In recent years the high street has not been a happy hunting ground for many private equity firms. Competition from online retailers and high rents and business rates have combined to create a difficult trading environment. These pressures have come to bear on several private equity-backed high street names, including Toys ‘R Us, Debenhams and HMV. The government is well aware of the problems facing the high street and is introducing plans to revitalise an important element of the national and local economy.
In December 2018, the High Streets Expert Panel published its independent report into the future of British high streets. The High Street Report made three separate recommendations: the creation of a High Streets Task Force, the establishment of the Future High Streets Fund, and various short-term measures to support town centres. The task force aims to facilitate collaboration between local stakeholders and provide expert help and support so that high streets can be revitalised from the bottom-up, rather than having top-down solutions imposed on them. This will be achieved through improved data sharing, allowing town centres to assess their performance and compare their progress to that of other towns, and the provision of expert help in areas such as communications and project management. Streamlining the planning system is also within the remit of the task force, and it will play a role in encouraging planning decisions to be made more quickly and in line with local strategies. However, the task force has yet to be officially launched, and there has been no announcement on who will be part of it.
The report also recommended the creation of the Future High Streets Fund to provide local authorities with the resources to improve town centres. The government has allocated £675 million to the fund, with towns able to bid for grants. The money from the fund will be used for two broad purposes: to support the development of long-term strategies for high streets and to co-fund projects to improve physical infrastructure, such as transport links and physical spaces in town centres. Bids for grants from the Future High Streets Fund will be undertaken in conjunction with the High Streets Task Force; the Task Force will support the bidding process and ensure any regeneration involves local stakeholders. The report also proposed measures to make town centres more visually appealing and reduce the number of empty shop fronts, as well as suggesting local authorities need to be mindful about providing adequate parking to encourage shoppers to travel to town centres.
The government has deliberately avoided creating a plan that must be applied uniformly to high streets up and down the country. Towns will have different consumer profiles and be able to exploit different advantages (geographical, historical, cultural etc.). As such it makes sense for local areas to set the terms of their own regeneration.
The Institute for Place Management echoed this sentiment in its report High Street 2030: Achieving Change, which was released in conjunction with The High Street Report. The High Street 2030 report presented evidence to support the development of policy towards town centres, based on the experiences of towns that had successfully achieved change. The report concluded that towns need to avoid being identikit copies of one another and that people value independent shops, community atmosphere, cultural venues, heritage and unique features.
These findings present a problem for those looking to either make a success of their existing assets or are trying to find new avenues for investment on the high street. The success of many high street brands is founded on their name recognition and the guarantee of a particular standard of good or service at a consistent price nationwide. This recipe for success is at odds with the approach to regeneration successfully adopted by towns such as Altrincham and Shrewsbury, where the focus has been on independent retailers and unique local features, such as historic market places. Investors will need to come to terms with a new era where consumer demands for authenticity and individuality are matched by government policy that aims to establish a new breed of high street.
The government has neither the will nor the ability to compensate for the huge shift in consumer behaviour away from the high street and towards online shopping. A tax on online retailers has been discussed, but if it was to be introduced, it would not be imposed at a rate that would level the playing field, especially given the cost advantages enjoyed by online retailers. Such a tax could also be illegal under EU rules. Business rates have been blamed for much of the high street’s malaise, and there have been calls to reform the business rates system. However, according to the Institute for Fiscal Studies, there is little evidence that reducing business rates would help the high street over the long-term. Any decrease in business rates is likely to be matched by an increase in high street rents, leaving businesses no better off.
When it comes to making a success of a high street business, it appears that small really is beautiful. The challenge for investors is to find businesses that can engage with local stakeholders and become part of the fabric of a town or city. There will always be room for brands that can use their economies of scale to provide consumers with good value products; however, the product itself is no longer enough to sustain a high street presence. On the high street of the future, businesses aren’t just selling goods and services; they are selling themselves.