Government and the retail sector

Baroness Neville-Rolfe speaks at the Retail Week Conference about the importance of retail to local and national economies.

Baroness Neville-Rolfe DBE CMG

Ladies and gentlemen, good morning. I am very delighted to be here at this enormous and business-like conference and I would like to start with an enormous thank you to Retail Week. I am still a subscriber and I have valued your support for the industry for many years.

I’m delighted to have been introduced by such an inspirational businesswoman as Jacqueline Gold. You’ve made Ann Summers a true British success story with gross annual sales turnover of over £150 million. For your contribution to women in business, entrepreneurship and the numerous charities which you support, I couldn’t think of a more worthy recipient of the CBE. Have a great day at the palace.

I’m sorry that you have to put up with me in place of Sajid today. This is all the more unfortunate since he has family experience of retail at the sharp end. His father, while making his way up in the world, ran a market stall and later a shop.

However, I also have retail experience both at Tesco for 15 years and later as a non-executive on the board of Metro and as the President of Eurocommerce. So whatever you may say about ministers in the Department for Business you cannot, I hope, accuse us of ignorance of the retail sector.

I am therefore well aware that retail is hugely important to local and national economies. It impinges on everybody and employs 3 million people.

You do not need me to tell you that the retail sector is going through major structural changes nor that people are changing how and when they shop, making the environment extremely competitive. I expect you will have some fascinating presentations on these topics.

Of course as a member of the government I am keen to tell you what we have done for the sector. As an aside I will say I wrote the next paragraph before yesterday’s announcements.

We have already:

  • provided £2.3 billion of finance to 40,000 smaller businesses through the British Business Bank
  • taken action to help companies like yours access new markets - I’ve visited China, India, South East Asia and European cities where British private companies are doing just that
  • we’ve lifted 450,000 employers out of national insurance contributions

And of course our economy is growing well. The retail sector is contributing strongly to that growth having expanded by over 10% in real terms since 2010.

The employment story is a particularly good one. More people are in work than at any point in British history, with almost 31.5 million people in employment at the end of 2015. Again retail contributes strongly to this providing just over 3 million jobs.

This is a good story. But we want to make it better so our focus now is on the difficult and long-term task of boosting productivity.

Since the recession, productivity growth in retail has been far greater than that seen in the economy as a whole. Nevertheless, productivity and wages in the sector remain below the UK average. I don’t underestimate the challenge the National Living Wage presents to the retail sector. But with employment rates at a record high and GDP growth forecasted to be the highest in the G7 in 2016, I believe that the time is right to ensure low wage workers can take a greater share of the gains from growth.

I am very pleased that Sir Charlie Mayfield of the John Lewis Partnership is leading work looking at productivity in the retail sector; the results will be published in the summer.

A variety of measures in the Enterprise Bill will also help deliver our ambitions on higher productivity. We hope the bill will cement the UK’s position as the best place in Europe to start and grow a business including through our ambition to create 3 million new apprenticeships.

Devolving power to local areas is a cornerstone of this Parliament. We need to rebalance the economy and empower local government through the devolution of powers away from Whitehall is one of our chosen mechanisms.

The result of the vote on Sunday trading is disappointing. Our proposal was about attracting more people to high streets and helping struggling local businesses. It would have made a lot of difference to many businesses up and down the country. We, however, remain committed to helping local areas and high streets compete effectively.

Business leaders have told us that business confidence is created by tax certainty and stability. We want a tax system that reflects this. The Business Tax Roadmap which sets out the government’s plan on business taxes over the rest of the Parliament will help give business the clarity they need to invest with confidence.

Having a competitive and fair tax system is vital to the UK. In his Budget statement the Chancellor announced the biggest ever cut in business rates, worth almost £7 billion to business. Retailers have been calling for the smallest properties to be taken out of the tax regime and for a switch in annual indexation from RPI to CPI. The Chancellor has clearly been listening.

Corporation tax has been cut to the lowest level of any major economy and will be cut further to 17% in 2020, benefitting over a million companies.

We have also lifted hundreds of thousands of businesses out of Employer National Insurance Contributions, and set the highest ever permanent level for the annual investment allowance – so certainty again.

Government will also tackle overseas firms who sell goods VAT-free through online marketplaces to the detriment of legitimate UK retailers.

So what do current trends mean for the retail sector?

Despite the recession, the value of retail sales has increased every year for the last 12, and in 2015, was at £340 billion.

However, we recognise that changes in technology and consumer habits are revolutionising how people shop and how high streets and town centres are used.

British Retail Consortium’s (BRC) recently published report ‘Retail 2020’ (PDF, 919 KB) has described the changes that can be expected to the retail landscape in the future.

I am optimistic about the future:

As Sir Charlie Mayfield has said, in the future customers will get better choice, better value, and more convenience. Retailing will be more productive, powered by better jobs that offer the chance to develop a wide array of skills and greater earnings.

The sector proved resilient in times of economic difficulty and I am pleased to see that high streets have started to turn the corner - according to the Local Data Company, vacancy rates are at a 6 year low.

High streets

…and although retail is no longer the sole purpose of high streets and town centres, it remains the dominant economic and social driver.

We know that some areas still have further to go, which is why we are making changes to planning laws, and tackling over-zealous parking practices.

But it is not all about physical stores.

Digital revolution

British households are pretty savvy when it comes to the internet, and this is seen in the retail sector more than most.

In the last year 12.5% of retail sales were conducted online, amounting to about £42.5 billion.

A digital economy is a productive one.

That’s why we will be publishing our Digital Strategy this year, setting out what we will do to ensure that the benefits of digital are felt throughout the economy.

Creating a fully functional Digital Single Market in the EU can create further opportunities for UK companies - by removing barriers to e-commerce so that businesses can export easily across Europe, without hiring armies of lawyers and accountants to do so.

And because of our strong starting position, UK retailers – start up or established businesses, with both multichannel or online business models - stand to benefit hugely from these opportunities.


The internet has revolutionised the way many of us work and shop. However, reliable transport links are still a vital part of any serious, growing economy.

Over the next 5 years we’re going to invest £100 billion in infrastructure, creating new roads and getting rail investment back onto a sustainable footing,

UK as a destination

The retail sector is also looking further afield to maximise growth.

And it is not just savvy consumers that see the UK retail sector as a world leader. The UK is number 1 destination in Europe and number 2 globally for foreign direct investment in retail.

Global retailers are locating in the UK.

Pep and Co from South Africa (discount value clothing retailer), Kikki.K (stationery) from Sweden and Smiggle from Australia (stationery) are expanding across the UK.

Retail global giants like Asda/Walmart are increasing their footprint, not just in stores but in distribution and retail efficiency projects, including click and collect sites.

These are all examples of global confidence in the UK retail sector.

The rise and rise of internet retailing is also yielding foreign direct investment, with companies like VIP.com and Xiu.com from China investing in their UK operations, to grow the pipeline of UK companies selling to China.

The EU single market has had a positive impact on retail industry and consumers. It has already led to higher demand, innovation in service delivery and higher profits for businesses, and improved convenience and choice for consumers.


UK retailers have become adept at expanding in the EU and beyond. Further opportunities are emerging for retail from existing free trade agreements.

So to conclude, how can government and retailers work together to exploit the potential of the sector?

We want to work with retail to help improve its growth and performance at home and overseas and to assist you in taking up opportunities presented by the digital revolution.

In particular, we want to continue to effectively engage with you on progressing government priorities on skills, increasing exports, raising productivity, on cultivating socially responsible business practices and on digital transformation.

I look forward to hearing about your continued growth and success, locally, nationally and internationally.

Ladies and gentlemen thank you for listening.

Published 24 March 2016