Pre COVID-19 some high streets were already struggling with 1 in 10 units vacant and declining footfall. As part of measures to reduce the spread of COVID-19, many non-essential shops were closed for long periods. Alongside this, changes in consumer behaviour resulting from reduced socialising and travel have had a big impact on our high streets and retailers. This is all prompting a wide-ranging and difficult rethink about what the purpose of our towns will be in the future. What might this mean for rural settlements? Jessica Sellick investigates.
The future of town centres and high streets has long been a matter of concern. This briefing highlights some of the key trends and challenges they face, how Government policy and investment has been supporting them, some suggestions from think-tanks about how to revive them, and what this all means for rural settlements going forward.
What are the trends and challenges facing our high streets?
According to the Office for National Statistics (ONS), in 2018 there were 4.4 million people employed on high streets, representing 14% of all employment: with 22% employed in retail, 15% in accommodation and food services, 13% in health, education and public administration, and ‘other industries’ accounting for the remaining 49%. Using figures compiled before the pandemic, the Grimsey Review 2020 found:
- Retail accounted for 5% of GDP.
- 18% of retail businesses had negative balance sheets with a shortfall of £2.2 billion. 107 had failed since the start of 2018, affecting some 126,000 jobs and 5,700 shop premises.
- Pubs and restaurants accounted for 5% of GDP but employed 3.2 million workers. 59% of operators were at risk of significant failure and 27% had negative balance sheets with a combined shortfall of £2 billion.
- There was a 42% drop in retail property investment between 2014 and 2018. Retail property investment totalled £200 million in the first half of 2019. There was a 78% decline in shopping centre investment between 2014 and 2018.
In 2019, ONS and Ordnance Survey (OS) collaborated to identify the physical geography of high streets for the first time – comparing trends on the high street with those in non-high street areas at a regional level. During COVID-19, ONS and OS have sought to provide analysis on the businesses, employment and people living near high streets. Around one-third of addresses on the high street in Great Britain in 2020 belonged to retail shops. More than half of the addresses were residential. In most regions, 10% of addresses were offices and around 2-3% leisure or community facilities. While these figures are similar to 2019, in 2020 there was a slight [1-2%] increase in the proportion of residential addresses, and a similar decrease in the proportion of retail addresses.
The figures on shopping centre investment and physical locations highlight how the retailers with a presence on our high streets are changing. John Lewis, for example, which has often anchored shopping malls and town centres, is closing 16 standalone stores and opening ‘mini John Lewis’ stores inside Waitrose supermarkets – intending all 331 supermarkets to have a ‘mini’ store within them over the next 12-18 months. John Lewis expects 70% of their sales to be made online by 2025. Other chains – such as Debenhams, Dorothy Perkins, Wallis, Topshop, Topman and Miss Selfridge – have been bought by online fashion retailers and disappeared from our high streets altogether.
For some retailers, the experience of going into one of their shops has been central to their appeal. Whether this personal, caring, customer service ethos can be translated online remains unclear. Similarly, retailers are carefully considering whether, how, and when to invest in physical stores with no guarantee of a decent return. When Woolworths was dissolved [I was very fond of the Ladybird collection and the pic n mix sweets] some of its shops remained unoccupied more than 12 years later.
Figures show how retail sales had been increasing steadily for a number of years prior to COVID-19. However, online sales had been making up an increasingly large percentage of these sales. During COVID-19 statistics reveal how retail sales dropped dramatically – while the proportion of those sales happening online saw a similarly large increase. Although these trends started to return to normal as initial lockdown restrictions were eased, business recovery has not been consistent across all types of shop. Retail sales show that food stores have maintained a steady level of sales throughout the pandemic compared to clothing shops which were below their pre-lockdown level in October 2020. Clothing was the only sector where the increase in online sales did not compensate for the reduction in in-store sales – leading to an overall decline of 14% in the value of clothing sales in October 2020 compared to February 2020.
According to a report from McKinsey & Company, fashion companies’ profits declined by approximately 90% in 2020, after a 4% rise in 2019. Even in a scenario where COVID-19 is relatively contained during 2021, it is not expected that the fashion industry will return to 2019 levels of activity until at least the second half of 2022. Figures from Oxford Economics for The British Fashion Council (BFC) estimate that some 240,000 direct jobs will be lost in the UK fashion industry as a result of the pandemic; rising to 350,000 job losses if the supply chain and related consumer spending are also included. As some customers do more of their shopping online, jobs in warehouses are increasing as jobs in stores decrease.
In banking, many lenders are reducing hours or closing high street branches. Which?’s bank closure tool has been tracking the decline in physical branches since 2015. This shows 4,299 branches have closed since January 2015, a rate of around 50 per month. In the first three-months of 2021, the number of bank closures planned for the year outstripped those in 2020. Wentworth and Dearne in Yorkshire is the first parliamentary constituency to lose all of its branches. By the end of 2021 it will be joined by Sheffield Hallam, Bradford South, Warrington North and Erith and Thameshead; with a further 20 constituencies down to their last branch. In August 2021, the Treasury Select Committee published correspondence from high street banks on branch closures. Banks were asked to outline their current number of branches, the number of ‘last in town’ branches, their plans to maintain branches, the factors considered when closing a branch and details of the support provided to customers when a branch is closed. Commenting on the responses, Rt. Hon. Mel Stride MP, Chair of the Committee, said: “while it is encouraging that the high street banks have engaged so positively with the Committee, we note that there are over 200 ‘last in town’ bank branches across the country. We are concerned that, should these close, vital access to cash and banking services will be out of reach for many communities. The Committee will continue to monitor the impact of bank branch closures on access to cash as part of our broader work.”
A number of banks have signed up to the Access to Banking Standard, and in September 2020 the Financial Conduct Authority (FCA) published guidance setting out what banks are expected to do when deciding to reduce the number of physical branches or free-to-use ATMs. While COVID-19 has given people a glimpse into the convenience of digital banking, there are still customers that prefer face-to-face contact at a branch and they continue to be important in rural areas. Yet around 10% of the rural population now lives at least 10 miles away from their bank’s nearest branch. In a report on access to cash in rural areas, Professor Russel Griggs made an argument for improving bank services in the Post Office and highlighted the rural convenience store (with or without a post office) as a critical piece of infrastructure. More recently, there have been calls for Government to legislate to require the provision of physical banking services.
The challenges facing our high streets are not confined to retailers, banks, businesses and consumers. Since the mid-2010s some Local Authorities have been building up portfolios of commercial property, putting the profits that are generated into their revenue budgets. Local Authorities are legally required to set balanced budgets, and there are risks in some of their commercialisation strategies – not least what happens if commercial property values and market rental values fall. COVID-19 is having a substantial impact on rent collections and this emphasises the need for Councils to ensure their commercial investment strategies are sufficiently diversified.
How is Government investing in our high streets and town centres?
A report from the Housing Communities and Local Government Committee in February 2019 identified online shopping as the main structural change to people’s shopping habits – causing a decline in the high street. They highlighted four systemic issues that were preventing high streets from adapting to these pressures:
- Too much retail space – within high streets and in terms of the size of some individual shops.
- Fragmented ownership – where so many people own different parts of the high street, coming up with a cohesive response becomes difficult.
- High fixed costs – namely business rates and rent.
- High and inflexible rates of taxation that do not affect online retailers in the same way.
In December 2020 MHCLG launched a consultation on change of use of permitted development rights that attempts to address some of these issues by giving businesses greater flexibility ‘to respond rapidly to changing market demands’. Where there is a surplus of retail floorspace, Government wants quality residential developments to diversify and support the high street. It also wants to see the effective use of existing commercial buildings, bringing additional footfall from new residents, and assisting in the wider regeneration of town centre and other locations.
As high streets and town centres have felt the effects of structural changes, further highlighted by COVID-19, Government has announced a range of measure to support them become thriving and vibrant hubs where people live, shop, use services and spend their leisure time. These interventions include:
- The Future High Streets Fund: launched in December 2018 and initially worth £675 million, with funding awarded to local areas using a competitive bidding process. Each successful area receives £25 million to spend on capital projects such as improving transport to town centres, congestion relief, new housing or office space, or turning vacant retail units into residential units.
- The Stronger Towns Fund: launched in March 2019, with £1 billion to be awarded on a needs-based formula and £600 million through a competitive bidding process. 100 towns were invited to bid for up to £25 million each. The funding runs until 2026, with £241 million made available in 2020-2021.
- High Street Taskforce: launched in July 2019, it supports towns shortlisted in the Future High Streets Fund competition through the process of drawing up plans for redevelopment. The Taskforce has published a Review of High Street Footfall between July 2019 and June 2020. This collated data from 154 locations in England and included four case study locations: Manchester, Ashford, Cleethorpes and Windsor. This found footfall volumes fell by 89.86% during the height of lockdown (March 2020) – with district centres seeing a footfall drop of 34.5%.
- High Streets Heritage Action Zones: part of the Future High Streets Fund has been allocated to support high streets in conservation areas. The fund is administered by Historic England and can be used to improve the physical realm around the high street and to support activities that encourage people to engage with heritage.
- Levelling Up Fund: this £4.8 billion fund will support town centre and high street regeneration, local transport projects, and cultural and heritage assets.
- The UK Community Renewal Fund: this aims to support people and communities most in need across the UK to pilot programmes and new approaches and will invest in skills, community and place, local business, and supporting people into employment. The Fund will also provide capacity funding to help places prepare for the introduction of the UK Shared Prosperity Fund.
- The Community Ownership Fund: this £150 million fund is intended to ensure communities can support and continue benefitting from the local facilities, assets and amenities that are most important to them.
- The Welcome Back Fund: £56 million of European Regional Development Fund (ERDF) has been allocated to support the safe return to high streets and help build back better from the pandemic. This builds upon the £50 million Reopening High Streets Safely Fund (RHSSF) allocated to Local Authorities in 2020.
- County Deals were announced by the Prime Minister in July 2021. The Deals are intended to take devolution beyond the largest cities, offering the rest of England the same powers metro mayors have. Further detail will be set out in the Levelling Up White Paper due to be published in late 2021.
It is worth noting that the Government has already created a number of institutional options which Local Authorities and others can use to revitalise town centres – such as Business Improvement Districts (BIDs) and Neighbourhood Forums.
The 2021 Budget announced a new study would be undertaken by the National Infrastructure Commission (NIC) looking at how to maximise the benefits of infrastructure policy and investment for towns in England.
In June 2021 MHCLG published its Build Back High Streets Strategy, setting out the Government’s long-term plan to support the evolution of high streets. The Strategy is intended to help every part of the country achieve the same: ‘vibrant high streets where communities are at the heart of place-making; where a mix of commercial and residential uses complement each other; and where businesses large and small feel welcome’. The Strategy focuses on five priorities: (i) breathing new life into empty buildings, (ii) supporting high street businesses, (iii) improving the public realm, (iv) creating safe and clean spaces, and (v) celebrating pride in local communities. These priorities are expected to generate more trade and investment on high streets. Whilst this may lead high streets to look different than in recent years, the Government believes that they will increase footfall and activity that is rooted in community pride.
While there is a recognition amongst policy and decision makers that town centres and high streets need investment and regenerating; there is also a sense that the number of initiatives underway, and the processes in place to access them, are all-too-often centralised, short-term and dis-jointed. Some Local Authorities have struggled to meet bid deadlines, applicants that have successfully bid often find they receive less funding than requested, and the focus sometimes reverts to shovel-ready projects and a bid-by-bid approach with some quick wins rather than taking a longer-term place-shaping approach.
A new life for our high streets and town centres?
COVID-19 is seen as both exacerbating the challenges many high streets were already facing but also a means to revive them in the aftermath. Various think tanks, charities and consultancies have published a range of studies looking at how to repurpose and reinvigorate places.
The Centre for Cities, for example, has a recovery tracker which shows how quickly high streets in cities and towns are returning to their previous levels of activity and the drivers behind it. You can select a settlement and see a series of data and tables before lockdown and from now. The analysis also includes tables summarising the top 10 and bottom 10 settlements for footfall and spend.
In the future of towns report, Demos developed a new typology of towns and analysed the challenges facing different town types. This reveals how different towns have different needs, and that people living in towns can be divided rather than united behind a clear vision of what they want their town to look like. The report contains a number of recommendations around having participatory conversations about the future of the high street, informed by relevant economic analysis. Similarly, the Royal Town Planning Institute (RTPI) published a research paper in December 2020 analysing public views. This also found that COVID-19 was acting as a catalyst for change and the three main issues were affecting high streets: business rates, access and the goods and services offered in shops. Under the strapline ‘survival and revival’, a report by Public First for ABF/Primark (also published in December 2020) found people feel a real civic pride in their towns – but that pride is dented when their towns are in decline; and many people have never heard the term ‘levelling up’ but they did like to idea behind it of leveraging funding into town centres to improve them.
Alongside retail and regeneration, the Social Market Foundation and stakeholders have explored scope for a new role for town and city centres: to improve public health. This includes the provision of green spaces, walkable ‘20 minute’ neighbourhoods, and accommodation which supports people to be independent and healthier in their older age. Sustrans highlights the tension that often exists between the role of a high street as a destination and as a place for movement for people – and makes recommendations around reprioritising high streets as places for people, with more space, use and equitable access. The New Economics Foundation (NEF) has called for a pilot scheme of new self-employment centres, modelled on Sure Start children’s centres, which would provide free coworking and meeting spaces and face-to-face tailored advice services.
What does this mean for rural settlements?
In August 2021, the Rural Services Network (RSN) published a rural lens review into the Government’s Build Back Better High Streets Strategy. As part of calls for a cross governmental department Rural Strategy, the RSN highlights how:
- The plan lacks any mention of the wider economic and social issues faced by people, businesses and communities in rural areas – and the plan has not been rural proofed.
- The importance of high streets in historic market towns to the rural tourism offer – and how this is not particularly recognised.
- Some of the content is a re-statement of pandemic support already announced by Government – no new money is detailed.
- It does not recognise the financial or capacity constraints facing rural Local Authorities.
Also in August 2021, the RSN published a report ‘towards the UK Shared Prosperity Fund, which reveals how only 18 rural districts were placed on the Government’s priority list of 123 local authorities for its Levelling Up Fund. Researchers found that number should have been as high as 27 if low standards of living in rural communities had been properly accounted for.
While retail is an important part of the town centre mix, our high streets are also focal points for local identity, community pride, heritage and values. A working paper from the LSE for Power to Change, for example, presented case studies of community businesses on the high street and how these contribute to high street regeneration. The case studies included the old library in Bodmin, Midsteeple quarter in Dumfries, Hebden Bridge town centre, Made in Ashford, Radcliffe market hall in Bury and the ultimate picture palace in Oxford. The paper identified the following benefits of community businesses: increasing the diversity of high street users, building resilience and recovery, building links with other local businesses, and shaping a vision for the high street. The paper highlights the role of Local Authorities in working with communities and businesses around asset transfers, subsidised leases and service delivery.
The Community Access to Cash Pilots are supporting eight communities across the UK to trial and test scalable solutions to help keep cash sustainable. The initiative involves Botton Village (North Yorkshire), Burslem (Stoke-on-Trent), Cambuslang (Lanarkshire), Denny (Falkirk), Hay-on-Wye (Powys), Lulworth Camp (Dorset), Rochford (Essex) and Milisle (Northern Ireland). The Hubs offer a counter service run by the Post Office, alongside face-to-face access to Community Bankers representing those banks with the most customers in the area. In August 2021, the Access to Cash Action Group announced the initiative would be extended until at least April 2023, and that ‘cashback without purchase’ would be rapidly rolled out to thousands of smaller shops.
Research by Alvarez & Marsal and Retail Economics suggests 1 in 4 of us expect to permanently change our shopping habits in favour of online retail, even once the pandemic ends. According to a YouGov poll, 1 in 5 workers wants to work from home permanently after the pandemic, with a further two-fifths wanting to work from home some of the time – leading to reduced demand for office space in towns. What do these trends mean for rural settlements?
While the high street decline and the succession of programmes and funding to reinvent them has been extensively documented, there has been less focus on what this means for rural places. In order to more fully consider this, we need to build our evidence base to gain a better understanding of how rural settlements function, their socio-economic characteristics, and current Government investment in them [i.e., mapping the allocations for all the funding streams described above; reviewing outcomes from previous investments such as the Portas Pilots]. If we are to ensure that they continue to appeal as places to live, work and enjoy – and if we truly want to build back better – rural residents, businesses, Town and Parish Councils and Local Authorities are at the heart of developing better solutions to local challenges and opportunities. Will the Levelling Up White Paper support them to do this? Watch this space.
I would like to extend my thanks to Mr. John Hann from Winchester for drawing my attention to a series of articles on the financial health of Local Authorities, the future of retail, and the need for town centres to find a new purpose.