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Little shops of horrors for business rates

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LGC’s essential daily briefing.

Timing is everything and forcing councils to rely for income on business rates just as the retail sector undergoes a collapse suggests the government got this wrong (assuming the cynical view that it wanted to get rid of a poisoned chalice is not subscribed to).

Famous high street retailers have always come and gone – where are you now Safeway, Woolworths and Augustus Barnett? – but this year has been notable, seeing the disappearance among others of Maplin, Poundworld and Toys R Us, and recent announcements about sweeping store closure programmes from House of Fraser and Homebase, and earlier ones from Mothercare and even the mighty Marks & Spencer.

Consumers switching to internet shopping is partly to blame, but so too are increased business rates on brick and mortar shops not faced by their online rivals.

Chancellor Philip Hammond has this week floated a tax change to even this up.

But it would have to be huge to put the likes of Amazon and high street stores on a level playing field, and consumers might not necessarily be enticed back to shops.

This leaves councils with two problems.

The first is that retail carnage will make them harder pressed to raise significant income from business rates.

That could in theory be solved by the government admitting the retail environment is so different from when the idea to move towards 100% rates retention originated that a rethink is now needed. That would be, at best, confusing for councils and maybe humiliating for ministers but given the uncertainty already surrounding the way sector will be financed in the future it would be one heck of a last minute U-turn to go back on current plans.

The second is regeneration. Huge efforts have gone into reviving declining high streets and improving thriving ones, with a dead town centre generally considered a mark of economic decline.

But do changing shopping habits make it any more sensible to ‘defend’ high streets as they are than it would have been to ‘defend’ municipal horse troughs a century ago?

If large numbers of people find online shopping more convenient and economical, it will be hard for any council to reverse this.

That means town centres becoming something different, possibly more residential but with entrainment, catering outlets and other amenities that might bring in custom.

These might generate some employment, though possibly not enough to counter the loss of what had been lower paid but reliable jobs in shops, so hitting local economies.

The alternative is high streets full of charity shops and services that cannot go online like hairdressers and convenience stores.

House of Fraser closures prompted cries of alarm from councils as diverse as Warwick DC, Wolverhampton City Council and Surrey Heath BC, which all feared for the economic health of their centres.

But while it’s at least possible to envisage some different future for town centres, along the nation’s bypasses stand the out-of-town retail centres beloved of 1990s planners.

What will happen when the business rates from them dry up, and have they any alternative use?

By Mark Smulian, reporter

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