but we have serious reservations about the scale of the Government’s ambition for it. It must be much more than a forum for discussion and avoid becoming a ‘talking shop’ and, in combination with the Future High Streets Fund, must provide real and tangible support directly to local areas on a much greater scale than the Portas pilots. While centrally collated data, best practice and case studies will certainly be needed, given the enormity of the challenge they face, there is a clear need for local areas to have access to proactive expert support. (Paragraph 165)

41.Believing the Private Rented Sector Task Force to be an instructive model to follow, we recommend that, in terms of its set up and operation, the Future High Streets Task Force should:

42.The Task Force should be equally wide-ranging in terms of its scope, providing support to local areas on the full range of issues pertaining to high streets and town centre transformation. Based on the evidence we received, we have identified some specific things that the Task Force should do:

Conclusion

43.Without a crystal ball, we cannot predict what changes lie ahead. But, with online sales having nearly doubled in the last five years, it is almost certain that online shopping will continue to grow, all the while undermining physical retailers and our high streets and town centres. (Paragraph 168)

44.However, we firmly believe that our high streets and town centres can have a better and more balanced future ahead of them. This will require a shift from the retail focused activities of high streets and town centres today to new uses and purposes which foster greater social interaction, community spirit and local identity and characteristics. (Paragraph 169)

45.Achieving this will require significant structural change and concerted effort. But, with a properly planned strategic intervention led by the local authority, with the backing of local stakeholders and the wider community, we can redefine our high streets and town centres and make them sustainable and future proof. (Paragraph 170)

46.We see the possibility of a bright future for our high streets and town centres if our recommendations are followed. The Future High Streets Fund and Future High Streets Task Force have the potential to kick-start transformation but are just a first step and must be accompanied by the more wide-reaching reforms that we have outlined in this report. (Paragraph 171)

47.If action is not taken now we strongly believe that the future will see high streets and town centres with an increasing prevalence of empty shops, dereliction, deteriorating infrastructure and a loss of customers who will take their trade elsewhere. We are concerned that this will lead to some towns centres and high streets effectively closing down altogether, most likely disproportionately affecting people on lower incomes who have less opportunity to shop elsewhere. We therefore urge the Government, local government, retailers, landlords and the local community to act on our conclusions and recommendations now in order to save the high street and ensure its long-term sustainability for future generations to come. (Paragraph 172)





Published: 21 February 2019