Pathfinders to the Parliament page :11

Pathfinders to the Parliament

RETAIL SECTOR PATHFINDER

Introduction

The Retail Pathfinder Group was invited to convene by Lord Macdonald in early 1999 and comprised a number of senior figures from the Scottish retail sector. The group's aim was to identify six key areas that the members of the Pathfinder Group believe the Scottish Parliament should consider with respect to supporting the retail sector in Scotland.

In guiding the Scottish Parliament towards the six areas identified, the Retail Pathfinder Group seeks to lay the foundations for a coherent framework within which the Scottish retail sector can continue to grow, thrive and make its key contribution to the Scottish economy.

The Retail Pathfinder Group's membership comprised:

Chairman
Tom Hunter: Chairman, Fosters Trading Company

Members
Ian McGeoch: Chief Executive, MacKays
Bill Neish: General Manager, Marks and Spencer
David Stevenson: Chairman, Edinburgh Woollen Mill
Eddie Thompson: Founder & CEO, Morning, Noon & Night
Gordon Wotherspoon: MD Property and Development, Safeway

The Retail Pathfinder Group directly represents a total of 342 retail locations throughout Scotland employing some 21,360 people.

Background

The Scottish retail sector is massively important to the Scottish economy.

Some key statistics are:

- Scottish retailing accounts for 8.3% of the total consumer expenditure in the United Kingdom of Ł37 billion.

- Scottish retailing employs 11.6% of the Scottish workforce equating to 230,000 people.

As a barometer with which to gauge the health of Scotland the retail sector is powerful. Indeed the health of the retail sector is directly linked to the health of the entire Scottish economy. The Retail Pathfinder Group would, therefore, seek to impress upon the Scottish Parliament the fundamental need to support and encourage the sector to grow and prosper in order that Scotland itself can grow and prosper.

In addition the group would like to stress that it is through a strong partnership between the Scottish retail sector and the Scottish Parliament that the future of Scottish retail lies. Indeed Scottish retailers are committed to the idea of an ongoing relationship with the Parliament in order to ensure the sector's success.

Summary

The Retail Pathfinder Group identified six key issues it considers the Scottish Parliament should address with regard to supporting and driving forward the retail sector in Scotland.

The following six issues, in essence, underpin a framework which if established, would enhance the retail experience as being attractive, easy and safe from the consumer's perspective in Scotland.

The six issues, in no particular order of importance, are:

1. The rationalisation of the Uniform Business Rate.

2. The avoidance of legal divergence.

3. The reduction of retail crime.

4. The rationalisation of planning control.

5. The development of the transport infrastructure.

6. The production of focused Scottish retail research.

Uniform Business Rates

Property rates are a significant element of the total retail cost structure. The British Retail Consortium's (BRC) 1997 survey of members showed that rates equated to 18% of retail profits. The level of UBR set by government must adequately reflect its significance as a cost to retail business.

The current situation in Scotland is that the UBR structure actually penalises retailers with an overly heavy tax burden when compared with the rest of the UK. Indeed when rates payable are analysed as a percentage of market rent the bias is very clearly for Scottish retailer's property to sit within significantly higher percentage bands than the equivalent analysis for English stores.

The opportunity for the Scottish Parliament is to support the Scottish retail sector through managing UBR to a level which gives the sector competitive fairness through a reduced cost base. If, however, Scottish retailers find their tax burden increasing rather than decreasing relative to the rest of the UK the net effect will be to drive the erosion of the sector as it becomes increasingly uncompetitive on a UK, European and global basis.

In more detail, the Scottish Parliament should consider:

The retention of transitional relief: a recent BRC survey concluded that 74% of the retail property portfolio would be re-valued substantially upwards as a result of the year 2000 revaluation. The retention of transitional relief is therefore considered essential to the short term health of Scottish retail.
Move towards more frequent property revaluation: this measure would ensure revaluation with reduced value swings, based on more accurate information leading to greater certainty for business.
Rationalisation of the rating system: there is a need for a much more comprehensible and uniform administration and appeals structure within the rating system. This may include a mechanism for early stage consultation between local authorities and business thereby addressing past issues of communication breakdown and resulting conflict.

Legal Divergence

There is, currently, a real feeling amongst Scottish retailers that the sector is drowning in a sea of legislation from Westminster and Brussels. The sector needs 'freeing up' through future legislation that actually reduces costs and enables streamlining of operational activity. Legislative divergence between Scotland and the rest of the UK should be kept to a minimum and the existing burden of red tape lightened.

The opportunity for the Scottish Parliament is to take steps that ensure an efficient legislative environment for the retail sector to work within. This environment ultimately forming a legislative model that gives the sector clear competitive advantage and becomes a model for others to aspire to.

The model should encompass:

Harmonisation: harmonisation of the Scottish legislative environment with the legislative environments external to Scotland should be key to this model. From a UK retailer's perspective, be their head-office in England, Scotland or Wales, harmonisation of the legislative environment in which they operate will negate unnecessary costs and support all UK retailers.
Best Practice: the Scottish Parliament should consider formalising an ongoing mechanism for reviewing retail legislation in order to feed best-practice in to the Scottish model. This should be done in a fashion that not only supports the aim of harmonisation but also supports the aim of Scottish retail competitive advantage.

Retail Crime

The British Retail Consortium's 1996 Crime Survey highlighted the fact that retail crime cost Ł1.83 billion across the UK in that year. The loss to retail is profound and a constant frustration in its drive towards growth and prosperity.

The opportunity for the Scottish Parliament is to take a partnership approach focused on greatly reducing the level of retail crime in Scotland. The opportunity encompasses the communication of a clear intent to change, supported by a comprehensive package of measures, to those bodies upon which the retail sector depends but has no direct influence, i.e. the courts, police, legal profession and so forth.

Aspects of the partnership approach would include:

Retail crime profile: the profile of retail crime requires to be raised through production of relevant publications, provision of training and management seminars, promotion of research and crime impact assessments and so forth. One recent publication example is the BRC's 'Community Crime Reduction Partnerships' booklet currently being considered for release in Scotland. The booklet sets out initiatives that retailers can adopt to tackle crime.
Networks and partnerships: network and partnership organisations such as the Scottish Business Crime Centre (SBCC), a partnership of business, government and police, should be encouraged as a principle means of facilitating the process of reducing retail crime specifically and business crime generally. Developing more anti-crime initiatives at a Scottish level generally would reflect many that have already been implemented in England and Wales as a result of the Crime and Disorder Act 1998.

Planning

The growth of the retail sector is heavily dependent on the planning process in Scotland and its effects on new store development and existing store redevelopment. Whilst recent government legislation has been designed to strike a balance between out-of-town retail development and town centre development, the Pathfinder Group's view is that both development opportunities should be encouraged within appropriate environmental sensitivities while still protecting retailers in rural and remote areas who provide an essential service to the community.

Scotland's retailers would seek to encourage the Scottish Parliament to develop a balanced and flexible approach to retail planning and development, including proactive and co-ordinated policies to ensure the vitality of town centres. This approach should encompass an appropriate balance between environmental protection and economic growth, with policy development based on sound science, practicality and full cost benefit analysis.

National Planning Policy Guideline (NPPG) 8: the sequential approach adopted by The Scottish Office with respect to NPPG8 is generally accepted and understood by Scottish retailers. It is imperative, however, that NPPG8 guidance is applied consistently by all Scottish local planning authorities. Such consistency would ensure the avoidance of differential outcomes in determining retail applications, the outcomes currently being dependent on the area where the development is sought.
Reform current planning system: the Scottish Parliament should consider radical reform of the planning system which is currently perceived to be cumbersome, time-consuming and failing to deliver value to local communities. This reform should encompass the planning appeals process in order to limit the significant delays currently being experienced.

Transport

The Scottish transport network is of key importance to the retail sector. Firstly, retail operations are dependent on their own highly complex and flexible distribution systems which, in themselves, are dependent on the transportation infrastructure. Secondly, it is the transportation infrastructure that enables the consumer to access retail outlets.

The Retail Pathfinder Group acknowledges the clear need for transportation policy to pay close attention to planning, land use and environmental issues and the sector believes that the opportunity exists to address retailer's transportation issues in such a fashion that all due respect is paid to the wider environment. It is a strong, well-developed transportation infrastructure that enables an efficient and cost effective retail sector.

In more detail, the Scottish Parliament should consider:

Town centres: should the policy of reducing car access to town centres be maintained then it is of vital importance that compensating improvements are made in the quality and level of public transport available to the consumer. A comprehensive, fully integrated transport system is core to the future of the town centre.
Road pricing: the sector does not relish the idea of a road toll tax imposition that has the net effect of forcing lorries off motorways onto rural roads and through towns in order to save transport costs. The sector does however recognise the increasing need for tolls as a method for easing road congestion. One means of ensuring the sectors support for tolls would be a clear commitment that charges would be channelled back into the retail industry in order to further support the industry.

The sector would be against any retail car park tax. The BRC estimate such a tax would cost UK retailers Ł300m per annum. Scottish retail share of this burden, if imposed, would be around Ł26m per annum.

Road programmes: there currently appears to be little activity with respect to maintenance and upgrading of Scotland's roads. Indeed, from the retailer's perspective Scotland appears to require major investment in the road network. There is an urgent need, amongst many other things, to:

- complete the M74 northwards into Glasgow;

- address the enormous pressure of east/west traffic on the M8;

- address the M80 with its status as the gateway to the north of Scotland.

Curfews: of the retail store base in Scotland a significant number are subject to some form of curfew applying to deliveries. The majority of curfews restrict deliveries between 20:00 hrs and 07:00 hrs requiring more vehicles on the roads to service the stores. Removal or relaxing of the curfews would reduce the retail fleet size by a significant percentage (possibly up to 20%) considerably easing road congestion and reducing pollution.

Retail Research

One of the main difficulties in addressing issues of concern to Scottish retailers is the lack of detailed statistical information and research at their disposal. Developing comprehensive economic statistics focused on Scottish retail will support the sector at the heart of its decision - making process.

The opportunity for the Scottish Parliament is to support the appropriate government bodies and others in the research and collation of focused Scottish retail data in order to allow retailers to better respond to longer-term trends in the market place.

There are a number of ways in which the statistical information about the Scottish retailing sector can be improved, detailed as follows:

Consumer expenditure figures: consumer expenditure figures for Scotland could be supplied on a quarterly basis in conjunction with the ONS' Regional Trends figures.
Employment statistics: employment statistics could be readily produced for the retailing sector in Scotland by reviewing the classification of employment in the ONS' employment statistics.
Census of retailing: one of the main conclusions of a report on "Retailing and Small Shops", published by The Scottish Office's Central Research Unit in 1997, was that a National or Scottish Census of Retailing should be reintroduced by the government. The census was abolished post-1971 and replaced by the Retail Inquiry that is undertaken by the ONS. Whilst retailers would have concern about additional burdens in terms of complying with information requirements of such a census, there is a need for more statistical information about Scottish retailing, for example, the numbers of retail outlets, shop space occupied, type of retail outlets, and so on. One option, instead of reintroducing the Retailing Census, is to review the effectiveness of the current ONS statistics on retailing in Scotland and consider where this can be improved by the collation of new statistics.
Retail Price Index: the publication of a Retail Price Index (RPI) for Scotland would provide the Scottish Parliament with a new tool in measuring the performance of inflation in Scotland as well as giving a useful comparison with comparable figures at the UK level produced by the ONS.

In detailing the above research examples, the Pathfinder Group are also aware of the future launch of the Scottish Retail Consortium in April of this year. Part of this new forum's function will be to provide additional research information on the Scottish retail market place.