COMMENT As the cost-of-living crisis continues to bite, retail market analysts are reading the runes for a tough Christmas ahead for the retail and hospitality sectors.
The World Cup may have provided a temporary boost to pub sales but there is no shortage of data to back up the gloomy prognosis. While total UK retail sales were up by 4.2% year-on-year in November according to the British Retail Consortium and KPMG (better than 1.6% the previous month), the data also confirms that volumes have fallen significantly given that CPI inflation reached a 41-year-high in October. And in a worrying sign for non-food retailers, total sales were flat for the three months to November.
Meanwhile, Barclaycard, which accounts for half of UK debit and credit card transactions, is reporting that 50% of consumers will be tightening their belts during the festive period. There are signs that consumers are increasing purchases of pre-loved and refurbished products to help bring down the cost of Christmas.
We can perhaps take some encouragement from recent data from the Local Data Company, which showed high street vacancy is around 14% and trending downwards. This was the fourth consecutive quarter of falling vacancy rates with all locations seeing improvements in vacancy rates in Q3, and independent businesses in particular continuing to flourish as consumers remain loyal to their local high streets.
Energy efficiency
But the high street remains fragile. There are signs that the government recognises this. In November, after extensive lobbying from the BPF and others, it gave high street businesses a boost and froze the business rates multiplier, averting a more than 10% inflationary rise. Furthermore, the end of transitional phasing means that retail, leisure and hospitality businesses that will see their rates bill decrease from April 2023 as a result of the revaluation undertaken last year will see the full benefit straight away.
With the burden of business rates now eased, at least in the short term, it is energy costs that are now the biggest concern and risk making occupying some premises unviable, or at the least unattractive commercially. We are promised the outcome of the government’s review of the Energy Bill Relief Scheme by the end of the year, and it is clear that further support will be needed for the high street beyond April 2023.
As ever, there must be a balance between addressing immediate pressures and long-term strategic thinking. The energy crisis has brought into sharp focus the need for more efficient buildings in town centres and on high streets where there is predominantly older stock. Recent research from Savills shows that the situation is becoming increasingly urgent with 185 million sq ft of retail space unlikely to meet EPC standards as soon as next year. Knight Frank, meanwhile, finds that just 1% of UK retail floorspace has modern sustainability accreditation (BREEAM), highlighting the massive scale of investment required.
A new framework
How do we ensure the long-term health of our town centres? By harnessing the vision and commitment of local leaders together with the capital, ingenuity and problem-solving skills of our sector. For the past 12 months, the BPF has been promoting a new framework for such a partnership, through Town Centre Investment Zones. While the government’s focus is primarily on freeports and knowledge clusters, we will continue to champion the need for a clear framework applied in the places that need it most, where true levelling up can be delivered.
The retail, leisure and hospitality sectors are fast-moving, dynamic and highly seasonal, which means it is always tempting to focus on the immediate and short-term. Government, together with the property sector, must take a long-term view if we are to revitalise the nation’s high streets.
Melanie Leech is chief executive of the British Property Federation
