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When the shops shut

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Commentary on online retail menacing more than business rates

There is speculation that MacKenzie Bezos could be worth half of her husband Jeff’s £107bn fortune after the couple that founded Amazon announced their divorce.

If so she would be about 850 times richer than the local authorities to which the online retailer paid a paltry total of £63m in business rates last year on UK revenues of more than £8bn, as MPs heard this week.

Some finance directors must wish they had married Mr Bezos.

But leaving aside mere envy, the ability of online retailers to pay a fraction of the business rates faced by their brick-and-mortar counterparts has implications beyond councils’ finances, important as those are.

High street carnage this year has seen almost every mainstream retailer reporting reduced, or no, profits despite the normally bumper Christmas season.

According to the Centre for Retail Research, 2018’s failures included HMV (again), Coast, Poundworld, Toys R Us and Maplin, with 43 firms in total.

That makes it hard for any council to deliver ‘retail-led regeneration’, the favoured approach of pre-recession and pre-internet schemes to revive derelict areas.

There must be a danger that the retail slump will lead to them staying derelict, with resulting damage to residents’ prosperity and local quality of life.

The common boast of having “secured Messrs Scroggins and Scroggins as the anchor tenant” of a regeneration project  a phrase much favoured by council press releases of yesteryear - is heard much less frequently these days.

If regeneration cannot be led by retail, it will either not happen or must be led by something else.

Ideas are developing for town centres to become places for leisure, eating out, education, health, work and – in a change from conventional patters – residence, so creating a destination people might visit for multiple purposes.

Even if this works in urban areas, it’s hard to see what will revive or replace the out-of-town complexes beloved of 1990s planners.

It’s also hard to see what will replace the retail business rates the government expects council to increasingly rely on.

If retailers are not making money they will not occupy premises, and unless the property industry can do something else with these sites there will be less rates income.

Additionally, the industry’s ability to raise money to develop alternative projects may be hit if a firm that owns lots of shops suddenly finds them worth far less than expected.

Junior communities minister Jake Berry said this week that the 2% digital services tax was “in some ways levelling the playing field” between online and physical shops.

Even if this partly fills the business rates hole, can regeneration be saved if the retailers go?

Mark Smulian, contributor

 

 

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