Rates, reform and renaissance — solutions for the high street (Vivienne King)

Vivienne King is the founder of ESG consultancy Impactful Places. She is Chair of the Shopkeepers’ Campaign and the former CEO of retail real estate membership body Revo. Following the Government’s Autumn Budget, she shares her thoughts on the Budget’s role in reviving town centre retail.

There was a time when high streets were the beating hearts of the communities they served. Today, that is more likely to be the case in thriving cities than in smaller towns. 

This polarisation is partly driven by local affluence or deprivation — with town centre health based on households’ ability to spend — but also by a desire for convenience and value, which has driven consumers towards alternatives, be that online fulfilment or out of town retail.

Given the social impact of high streets, which have been community hubs for generations, failing to reinvigorate them is to fail local communities. So how do we revive those that are still struggling?

Meaningful collaboration

High streets need to win back the footfall they have lost on the back of the pandemic and, more recently, the cost-of-living crisis. That means focusing on creating a unique offer that’s unavailable in any other form, to draw people in.

The role of social spending and the blend of retail, leisure and hospitality have all been well documented, and it's pleasing to see high streets across the UK already starting to find an effective balance after a period of deep challenge. Where there has been success, there has generally been a joined-up approach incorporating partnerships that have coalesced around a common purpose with a genuine understanding of the needs and wants of the local demographic. 

But we cannot ignore the major challenge to this which is fragmented ownership. Unlike a shopping centre, high street units will generally be in individual ownership, many of whom are focused on their own commercial objectives, which don’t necessarily align to the bigger picture. This prevents an overall holistic approach to creating the best outcome for the longer term.

What we need to see is local authorities, landowners and occupiers coming together to create a well-functioning place for everybody, even if that means making short-term commercial compromises in the interests of longer-term growth. A more blended mix of uses will help encourage visits, footfall, dwell and spend, resulting in more resilient places and supporting a sense of belonging and pride. 

The positive news is that research by Revo and Lambert Smith Hampton found that almost three quarters (72% overall) of investors and/or local authorities are planning to fund and/or develop town centre projects over the next five years. 

The new government’s intention-setting around planning reform, to accelerate the physical transformation and repurposing of high streets, has been a welcome intervention in this respect. Indeed, greater powers for compulsory purchase, introduced under the last government, have already given local authorities a clearer legal basis for use of CPOs. The Autumn Budget has identified £46m of additional funding to be applied to increase capacity in local planning authorities, to support planning reform as a driver of growth, which is a welcome move in the right direction. 

Reforming business rates

UK business rates are among the highest in the world and they have been increasing.

Added to this, we have a situation where 21% of all business rates in the UK are paid by retail, even though retail only generates 5% of GDP — clearly the numbers have gone very wrong somewhere. If we don’t reform business rates, then those retail businesses that are still able to sustain our high streets will be put at risk.

One of the Government’s pre-election pledges was that it would overhaul the rates system — a position the Chancellor re-iterated at the Labour Party Conference in September and once again in the Autumn Budget. Its appetite to do so appears to be stymied by the £22bn funding hole it has identified in the public purse. Next April, the Government plans to replace the current 75 per cent discount to business rates payments for retail, hospitality and leisure to just 40% up to a cap of £110,000 per business for 2025-26. While the Chancellor has indicated longer term ambitions to create a permanently lower business rate for properties in the retail sector, the current intention is for this to be paid for by a higher multiplier for larger properties, some of which will still fall into the retail leisure and hospitality category. It has not been carefully thought through and a comprehensive overhaul of business rates to address the failures in the system remains outstanding.

In the interim, the changes will leave many facing unmanageable bills and difficult decisions about their future — inevitably leading to job losses and closures, further deteriorating our already struggling high streets and town centres. While it was reassuring to see the Government acknowledge the impact of business rates and the need for reform in the Autumn Budget, we have as yet seen no measures from the Government to stimulate investment into the retail economy. 

As retailers concentrate on maximising sales during the Golden Quarter, the impact of planning and business rates reform will play a major part in how well they, local authorities and landlords will be able to collectively deliver high street renaissance.