I have posted below an article I have written for a new magazine which was published this week. The magazine called The Progressive Conscience has been launched by the new political group, Bright Blue. I have used the article to set out my thoughts on how we could promote local business and help our struggling high streets. I would be grateful for your thoughts on this.
Running your own business, like owning your own home, is at the heart of the aspirational economy. It is not only a measure of personal fulfilment but often a driver of innovation in the economy and creator of jobs. And the fact that Tesco started on a stall and Google in a garage, show that entrepreneurs are often better at spotting new opportunities than Governments are.
But if you want to see how the greatest recession in modern times has affected life in Britain today, you can walk down the high street of most towns and shopping centres. According to the Local Data Company’s 2009 report, in towns like Margate and Wolverhampton, around one in four shops are empty. In Folkestone in my own constituency, the rate is estimated to be around one in six. This decline has been driven in the recession of by the loss of independent businesses, as well as larger national chains like Woolworth and Borders.
These are difficult times for all businesses, but I fear we may have reached a tipping point where shops in town and village centres are struggling to be viable. They have suffered the triple whammy of the rising burdens of tax and regulation, competition from larger retailers and the internet, and the steady retreat of local institutions like bank branches, post offices and pubs.
We cannot turn back the clock, nor should we try. All businesses have to adapt to changing times and we cannot recreate the high streets of the 1950s. Independent businesses will struggle to beat their larger competitors on price, so instead must offer something else, whether it is expertise, the local knowledge to spot a new market opportunity, or more creative approach to the sourcing and presentation of their goods and services.
So is there a role for policy makers in confronting this issue, or should it be left to market forces and creative entrepreneurs? In the past, if you wanted to understand the social scars of business failure, you went to the old industrial heartlands. That is what took Margaret Thatcher to Teesside and the London Docklands. Enterprise Zones were created to attract new private sector investment and create jobs. There was an acceptance that to re-establish a viable market economy, that investment needed to be attracted from outside. Similar problems now exist in our town centres.
In many older town centres which have been suffering from decline for a number of years, dilapidation has become a problem. This means that the premises are in such a poor state that it would cost too much to restore them. In Folkestone, the Creative Foundation established by the Roger De Haan charitable trust has bought a number of properties in the Old High Street and area near to the harbour. They have invested in renovating the properties and then trying to attract creative businesses like artists, designers, and florists into them at discounted rents. However the size of the investment required bringing the properties up to scratch is currently well ahead of what the local property market could afford. The rents you would need to charge to repay the investment in the buildings would mean that a fully commercial rent would be too high. Yet, without the investment to improve the quality of this shopping centre it would be difficult to attract new businesses, and with them new customers.
We also need to recognise that high street and village centre businesses are part of the communities they serve. They employ local people and often buy goods and services from other local businesses. It has been estimated that 50% of the money taken over the counter by a local business, will go straight back into the community. Measures to encourage local enterprise can be considered not just as business support, but part of the regeneration of the whole community.
Business support measures also tend to benefit individual companies, whereas a key part of the survival of a local community business could be the strength of its neighbours. Local businesses will cluster together knowing that the combination of their offer will help to attract customers, not just their ability to make themselves a destination in their own right. This is just not the case with local food businesses, where a butcher, baker and greengrocer will sit together in the same high street. The creative economy works in a similar way. Commercial photographers will often like to work near picture editors, advertising and marketing companies, casting agents and web designers because they may benefit from working together and referring customers. This is as important in a major centre like Soho in the West End of London, as it is emerging centres like the area around the new Media City in Manchester, cities like Brighton, and in the planning of the new Creative Quarter and Foundation in Folkestone.
I believe that the decline of businesses at the heart of our communities requires a bigger solution than the manipulation of tax rates and relief from heavy handed regulation alone. It requires creative thinking to develop an effective local plan to regenerate businesses, and involving a combination of the councils, landlords and businesses in that area. But for these plans to succeed, policy makers need to consider a number of reforms.
Local authorities have had no direct incentive to invest in reviving high streets and local business centres, and this is because they do not keep the business rates they collect for the Government. Therefore the level of business activity in their area has little direct financial impact upon them. With council budgets under pressure any money spent on business support initiatives must come from other services or from additional increases in council tax. Conservative policies to allow councils to keep part of an increase in business rates if new businesses are encouraged into an area, will though give local authorities an incentive to support business development.
In Folkestone in the week before Christmas 2009, Shepway District Council paid for three days worth of free parking in the town. This led of an increase in the number of shoppers in the town centre of 11% against the same period in the previous year, and when the national trend over was actually a fall in customer numbers. The local traders regarded this as a great success; an effective, localist measure to stimulate trade in a recession. But other than gratitude, the council gets nothing back from this, and the policy has cost it lost parking revenues. Business groups have long criticised parking charges as something that depresses trade, but councils have an incentive to charge as much as they think they can to subsidise other areas of their work. In a similar way, the payments developers of new retail parks have to make to councils following a planning approval, known as Section 106 agreements, create incentives to approve more business development away from a struggling town centre. In a recession, budgets for local marketing, promotion and events to encourage visitors may also be one of the first areas of spending to be cut.
Regional Development Agencies can support regeneration projects in town centres, but the decision makers in this process of allocating funds can be distant from the local economies they could support. Their support, whilst welcome and can also be relatively short term, when an area might need more consistent help over a number of years and across a business cycle. It could be more effective instead to use resources at a local level, so that authorities are given an incentive to take the lead in supporting local business growth. So if the council want to support the renovation some run down shops, it could recover that investment when tenants had moved in and were paying business rates. Also, if the council decided to invest in reducing parking charges, or funding a marketing campaign, that this cost could be recouped from the increased business rares across the area if activity was a success. It may be possible that this work would not have to be underwritten by the local authorities, but perhaps by a not for profit company comprising of a variety of local business interests, working with the support of the local authority.
The ability to create new local business regeneration bodies should also be partnered with greater independence of operation and their ability to seek and give advice and support from a wider range of sources. There are a number of large companies and non for profit organisations that are pioneering new and creative ways to support business development. However, there is often the complaint that Government run services like Business Link are reluctant to refer people to a service that is only offered by one or two private companies, even if it could be of benefit. For example Microsoft runs schemes to support new high tech business start ups, but this is not offered by all technology companies. We could also help promote local awareness of organisations like ‘Pub is the Hub’ which is supported by the Prince of Wales and works with companies, agencies and in some areas local government to help keep local pubs open by increasing the diversity of the service they provide; for example, encouraging a local food shop or post office under threat to trade from part of the premises of a pub.
The regeneration of businesses in the community requires urgent and creative thinking. It is not a matter of returning to a way of doing business that is past, but instead embracing new ideas and planning for the future. But key to this is to give local bodies an incentive to support business growth and the tools to provide more local assistance. With a local plan for a new local economy, we have the opportunity to support a new generation of businesses in the community, and perhaps create a business ownership revolution, to rival the home ownership revolution of the 1980s.