A government plan for the high street
31st October 2018, David Whiteley
In the House of Commons, at 3:30pm on Monday 29th October, Chancellor Philip Hammond stood up at the despatch box to give the budget statement.
I don’t feel quite so old
This is the first Monday budget in my lifetime – the last one was Monday 9th April 1962.
In 1962 the share of consumer spending online was around 0% (I’ve not checked that fact, but I’m fairly confident).
Supermarkets were the disruptive retail business model; out-of-town superstores were yet to appear; and the brand new technology sweeping through Britain’s households was the domestic fridge.
The Chancellor is facing quite different challenges today.
Is the government taking the high street seriously?
Here’s a quick rundown of some points relevant to the high street community …
- The government has a plan for the high street, “Our Plan for the High Street”.
You can read it here
It’s encouraging that the Treasury is promoting a government plan for the high street. This must be good news for key ministries like MHCLG.
- Business rates are cut by a third for most properties on rateable value below £51,000 for two years from April 2019.
The Chancellor announced this should mean a saving of around £8,000 p.a. on average for those benefiting. (The Treasury has budgeted £900 million.)
Whilst this benefits independent local businesses including shops, restaurants, pubs and hairdressers, the Treasury seems to have an issue with some services businesses like estate agents and professional services firms who could be excluded.
- The government is to establish a Future High Streets Fund to support transformation of high streets over the next few years.
The fund will invest in town centre infrastructure to increase access to high streets, reduce congestion, support redevelopment and enable housing and new workspaces to be created. (The Treasury has budgeted £675 million.)
The fund is intended to help high streets “keep up with changing consumer behaviour so that they can remain at the heart of local communities”. It will “invest in town centre infrastructure, including to increase access to high streets and support redevelopment and densification around high streets … restoring historic high streets to boost retail and bring properties back into use as homes, offices and cultural venues”.
- There’s to be a new High Street Taskforce
It will “provide hands-on support to local areas [local leadership] to develop innovative strategies to help high streets evolve, connect local areas to relevant experts and share best practice [to adapt and thrive]”. (I’ve seen reports of a budget of £2 million.)
Sounds great. I’ve said it before and I’ll say it again, you can’t have enough high street taskforces.
- Government is consulting on planning measures to support high streets to evolve
It will consult on issues such as empty shops and a change of use regime that will “make it easier to establish new mixed‑use business models on the high street”.
I think this means a greater mix of residential, office/workspace and commercial property on the high street.
- A digital services tax is to be introduced from April 2020
A 2% tax is proposed on UK revenues of “certain digital businesses”, including “search engines, social media platforms and online marketplaces”. The tax will apply only to larger businesses – those with at least £500 million in global revenues and £25 million on UK revenues from these types of business model. (The Treasury is budgeting receipts growing from £275 million in 2020-21 to £440 million in 2023-24).
So that’s Google, Facebook and Amazon then.
The economic context – so what?
OBR is projecting over the next five years (2019 to 2023) for the UK …
- GDP growth of 1.4% to 1.6%
- GDP per capita growth of 0.9% to 1.1%
- Inflation (consumer prices) of 2.0% to 2.1%
- Real household disposable income growth of 0.6% to 1.6%
- Unemployment rate of 3.7% to 4.0%
My reading of this is consumer spending is projected to grow (the reference to “real” disposable income), markets are growing faster outside the UK (projected to underperform global growth significantly), and recruitment is likely to remain challenging (as unemployment is low).
Which could mean … keep giving excellent service to local customers, start targeting overseas markets if appropriate for your business, and invest in technology to improve productivity and attract new recruits.
In summary, some positive news for high streets and independent local businesses
With the introduction of Our Plan for the High Street, the Future High Streets Fund and the 2-year cut in business rates for smaller businesses, the government is starting to show some concerted action around the high street.
The policy changes laid out in Budget 2018 point to an acceptance of the challenges facing high streets at the heart of every community and local economy, and enabling the transition to a better connected, digitally enabled, more sustainable high street of the future.
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David Whiteley is a seasoned business leader with a 25 year track-record spanning roles as COO, CEO, head of operations and senior consultant for a range of startups, consultancies and publicly listed companies including Virgin.com.