I’m delighted to be able to join you at this, my third Association of Convenience Stores conference, though I don’t think that earns me a Crackerjack pen!
And I would like to pay tribute to James Lowman and the work of the Association. Whilst we have not always agreed, I have always found James to be both persistent and effective, in putting your case.
Indeed, it was following talks with James that I pressed for, and secured, a 3 year moratorium for small shops from the tobacco display ban, (much to the chagrin of the supermarket groups!). This was partly because of the points James made on how a convenience store is run, so his knowledge is invaluable.
Let me start by saying that I recognise as someone who has been involved with business, and the government recognises, that these are tough times for retailers.
Consumer incomes are under continuing pressure. The uncertainty in the Eurozone has prolonged the credit crunch. And of course there is increasing competition, which only squeezes your already tight margins.
Indeed, alongside the established competition from the supermarkets and out of town centres, we are also seeing a long term shift in consumer habits, as the online market grows. In fact, I was looking at the numbers and online sales have doubled in the last decade, to make up 10% of UK retail sales. That trend is only going to continue, and begs real challenges for all of you.
This shift in consumer habits is not wholly bad for smaller bricks and mortar retailers. Indeed it has been shown to actively help specialists or those with a particular offer to reach much wider markets. But it means that the question for all retailers is no longer whether you should adapt your business, but how.
It’s a very important shift which we in government must respond to.
Value of convenience sector
In government, we recognise the economic worth of the retail sector, both by turnover and measured by the number and type of jobs. Retailing is, for example, one of the most important ‘first’ employers, with a third of all retail employees, aged under 25.
But there is also a social value in small shops, (and particularly in the convenience sector) which we should not ignore, as indeed your research has shown.
A local convenience store is often one of the few places, where people meet and talk today. In villages and on many estates, it’s you and it’s your staff who know the local community, (and make time to talk to the elderly.)
Representing 40% of all rural shops (and a third of shops in our towns), it’s the convenience sector which is usually there for a whole range of customers - perhaps those who don’t have a car, for young families, and for the elderly. It’s not to say that you aren’t economically important, but I also recognise the social benefit of a diverse, convenience sector.
And, both as a constituency MP and as a member of Parliament, as well as a user of my local convenience store, and on behalf of the many customers who rely on the service and care you and your staff provide, let me say thank you.
What can be done to help?
As a former businessman, I understand that of course empathy doesn’t pay your bills, or help you compete.
So what I would like to do if I can, is explain what we’re doing in government to help business generally, and retailing in particular, to weather the storm.
First of all, I think it’s important that we have been able to keep interest rates lower for substantially longer, by cutting the financial deficit by a quarter. The fact that we’ve been able to do this over the last 2 and a half years is vital. Clearly, there’s a difference between what we the government and you as retailers can borrow, but if we had continued to borrow, interest rates would have soared, crippling businesses and families alike. We can all see what that means, when we look abroad.
So low interest rates have helped. But the government has also acted to cut your costs. We have cut corporation tax rates to 24 pence for larger firms, and to 20 pence for smaller businesses. And we have reversed plans to increase National Insurance contributions, which would have hit jobs hard. The Association of Convenience Stores were amongst those who helped to make that point.
When we came into office, we also acted to help cut business rate bills. It’s why we extended and doubled the small business rates relief that’s helped thousands of small shops pay their bills, and it’s why we have now given councils new powers to discount rates, (funded locally), to help those firms which are struggling. It’s a new power, only a few months old, and only a few councils have taken it up. I am sure the association will want to change that. In fact, your own submission to the Treasury says that.
It’s there, now all they need to do is use it.
Clearly, our financial room for manoeuvre is very limited but we are listening carefully to your concerns and will try and help where we can. However, as I’d like to remain a minister, I won’t pre-empt the Chancellor’s Autumn Statement!
Recently we have delayed the planned revaluation from 2015 to 2017. This is an important issue. Let me explain our thinking.
First, we know that the last thing businesses needed right now, is the uncertainty which a revaluation would create. You get your valuation, there’s the counter valuation, appeals which leads to 18 months of uncertainty. It isn’t the right time to be doing this.
Second, we looked carefully at the independent evidence produced by the Valuation Office Agency as to who the likely winners and losers would be. We were and you might be surprised by the evidence.
The Valuation Office Agency’s analysis shows that some 800,000 premises would have seen a real term increase in their rates bill, with roughly 300,000 benefitting. Indeed many of the businesses represented here would have seen big hikes, in some cases up to 28%.
This seems counter-intuitive, but the reason for this, is that because the revaluation must be revenue neutral, to compensate for lower rateable values, the tax rate would have to increase by approximately 20%. As a result, many businesses whose rents have fallen by less than the national average, which is how it is balanced, would have seen business rate bill goes up from 2015. We have asked business to come in so that we can explain how this works.
So we felt, on balance, that now is not the time to be making this revaluation and in doing so we believe we can help many businesses in the process.
I appreciate that for many people, they think, ‘my rents have gone up’ but because there are 2 elements to business rates it doesn’t quite work like that.
Town centres need to compete
Of course, it’s not just individual shops that need help. It’s also the traditional high street and many of our town centres. And our role should not be not to protect, but to enable. To ensure that our high streets are able to adapt to changing markets and consumer habits, so you can compete.
That’s why last year the Prime Minister asked Mary Portas to review what needs to be done, by government, by local authorities and by business itself.
She has produced an excellent report and brought her typical real energy and a keen consumer eye to the towns wanting to pilot this change.
So what’s actually happening on the ground?
To begin with, our Town Centres First policy is an important and explicit part of our new National Planning Policy Framework. What it means in practice is that town centres should be the first preference for new retail outlets.
Second, we want to reform, planning to help town centres adapt. This means making it easier for the conversion of redundant first floors into homes, and secondly to enable empty offices that can often blight some high streets to also be converted into homes. Both these measures will bring people back into the town centre, increase footfall and so help existing retailers.
Thirdly, we believe that strong local leadership is vital if towns are to be renewed. That is the clear lesson from both the Portas pilots and what we see regularly from successful shopping centres, who manage the whole customer experience.
If struggling high streets and town centres are to compete, they need the right people to deal with the promotion, management and coordination of their ‘centre’.
And that is why we announced last month the creation of over 320 town team partners, who will get the expert advice, mentoring and support they need, to get an effective business plan in place.
I recently went to Deptford, where I met the leaders of their town team, who are using one-stop shops and community cafés to make the most of what they feel is their unique selling point - its significant cluster of local artists.
They plan to bring benefits to the entire high street, install art in the high street and set up shops as galleries under the ‘Made in Deptford’ banner to bring more people in.
It was a really encouraging visit and just shows what together local civic and business leaders working as a partnership can achieve.
Of course if towns are to compete, they need to address other issues than those I mentioned: from actively promoting local markets; through to being innovative, when managing and charging for local parking.
At the same time, lets be honest many need to change their appearance. And getting empty shops occupied is crucial.
That is why my predecessor Grant Shapps provided a £10 million High Street Innovation Fund, specifically to help those areas with the worst levels of empty shops. We’re already starting to see this helping to bring run down shops back into use, with other businesses kicking off as a result.
But I think we can do more. The pop up shop movement, which helps new businesses set up and sell, is a great idea. Its something I want to impress on both landlords and tenants, and see expand right across the country, not least as it helps new firms start and will generate additional footfall.
That is why I am in talks with the Pop Up Britain team, led by Emma Jones, to see how we in government can help promote pop up shops across the country, and I hope to have something positive to say about it very shortly.
The next step
So I hope you can see, as a government we believe that much can be done to help retailers and our town centres compete. But it has to be a collaborative effort.
Government, councils, businesses and local people (especially) need to be engaged and feel that they can make a difference. This involves a long term shift and short term squeeze. This won’t be easy and many towns will struggle, especially where that sense of collaboration is missing.
But it can be done. As the people in Deptford have shown, if there’s the right imagination, will and support our high streets can have a great future.
It may be different to what went before, but it’s vital that once again our town centres regain their role, at the heart of our communities.