The retail industry has called for the government to “wake up and take positive action” following its inquiry into the future of the high street, Drapers can reveal.
The housing, communities and local government select committee’s findings, published today, concluded that high streets must adapt to cater to the changing needs of communities.
The parliamentary inquiry called for urgent reform to the business rates system and proposed the introduction of an online sales tax. It urged landlords to be more willing to negotiate lease terms with retailers, and suggested leisure, arts and culture should play a bigger role on the high street.
However, retailers and suppliers have hit out at the report, telling Drapers the government is ”trying to find a plaster solution that will not work”.
Managing director Lakeland Leather, Martin Foster, who represented independent retailers at the inquiry, told Drapers: “The report took nine months and all it recommends is that we look at reforming rates. I was hoping for a more prescriptive recommendation. Seventy thousand retail jobs were lost last year and this will continue until the government wakes up and takes positive action.
“The report suggests an online retail tax. All that does is shift the cost burden between different retail sectors. Rates reform needs to shift cost to other property users: accountants, lawyers, recruitment agents etc – others that use central town/city sites but have lower rates costs.
“Meanwhile, landlords are not working with retailers to find solutions. Property agents bat back any request for rent review and reductions. Until action is taken landlords can sit back and continue to collect premium rents until the retailer collapses – only then will they emerge and start talks.
“High streets must adapt to the fact that by 2030 at least 30% of sales will be conducted online – that means fewer shops on our high streets.”
The government is trying to find a plaster solution that will not work
Fashion entrepreneur, Touker Suleyman
Touker Suleyman, owner of Ghost, Hawes & Curties and fashion supplier Low-Profile, said: “The government is trying to find a plaster solution that will not work. If it decides to do away with or lower business rates, then that is great, but it won’t solve the problem.
“Meanwhile, everyone’s blaming online for the death of the high street, yet most bricks-and-mortar retailers also have a significant presence online. How can you punish them with online tax and still make them pay the rates? It just makes the situation worse.”
“I think it’s the shopping environment rather than shops themselves that needs reviewing,” the managing director of one UK footwear retailer said. “If you get a reduction in rates, businesses are potentially no better off. It’s the same with an online tax. The government needs money and what it might be better off doing is taxing profits, rather than the cost of doing business.
“Meanwhile, landlords need to take a bit more risk with retailers and be a bit more flexible with leases. Otherwise you’ll end up with shopping centres that end up as golf courses.”
Jenny Holloway, chief executive of north London factory Fashion Enter, agreed: “No one can stop the digital age and industry progression, so while it’s encouraging to read that the rents for retail are to be reviewed, proposed additional taxing because a business model doesn’t have retail outlets is quite frankly ridiculous. Etailers may not have bricks and mortar in the form of shops, but they have huge fulfilment centres and transportation costs.
“All businesses evolve, and certainly the rents and business rates must be reviewed, but don’t penalise one sector for another. How is this good business sense? Isn’t this called robbing Peter to pay Paul?”
Andrew Pace, director at supplier Panda Sourcing, said business rates “must be realistic”, while online retailers should pay the same rate of tax as everyone else: “The government needs to look at making it harder to have a CVA [company voluntary arrangement] or pre-pack administration – that way some of the high street retailers would need to work more smartly and not just give up at the drop of a hat.”
Meanwhile, financial retail experts have told Drapers it is “too late” for the high street to look to the government for salvation.
“Putting a tax on the online part of business does not solve the overall situation – it will disproportionately hit those players that have a significant high street presence,” warned Paul Martin, UK head of retail at KPMG, one of the Big Four auditors. ”In a time of significant headwinds for the sector, an additional compliance related theme is going to cause more concern.
“I think there has to be a fundamental re-think of how we use footfall related space and what the future model of consumption is actually going to be.”
Looking to government for salvation is likely to be a case of too little too late
Peter Saville, managing director AlixPartners
Peter Saville, managing director of turnaround consultancy AlixPartners, said: “Looking to government for salvation is likely to be a case of too little too late. While few would disagree that the business rates system requires review, the populist concept of online taxation is no guarantee of increasing competition. Indeed, for those online retailers of significant scale, the so-called category killers, it’s unlikely that sufficient impact would be felt to level the pricing play field. Instead, these giants would look to absorb the cost and likely seek to push it down through the supply chain.
“It is also unclear how this would work in practice with regards to the growing click-and-collect phenomenon, which for many retailers is a key tactic to drive traffic to physical locations as part of a well-rounded multi-channel approach.”
Ian Gilmartin, head of retail and wholesale at Barclays bank, concluded: “The committee is right to note that high streets have to adapt, but that’s not a new phenomenon. The story of the high street has been one of almost constant evolution for decades. Granted, the scale of disruption is more significant now with the growth of online, and wider economic uncertainty affecting bricks-and-mortar stores, but the reality is that our shopping districts will continue to be integral features of the UK’s towns and cities.”