Friday, 8 June 2018

The Death of High Street Retail and the Role of Business Rates

For a very long time, I've complained to anyone that will hear it, that business rates are killing er, business.

This week House of fraser, that doyen of the upper middle clesses has got to the point where its high street presence is almost untenable.. When even the upper midle class don't have the spare cash to spend to keep a favourite afloat, you know we are in truly troubled times for the retail sector.

Business rate rises are killing the town centres of this country. Along with the money-grabbing extrotionate parking charges that local authorities charge.

It's a double whammy for business: They are charged huge costs in rent and rates to have a presence on the high street, and then the local authority prevent customers from actually getting to them by charging monstrous parking charges in town centres.

You may say that low corporation tax helps. But only if other business costs stay static. Recently there have been several raids by local and central government on business profits. Business rates, the new national pension scheme, rises in employers N.I. and probably a few more I've missed.

It's as if local authorities down't want shops in town centres any more. Either that or they are very thick and don't understand how business works or at worst disingenuous. It's their job to empower and invigorate the town, not bleed it to death.

Just to spell it out to local authorities, the way business works is you sell a product and hopefully the price you sell that product at covers the cost of heating, lighting, water, rent, rates and wages, plus something in reserve called profit that you can buy more stock with and also re-invest in the business.

There are a number of companies that I can see on the high street that I know are struggling. These are the companies that are earning very little in profit and have not had the money to re-invest in refreshing stores to keep up with trends. A classic at the moment is Argos. After a big investment 8 years ago in bringing touch screens into stores, and more recently tying in with eBay to allow in-store collection, there hasn't been much in the way of change. the stores are as they were after that re-vamp 8 years ago and footfall in any Argos store these days is pretty low. I assume the on-line/home delivery side of Argos is still ticking over, although you don't see as many Argos delivery trucks roaming the housing estates of the country as you used to.

The assumption with any store that is looking a bit dated is that profits have dipped below that which allows regular re-investment. The owner can no longer afford to refresh the look. Marks & Sparks were in this position 5 years or so ago. Howvere they seem to have realised what it is that actually makes money for them; food. So they are closing down quite a few of their clothing stores and concentrating on the food side.

But this is where local authorities need to step up and take responsibility. Businesses are not ever-producing cash cows that can be milked for ever. The nature of business is that there is a point where it becomes untenable and more importantly illegal to continue to keep running the business. As soon as the maths stop making sense then the business stops. Those business rates you milked it for stop flowing entirely. Those car parking charges that people paid to visit those businesses dry up.

Eventually the town centre dies.

And that is where we are at the moment. Local Authorities need to recognise their role in the death of the high street. They are not innocent in this. It's no coincidence that buiness rates went up in April by some margin and we've had a slew of business closures.

In the end retail will become wholly on-line. Rent a lock-up and post products out to people. No parking necessary. Why would anyone rent an expensive shop? The number of mobile hairdressers is on the rise, even ones based in vans so you still get the salon experience and no hair on your carpet. After all if dogs can be groomed in vans, why not humans?

The maths of the high street are only going to become worse as wages stay flat and expendable cash from custromers is squeezed and the local authorities place ever heavier burdens on business.

Right now the tax burden on Buiness and private individuals is the around highest it's ever been. That this is happening under a Conservative government is shameful. The party of business and enterprise has lost it's way.