Independent Retail

Bill Esterson Excerpts

Tuesday 4th February 2014 Westminster Hall

[Bill Esterson (Sefton Central) (Lab)]

The Waitrose website’s myWaitrose section states:

“A free cup of tea or coffee every day as a myWaitrose member.”

It goes on to say:

“Nothing says ‘welcome’ more than a lovely hot cup of tea or coffee, so let us treat you to a free regular tea or coffee every day! You can enjoy one cup a day—to drink in or takeaway. Simply present your myWaitrose card at the till and you won’t be charged a penny.”

In addition, Waitrose offers a free newspaper to customers who spend more than £5. The myWaitrose offer was drawn to my attention by Mr and Mrs Cairns, who run the village newsagent in Formby, which is near a Waitrose. They sell newspapers—or rather, they used to—but a few months ago people could suddenly get a free paper at Waitrose and no longer needed to visit the other shops in the village.

The impact on the newsagent has been disastrous, with a big drop in trade. Not only are newspaper sales down, but so too is their other trade. Neighbouring shops in the village have also lost out as customers of the newsagent no longer call in. As people drink their free coffee at Waitrose, they no longer buy from the range of independent coffee shops. Instead, they wait in long—sometimes very long—queues after doing their supermarket shopping. A similar point was made to me by a Mr Cant, a constituent of my hon. Friend the Member for Corby (Andy Sawford), who also has a Waitrose store near his shop. Colleagues from elsewhere around the country will have similar examples.

The proprietor of Formby Books, Tony Higginson, also tells me about the impact of supermarkets selling books at a much lower price than he can as an independent book shop owner. Speaking of bookshops, it is only fair that I mention Pritchard’s, which has bookshops in Formby and in Crosby. In addition to competition from the supermarkets, the bookshops face competition from online retailers such as Amazon.

We also have a Tesco in Formby, which recently opened a hand car wash which took most of the trade from the car wash on the industrial estate next door. Formby Tyres also operates on that industrial estate. National Tyres and Autocare recently set up nearby and can sell tyres for less than Formby Tyres can buy them. The ability of national chains to buy far more cheaply than small businesses is one of the many challenges facing independent retailers.

[David Simpson (Upper Bann) (DUP)]

I thank the hon. Gentleman for giving way and congratulate him on obtaining this debate. I cannot help but wonder whether he has taken up Waitrose’s offer.

On a more serious note, he will agree that small independent retailers have been the backbone of the United Kingdom’s high streets for many years and that we certainly need to do more for them. We welcome the 2% cap on rates, but we perhaps need to look at other issues. The hon. Gentleman mentioned major supermarkets; perhaps we need to consider the whole planning structure in the UK.

--- Later in debate ---

[Bill Esterson]

I am grateful to the hon. Gentleman for that intervention. I will come to his points later, but I agree with what he says. I hasten to add that I buy my coffee from local independent coffee shops.

The Local Data Company has reported that some 66% of retail outlets in town centres were independent in 2011. To put that into context, however, I should say that since 1980, the number of butchers has fallen from over 40,000 to around 10,000 and the number of fishmongers has fallen from 10,000 to 2,000. Since 2001, we have seen a 31% rise in the number of large chains and supermarkets.

[Jim Shannon (Strangford) (DUP)]

In Northern Ireland, there is a system of small business relief based on a net annual value of £15,000; in the UK mainland, the NAV is £12,000. Does the hon. Gentleman think that it might be a good idea for the Government to consider increasing the NAV cap on the mainland, thereby keeping shops open, rather than closing them, and creating employment, rather than unemployment?

[Bill Esterson]

I will let the Minister answer the hon. Gentleman’s question, but we should be taking the opportunity to look at all sorts of ways of supporting small independent retailers. I will be interested to hear the Minister’s answer.

[Kerry McCarthy (Bristol East) (Lab)]

Is my hon. Friend aware that in Bristol we have something called the Bristol pound, our own currency? More than 600 local shops and businesses now accept the Bristol pound; people can even pay their bus fares and council tax with it. It is an excellent way of supporting independent businesses and encouraging people to spend their Bristol pounds in independent shops, rather than the big stores. Perhaps Liverpool ought to do the same.

[Bill Esterson]

Liverpool no doubt should, but perhaps Sefton can do it first—

[Kerry McCarthy]

Sorry—Merseyside.

[Bill Esterson]

A Merseyside pound would be an even better idea.

I was aware of the Bristol pound. We need to look at innovative ideas that support small independent retailers and the local economy, and what happens in Bristol is an active example of that.

In addition to the buying power that I described earlier, the large chains have various other advantages, including the ability to buy or rent property in advantageous locations and access to enormous amounts of data on the behaviour of shoppers, enabling them to tune their offer towards what consumers want. Since the 1980s, out-of-town shopping centres have become more numerous. They offer large retailers more space than is available in traditional town centre locations, but retail units in such centres are often beyond the financial reach of small independent shops.

[Caroline Dinenage (Gosport) (Con)]

I thank the hon. Gentleman for giving way—he has been incredibly generous with all the interventions this afternoon. Does he agree that it takes some imagination from town centres to attract small businesses into empty units? In my constituency, we have a town team that runs an empty unit scheme, which has helped to fund small businesses to occupy such units. So far, the team has two new businesses in place, with another three coming on stream. Will he join me in welcoming the good work of the town teams up and down the country?

[Bill Esterson]

I have two town teams in my constituency, in Crosby and in Maghull. In Maghull, the town team and the town council were instrumental in opening pop-up shops in an empty unit, which is a similar approach to that described by the hon. Lady. What she says is important.

E-commerce is up from around 2% of sales in 2007 to around 10% in 2013. Internet shopping offers independent retailers the opportunity to compete on a more level playing field with larger retailers, because the cost of overheads is massively reduced, but recognised brands still have an advantage in the online environment. In addition, footfall in town centres is reduced by internet shopping, meaning that independent retailers with a physical presence see less through traffic and fewer potential customers.

Down the road from Formby is Crosby, where Tesco now has two convenience stores in addition to a medium-sized Sainsbury in the village centre. Plans are being made for a further convenience store in College road in Crosby, near the existing Tesco and next to an existing Co-op. Plans for a further convenience store from a national supermarket chain have caused concern among local shopkeepers.

The National Federation of Retail Newsagents represents 16,000 independent news and convenience stores. The NFRN tells me:

“One of the biggest threats to independent news and convenience retailers has been the rapid growth of the supermarket sector.”

Tesco has more than 1,500 small stores, while Sainsbury has 594, according to The Daily Telegraph. Such stores are close to independent retailers and a third of NFRN members have seen a local or metro-style shop open near them in the last year alone. Often, little consideration is given to the impact on existing retail outlets.

Crosby village centre is very run down, like many town centres and high streets around the country, and the Sainsbury store in the village centre is the biggest attraction for visitors. I am optimistic that in the coming years a master plan for Crosby will be produced, but Sainsbury has to be part of that plan. The village desperately needs a complete overhaul, but this needs to be in partnership with the independent retailers.

The No. 1 issue raised by independent retailers is business rates. One retailer from Crosby told me that small businesses need help with bigger rate relief, as they find their rates crippling. Business rates date from a time when retailers had to have a premises and when land and property values were easy to predict. It is a system from another time, for another time—a time before out-of-town shopping centres, dominant national chains and the internet. That is why so many people are calling for a reform of the system to reflect the reality of retailing and business in general.

Amazon can sell books online and pay no tax on the profits generated in this country, and large retailers can set up shop on low-rated land. Local shops need to be where people will go, which generally means high street sites that are often expensive in terms of rent and rates. A first step to be requested is a full revaluation of the rates. Big retailers have many advantages, because of economies of scale, however, so a reform of the rating system is one way in which smaller retailers could be given an advantage to balance their lack of economies of scale.

In the autumn statement, the Government announced business rates support for retailers, and my party is committed to a cut followed by a freeze in business rates. The reality, however, is that small retailers need us all to go further; as the NFRN points out, those are all short-term measures. In some countries, business taxes are collected using a local sales tax. That is only one possible option, although no doubt the Treasury has reasons for rejecting such an approach—it usually does.

How many local shop keepers have good advisers and mentors to help them set up and support them over the years? Who is there to advise independent bookshops on how to make the most of the internet? Where is the support for small shops setting up online trading to help them grow and compete with the big players, despite their not having much cash to invest in a website? It can be done, as I discovered when I visited my constituent Helen Flynn at her shop, Gentle Cosmetics. Helen has both a shop and an internet presence. More retailers could do both, but they need advice and support. National Government have a role to play through the taxation and planning systems. The Government claim that they have made life easier by changes in planning, but whether independent retailers have benefited or high streets have been revived is another matter.

Other issues include parking and bank lending. The out-of-town supermarkets can offer free parking, while many town centres have parking charges. Sefton council offers a free half hour in Crosby and two hours in Formby. Meanwhile, in Maghull, town centre parking is free for half an hour in the privately owned car park in the town centre. In the run-up to Christmas, parking in Sefton’s council-run car parks was free on Thursdays to support late-night opening.

A system of local banks that work closely with their business customers would also help, hence Labour’s proposal for a regional banking system. There is already good practice that could be adopted to address some of the challenges I have mentioned in the debate. In the case of relationship business banking, the Cumberland building society already operates in this way. It is the only building society, so far as I know, to offer a full business banking service.

We face a cost-of-living crisis, and it is no different for independent retailers. Fifty-five per cent. of retailers tell the Association of Convenience Stores that they earn less than the national minimum wage. One of my constituents runs the post offices in Formby and in Crosby, but after paying her staff and her other costs she is left with next to nothing to live on. That story is repeated by many retailers I meet.

The experience of many is that being self-employed is a tough way to try to survive—something I can confirm from personal experience, having run my own business for many years. Government can help by making sure that the economy grows and by recognising the importance of the independent retail sector in our cities, towns and villages. Independent retailers are a key part of our economy and are significant local employers as well. Research by the Association of Convenience Stores suggests that 76% of new retail space given planning consent is located outside town centres. Far more planning consents are given to out-of-town developments than to town centre developments.

This debate is about balance. Yes, the big chains are a big part of shopping, and they need to compete with each other, but small, independent retailers are at the heart of our local communities, providing valuable services to local people and an alternative to the standardised approach of the big chains. The issue is about having a level playing field, and about fairness between large and small businesses. If the big chains wipe out the independents, we will all lose as the identity of our communities will suffer. Competition will be reduced if there is no one to challenge the big players.

The question is, who is on the side of the independent retailers? The big chains can and do look after themselves. In Formby, Crosby, Maghull and Aintree, I am supporting the “Shop Local” campaign and encouraging people to support independent retailers. There is room for both large and small retailers. We need both—our town centres and high streets need both, and so do our communities. However, a fair balance between large and small is not going to happen without intervention by Government. The Government say that they want to support our high streets, and, by implication, our local shops. The time has come for them to make sure that their actions speak louder than their words.

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I congratulate the hon. Member for Sefton Central (Bill Esterson) on securing a debate on this important subject. We certainly recognise the value of the whole of our retail sector to our local and national economies. It employs some 3 million people and contributes around £80 billion to gross value added—almost 6% of our economy. Retail is a significant contributor to self-employment and independent shops are themselves often crucibles of entrepreneurship and innovation.

Research by the Centre for Local Economic Strategies discovered that for every £1 spent locally, around 50p to 70p re-circulates back into the local economy. Local shops provide hundreds of thousands of flexible jobs, particularly for young people and those who juggle other commitments such as child care. They are important hubs of social interaction and can provide vital services to their communities. Many operate in the convenience sector, which has seen real growth—there are now nearly 50,000 convenience stores on the UK mainland. The convenience sector is worth some £35 billion in turnover, adding real social and economic value to communities. More than three quarters of shops in the sector are independent, and almost three quarters of owners, interestingly, are the first generation of their family to own and run a business in the UK.

The economy is now growing for the first time since the recession, and the retail sector is contributing enormously to that. Significantly, it is small stores that are driving much of that growth. Figures from the Office for National Statistics show that small stores are now seeing annual growth of some 8%. Figures released by the British Independent Retailers Association on 31 January show that more than half of independent retailers have had their best average growth since 2010. Nearly two thirds of respondents to BIRA are confident or very confident about the year ahead, and confidence levels are at their highest since 2009.

Our habits as consumers are changing. We are using local shops more—including independents—to top up our supermarket shopping. Independent shops make our high streets, town centres and local shops more diverse and vibrant. Shopping locally has a positive impact on the local economy.

As the hon. Gentleman said, the independent retail sector has faced challenges. It is simultaneously adapting to massive structural challenges driven by changes in consumer lifestyles and preferences, the impact of new and emerging technologies and the constant evolution in technology usage. Modern lifestyles demand a much more flexible and fragmented shopping style that combines physical with online retail, and leisure and convenience shopping. Furthermore, the shift to shopping online is reducing some retailers’ need for large and costly physical stores, as well as creating the need for new and different design roles such as web design. Technology is driving change—tablets and smartphones are making it easier for consumers to buy online and in any location, and new delivery options such as “click and collect” are reducing the problems customers face with home deliveries.

Verdict Research is predicting that as confidence in the economy grows and the population grows, consumer spending will increase. A bi-annual survey of 500 small businesses conducted by Aviva shows that they have a more positive outlook for the first six months of this year, compared with two years ago. Retailers that have a distinctive brand, focus on their customers and are well run are still managing to grow. That is true of independent retailers as well as larger ones, and there are many such examples from around the country. The hon. Gentleman referred to one such small business in his constituency to which he has given his support: Gentle Cosmetics, which has recently opened a store after successfully trading online.

We are seeing increases in local shopping because of consumer demand. Research by the Association of Convenience Stores shows that the fruit and vegetable sector has experienced considerable growth as people move away from doing one big weekly shop, and are instead increasingly using local stores and shopping more often.

I turn now to some of the issues the hon. Gentleman raised. If I cannot cover all of them, I hope he will allow me to write to him in more detail. I will first say what the Government are doing to help independent retailers. As he referred to, the autumn statement announced the biggest business rates support package for 20 years, including capping the retail prices index increase in business rates at 2% next year; doubling the small business rate relief for a further year, to 31 March 2015, which will benefit over half a million small businesses; a business rates discount of £1,000 for smaller retail premises for two years, benefiting around 300,000 shops, pubs and restaurants; a 50% discount for 18 months for new occupants of property that was previously vacant; and allowing businesses to pay their rates bills over 12 months, which will help every firm with their cash flow. In the spring we will publish a discussion paper on options for reform of business rates administration.

We have been working with the Department for Communities and Local Government on the town centre support package, which was launched on 6 December. That package includes a number of initiatives on car parking, a review of business improvement districts, consultations on new permitted development rights and other planning reforms, and a call for evidence on the red tape that could be hindering high street revival.

[Bill Esterson]

Before the Minister moves away from business rates, does he recognise the calls from a significant number of business organisations and individual businesses for a complete overhaul of the business rates systems? Bearing in mind my comment about business rates being from another time, what are his views on that issue?

[Michael Fallon]

I recognise the calls, which I have heard from business organisations such as the British Retail Consortium and the Association of Convenience Stores, whose conference I addressed. They would like a complete overhaul of the system. I have invited them to put their thinking caps on and to come up with some thoughts on longer-term radical reform of the system. Meanwhile, we have supported the Portas pilots with some £2.3 million. We have supported towns with high vacancy rates through the high street innovation fund and we have supported the “Love your local market” campaign.

We were very pleased to support the first ever small business Saturday. Just under half of UK consumers were aware of small business Saturday and nearly £500 million was spent on that day, an average of £33 per person. Almost one person in five said they had spent at least 50% more than they usually would. The day was supported by more than 100 local authorities who waived parking charges, including that in the hon. Gentleman’s constituency, I am delighted to say. Many of my right hon. and hon. Friends visited small businesses on that day, as I did, and saw their commitment and energy. We were proud to help small business Saturday to be a success.

I know that many in the independent sector are concerned about what looks like unfair competition between large and small, between grocery and other subsectors, between online and offline. We believe that consumers are served by open competition between commercial interests, so Government intervention should never be taken lightly, and any action must be evidence-based, proportionate and reasonable. If the hon. Gentleman has evidence of that not being so, it is a matter for the independent competition authorities.

Retail has always been highly competitive. Retailers are swift to change what they sell, where and how they sell it, and how they operate as businesses if that is what they need to do to drive success. However it is not for the Government to intervene in these matters. Changes in technologies and consumer habits are not something the Government or the House can stop or try to reverse, nor should we. The dividing lines between different subsectors of retail—the hon. Gentleman gave some good examples—are blurring as more and more retailers are innovating to serve customers as best they can.

Small retailers are not immune from these commercial pressures. They must adapt and innovate if they are to survive, and the best of our local stores are doing exactly that by trading online with a high street presence, by offering new products and services to customers, and by simply being the best at what they do in terms of customer service—whatever it takes. If a retailer takes market share from another retailer by doing something new or offering something different, that is the nature of the sector. I assure the hon. Gentleman that many small retailers are doing that and thriving as a result. Of course there are things the Government can do to help. Business rates and the planning system are two of the most obvious areas where the Government have a genuine role to try to help cultivate the spirit of enterprise that runs throughout the sector.

I am grateful to the hon. Gentleman for raising these issues this afternoon, which I assure him are central to the commitment of the Government and the Department for Business, Innovation and Skills to the retail strategy, and to our refreshing of that strategy each successive year, working with the British Retail Consortium and the Association of Convenience Stores. I also assure him that the interests of smaller and local retailers are not being squeezed out.