British Retail

Lord Harrington of Watford Excerpts

Wednesday 6th March 2013 Westminster Hall

[Richard Harrington (Watford) (Con)]

It is a pleasure to introduce this debate under your chairmanship, Sir Alan.

I chose to call a debate on retail for two purposes. From a parochial point of view, retail is a significant employer in Watford and a significant contributor to the economy. Also, the press that retail receives nationally, with glamorous Sky reporters standing in front of shops such as Blockbuster and HMV that are shutting down, gives a false impression of the sector’s overall prosperity and contribution to the economy.

Members of Parliament and the public at large should realise that retail is a big sector of the economy, and contributes in excess of 5% of GDP. Although the Government are trying to encourage growth in the manufacturing sector, the retail sector contributes more added value to the economy.

Retail is able to offer increasingly sophisticated employment. The old impression that people work in shops because they cannot do anything else is no longer relevant. Retail jobs are highly trained, and there are many apprentices. Many people, including me, started their business career in the retail sector. Following my law degree, I was a graduate trainee at John Lewis, which gave me ideas for developing my life both in business and more generally. It all went well until I became interested in politics.

Retail contributes employment and taxation not only through pay-as-you-earn and corporation tax but through business rates. The sector is a big contributor to urban regeneration. People do not think of retail as a factor in urban regeneration, but they only have to look at places such as Westfield on the Olympic site. When I went to work in Watford’s Harlequin centre, which is now known as Intu, in 1980, it was the poorest part of town, notwithstanding the efforts of John Lewis and other old retailers that had been there for 50 years, 100 years or more. The Harlequin centre was certainly not the sort of place people would want to go unless they had to go shopping.

[Mr Lee Scott (Ilford North) (Con)]

I congratulate my hon. Friend on securing the debate. Does he agree that the vibrancy of high streets that are under pressure from some of the multiples is also down to niche independents? Allowing niche independents to thrive and grow is vital.

[Richard Harrington]

My hon. Friend makes a good point, and I would expect nothing less. Independents are very much part of the story, and they are necessary, but large companies developing real estate and operating shops create massive employment, massive taxation and a massive contribution to urban regeneration, although that takes nothing from the validity of my hon. Friend’s point.

Things have changed. Everyone knows that in the past, apart from the high street, most towns had parades of shops. The developers of the masses of residential areas across London and the home counties from the time trains opened up those places would, for every few hundred houses, build a parade of shops that included a fruiterer, a greengrocer, a fishmonger, a general grocer and so on. Various things in the cycle, certainly in my lifetime, have kept those parades going.

I remember when the supermarkets started to take hold and some of those shops became empty and were replaced by banks, which were opening chains of local branches. It is hard to imagine now, but there was a big fight for which bank could get there first. Then there were estate agents. Again, if there was a spare unit, people would open an estate agency. There always seemed to be something, but that is not the case now.

With the internet there is less demand for individual units. There is plenty of supply, because, in many cases, the units were built before the second world war, if not before the first world war.

[Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Gentleman on securing the debate.

One of the changes is that massive supermarkets are also becoming dominant players in the convenience sector and are appearing in every community, rather than simply in out of town or city centre locations. Has the hon. Gentleman reflected on the health, or otherwise, of that for British retail and market diversity in those communities?

[Richard Harrington]

Yes, I have reflected on that fundamental point. Many hon. Members want to contribute, so I cannot address all aspects of retail. Suffice it to say that although in the past shops appeared, on the surface, to give people much greater choice, if we add the internet and other channels, people have great choice now. I do not completely agree with the hon. Gentleman, but his point is valid.

Many people of my father’s generation came out of the Army with a small amount of money and could never dream of opening a big factory or going into a big form of business, but they were able to use their money to open a market stall, as my father did in Yorkshire. Unfortunately, the Marks and Spencer dream of going from a penny bazaar to a major multinational did not happen in my family, but we ended up with two market stalls. My father’s business doubled in size over 30 years from one market stall to two.

The serious point is that in those days the barriers to entry were low and could be met by people with small savings and an idea. For almost any item of clothing, household goods, luggage or anything that people could think of, there was a place for a niche shop. It is easy to say, “All that has changed. It is now in the hands of Tesco and the other big companies.” I do not quite buy that, although, yes, in the start-up system it is generally true that not many people, for a number of reasons, are opening shops; they are not saying, “I want to sell shoes, so I am going to take a store in Watford high street.”

Even if someone is acceptable as a tenant, they probably cannot afford to pay the rent or the rates. Compared with my father’s generation, there probably is not the same demand for the high street, but that does not include internet start-ups. There are many such examples in my constituency, including the sister of Jenny Reed, who works in my office. Hayley Reed had no business experience, but she set up a shop in her spare room. If I might ruthlessly plug the shop, it is called ProperPresent.com, and is similar to what previous generations would have created in bricks and mortar. The retail sector, albeit differently, still allows for start-ups and for choices that fit people’s modern lifestyle.

[Mr Robin Walker (Worcester) (Con)]

I congratulate my hon. Friend on securing this hugely important debate, and I support his point. The coming changes in technology represent enormous challenges and opportunities for retail. Does he agree, therefore, that it is important that the Government take a long, hard look at the changes taking place in the sector and the policies that we need to implement to maximise employment opportunities? Does he welcome the news that the Select Committee on Business, Innovation and Skills has recently agreed to launch an inquiry into the changes that are taking place in the retail sector?

[Richard Harrington]

I more than welcome the inquiry. It shows that retailing is being treated seriously as an industry in its own right, rather than as just a mechanical part of the distribution chain. It contributes as much as manufacturing and other sectors. I warmly endorse what my hon. Friend says.

The ultimate answer to the question of choice in retail is whether the public are given a better service today. I argue that they certainly are. When I worked at Trewins, which was John Lewis in 1980, we shut on Saturday at lunch time, on Sunday and on Monday. Now the equivalent—the Intu shopping centre, formerly known as the Harlequin, in Watford—is, for better or for worse, open every day. People have the choice to shop all the hours they want. Similarly, from the small independent point of view, although I agree that the butcher, the baker and the candlestick maker are not there, the internet gives the public a huge amount of choice and very good service. Although the developments in the retail trade are muted in people’s minds by the shops, chains and household names that have closed down, the public are given a much better service.

We need only look at the effect on the economy. Again, to be parochial, the main shopping centre in Watford replaced a sprawling mix of businesses, including the smallest abattoir left in England, an old Sainsbury’s branch and lots of different warehouses. For the past 20 years, the main shopping centre has had 147 stores, but the important thing is that it directly employs more than 4,000 people, plus the distribution chain and all the businesses in it. The shopping centre contributes about £14.5 million in business rates, which is a tremendous amount. It has about 750,000 square feet of infrastructure, and has upgraded that whole part of town.

I am not saying that there have not been consequences. It would be wrong of me to say that things are all one-way and all about prosperity; I am aware of the effect that shopping centres have on other things, but they are economic powerhouses in their own right. By any standards, the shopping centre is a big business, employs a lot of people and contributes a lot to the economy.

Similarly, nationally, companies such as Westfield have come from abroad to invest significant amounts of money in what it sounds trendier to call “urban regeneration” than “retail”. The east end, White City and other places throughout the country are major, long-term investment projects. Westfield has invested about £3.5 billion since it came to the UK in 2000, and created 25,000 jobs. If it were another kind of business and that sort of growth were announced over 10 years, there would be headlines all over the place.

Although I accept that retail is not the total answer to our economic problems, we must accept what it does for employment, infrastructure and areas where the rest of the private sector and the public sector have failed completely. It is a significant and serious business, and its problems must be considered by Government. I am delighted to see the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon) in the Chamber; I know that he is experienced in this subject. Government must turn their mind to retail, because it is such a significant employer and a significant contributor to the national economy.

[Jessica Lee (Erewash) (Con)]

I thank my hon. Friend for giving way and congratulate him on securing the debate. The issue of employment has been raised, but does he agree that apprenticeships are another of retail’s valuable contributions? Sectors such as retail and catering offer important apprenticeships. They certainly do in Erewash. I recently visited Anderson’s on the High street, an independent coffee shop and caterers offering apprenticeships. Next week is national apprenticeship week. It is another important aspect of this debate that we must not miss.

[Richard Harrington]

I very much endorse what my hon. Friend says. As I said, it is easy to think of retail as “Open All Hours” with Ronnie Barker or Young Mr Grace appearing and saying “You’ve all done very well”, but shops invest a lot of money in training staff, and they know that a lot of their capital assets lie in the skills of those staff. Retail used to be minimum-wage drudge work, but it is fair to say, despite my lack of success in the John Lewis hierarchy, that now the management teams in some retail firms are comparable with almost anything else in this country, and the work starts from apprenticeship level. I totally agree.

However, there are some industry issues that we need to consider, and I will speak of them as I perceive them; I am not in any way a spokesperson for the industry, but I have tried to observe it and take all things into consideration. Business rates are a significant issue. In many cases, they are a more important overhead than rent. I believe that the industry contributes just short of £24 billion a year in business rates. That is a direct contribution to the local and national economy, and it is a serious amount.

The way that rates are linked to the retail prices index means that average shop rates have more or less doubled in the past 20 years. As most other valuations in the Government system these days are being linked to the consumer prices index rather than the RPI, that seems a little unfair. The industry’s greatest disappointment, which seems to have merit, is that there was talk of a fundamental revaluation that would remove many of the anomalies in the system, but it has now been postponed. It seems to me that there is a legitimate argument that in the interim, until the system is properly reviewed, rises should be limited by linking rates to CPI instead of RPI.

[Gloria De Piero (Ashfield) (Lab)]

I agree that business rates are crucial. I also think that we cannot divorce this debate from the general economic climate. Towards the end of last year, Ashfield lost its two Jonathan James shops. One of them, in Eastwood, has now been replaced by the Money Shop, a payday lender. Does the hon. Gentleman agree that what is crucial to this debate and to what our high streets look like is growth in the economy, not in payday loan companies?

[Richard Harrington]

I do not think that point is relevant in this particular case. As far as retailing is concerned, a payday loan company, provided that it is legal and proper in all that it carries out—I accept that there is a different issue—employs people in much the same way as a shop with the same number of staff. That is not to take away from the hon. Lady’s point, but from a retail perspective, it is important to realise that like traditional retailers, all those companies employ a lot of people and in that respect contribute a lot to the local economy, which is the subject of the debate.

Rates are an important issue to which the Government must turn their thoughts. The planning side of things is also important. The national planning framework, which I thought was absolutely excellent, gives a lot of emphasis to town centres and their development, but there seems to be no compliance mechanism. It must be remembered that more than 80% of planning applications for retail currently being considered are for out of town rather than in town centres. Given that it is generally agreed that the regeneration of town centres is a good thing, it would be good to have some form of compliance for ensuring that local authorities emphasise it.

We must accept that because there are now fewer functions for retail premises, local parades do not have the “get out of jail free” card that they used to have when new industries and uses would by and large appear. However one looks at high street retailing, there is less demand because of the internet, which has also brought many benefits. The Government’s current policies on relaxing planning rules to allow some units to return to residential use are a good thing and an acceptance of reality. Although one would hope that it was not the case and that some units could be live/work—for residential use at the same time as retail—the fact is that there are a lot of places where, if there is a convenience store, it is very good. I commend the convenience store sector for how it has adapted, notwithstanding the point made by the hon. Member for Chesterfield (Toby Perkins) about the big supermarkets in all their guises, from hypermarkets to convenience stores, doing their best to dominate the market.

There is still a strong and good independent sector in this country, and long may it continue, but that sector will not fill up all the parades of shops and tertiary units, which were built with very good reason. In the case of many of our parents or grandparents—for some hon. Members, their great-grandparents—the husband would be at work and the wife would walk to the shops every day with the baby in the pram and the shopping trolley. The shops had to be nearby, because there was often no public transport and people certainly did not have a car. Most of us accept that has changed, and that planning laws have to change in respect of empty properties; we need both private and social accommodation and some of it could come from surplus retail space.

[Paul Uppal (Wolverhampton South West) (Con)]

I declare an interest. Like my hon. Friend, I worked in the sector for about 20 years, either as a landlord or a tenant, and I echo his sentiments. The vital issue with retail space, in particular in city centres, is utilising the upper parts: residential conversion is crucial. For far too long, we have been obsessed with the ground-floor unit, almost dismissing the upper part. In continental Europe or other areas, people utilise the upstairs, which provides an alternative use.

[Richard Harrington]

I wholly endorse what my hon. Friend said.

I finish with two suggestions that might be unpopular with the large commercial sector, the shopping centre providers and commercial landlords. I mentioned many good points about companies such as Westfield and the strong regeneration sector; retail happens to be their product, but they are really redeveloping important parts of our landscape. However, it is almost impossible for independent retailers to get into such units. I am not talking about community efforts, an area for a market with local craftsmen and that type of thing; I am talking about people who are running proper businesses, be they start-ups or just one unit. They cannot get into the shopping centres because of the commercial value of a rent paid by an individual operator to the shareholders, many of which, ultimately, are the pension funds that look after all our pensions; those capital values are very much dependent on having big names in the units. As part of planning, the Government should look at the possibility of allocating to independent retailers a small number of units paying market rent; I am not arguing for any form of subsidy, except the sort that people get to move in, such as fitting out or a rent holiday. A number of shops should be allocated to companies with only one or two stores. That is the only way. It could be part of a general planning permission. I am not specifying half the units, or a quarter, but somehow it has to be realised in the retail sector that small companies and start-ups with capital—properly capitalised, I am not talking about ones that cannot compete from a capital point of view—should be allowed into those main retail centres.

My second suggestion will probably make me extremely unpopular, in particular with my hon. Friend the Member for Wolverhampton South West (Paul Uppal). Although the Government cannot do much about the role of small commercial landlords, those landlords are absolutely deluded about their ability to get the rents they ask. Their mentality is to ask for yesterday’s rent; because a shop was rented out 10 years ago at £40,000, they will keep it empty for three, four or five years under the delusion that they will get the same rent, and notwithstanding the fact that they are paying empty property rates, which I point out to the Minister it is right for them to be doing. If the vast array of small commercial landlords are listening to the debate or reading Hansard tomorrow, which I accept is completely unlikely, I have a suggestion that might help, although it is not the panacea for everything. As MPs, local councillors and people involved in the community, we could persuade small operators to come into some of those empty shops, but landlords asking for a rent that they once got 10 years ago makes it almost impossible.

In summary, retail should be recognised as a modern, vibrant sector, something that this country is good at and which contributes a lot to our national economy. It has to be accepted by Government that retail is up there with manufacturing and all the other businesses that the Government are promoting to help the country, and not, as used to be thought, something that just sucks in imports and is part of the distribution sector.

[Several hon. Members]

rose—

--- Later in debate ---

[Sir Alan Meale (in the Chair)]

Mr Harrington, would you like a few seconds?

[Richard Harrington]

No, thank you.

[Sir Alan Meale (in the Chair)]

I am grateful.