Retail Sector

Rebecca Long Bailey Excerpts

Wednesday 6th June 2018 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I beg to move,

That this House notes that 21,000 jobs were lost in the retail sector in the first three months of 2018 due to store closures and company administrations, with more announced since; further notes that the retail sector is one of the largest employers in the UK and contributed £94.6 billion to the UK economy in 2016; regrets that the Government’s industrial strategy contains only three references to the retail sector; further regrets that the Government has presided over the biggest squeeze in wage growth in a generation, is failing to provide certainty around future trading arrangements after Brexit and has failed to ensure a fair business rates system; and calls on the Government to urgently publish a strategy for the retail sector.

[Melanie Onn (Great Grimsby) (Lab)]

Will the shadow Minister give way?

[Rebecca Long Bailey]

I will.

[Melanie Onn]

I thank the shadow Minister. The point on business rates is one that small businesses in my constituency regularly raise with me as something that not only curtails their opportunity to grow, but impedes their security for the immediate future. Does she think that the Government should do something about this immediately?

[Rebecca Long Bailey]

I thank my hon. Friend for her intervention and I completely agree. I will come on to business rates and the action that I would suggest that the Government take shortly.

[Kate Green (Stretford and Urmston) (Lab)]

I welcome this debate. My hon. Friend may be aware of research by Revo and intu shopping centres that looked at the UK’s appeal to international investors in the retail sector. They highlighted that business rates were the single biggest inhibitor of new international inward investment. Does she agree that that is a further reason why, in a post-Brexit environment, it will be all the more important that we review our business rate regime?

[Rebecca Long Bailey]

Yes, and I thank my hon. Friend for her intervention—I completely agree. Before I start the substantive part of my comments, it is important to note that the commercial retail sector has faced significant strain over recent years, affecting landlords and tenants alike. That is not least due to the business rates system. A lot of major property investors—for example, St Modwen—have divested themselves of their retail arms, because they are simply not profitable anymore, not only for tenants but for landlords, so it is critical that the business rates question is addressed urgently.

[Rachael Maskell (York Central) (Lab/Co-op)]

I really appreciate my hon. Friend giving way on such an important issue as business rates. Can she fathom why the Government, when they announced 15 months ago that they were going to review business rates, have not done anything to progress this issue?

[Rebecca Long Bailey]

I completely agree, and now I will begin the substantive part of my comments, if I may.

The retail sector is undergoing a period of transformative change that will impact millions of workers across the UK. As has been played out in the press over the last few months, the sector is experiencing huge challenges, with almost silence from the Government, sadly. We have seen an onslaught of store changes; big-name chains that have been the stalwart of our town centres and high streets for years have collapsed and gone into administration.

[Alex Cunningham (Stockton North) (Lab)]

My home town of Stockton won the rising star award in the British high street awards, sponsored, ironically, by Marks & Spencer, which is now abandoning our town after taking profits from our people for over a century. We believe however that our town has got a future, but does my hon. Friend agree that firms like Marks & Spencer should consider the future prospects of towns properly, and show a bit of loyalty to their loyal customers instead of taking their profits and running off to out-of-town shopping centres?

[Rebecca Long Bailey]

I agree with my hon. Friend, but the issue is twofold. It is not simply about imposing obligations on businesses; the Government have a duty to provide a fertile business environment in which large and small businesses can grow and provide a positive contribution to their communities.

Toys R Us and Maplin collapsed on the same day in February, putting 5,500 jobs at risk in one day. Card Factory, Moss Bros, Laura Ashley, Carpetright and Mothercare have all issued profit warnings this year, and some have entered into company voluntary arrangements, with hundreds of store closures expected. In April we heard news of a possible merger between Asda and Sainsbury’s; a couple of weeks ago the one and only Marks & Spencer announced it will be closing 14 branches this year and 100 stores by 2022; and just this week there were reports that House of Fraser is on the brink of collapse and attempting to negotiate a CVA. That list is not exhaustive but it clearly demonstrates the scale of the challenge faced by the industry.

I am sure many Members across the House will at one point or another have worked in the retail sector; it is many people’s first experience of the working world, as it was for me. My first job was as an assistant at a pawn shop. I must clarify that it was a pawn, not a porn, shop—at a meeting a few years ago I said I had worked in a pawn shop and one lady in the audience, thinking it was a porn shop, was horrified. That first job was important because it taught me valuable skills and allowed me to gain some financial independence, but for millions of people retail is not just a Saturday job; it is their livelihood. It is therefore vital that the Government take the challenges facing the sector seriously and provide support to it.

The industry is one of the largest sectors in the UK, contributing £94.6 billion to the UK economy in 2016. However, staggeringly, its productivity is less than four-fifths that of the national average, and this low productivity drags down the productivity of the UK, a point made recently by the Institute for Public Policy Research. And, sadly, with low productivity comes low pay. We should not fall into the trap of thinking that all people in retail are low paid and in economic hardship—the student doing a summer job would certainly not be in that position—but there is a widespread problem in the retail sector, and according to the Joseph Rowntree Foundation there are around 1.5 million people in low pay in retail, with a higher proportion of households facing economic hardship than in working households generally.

Because retail is such a large sector, the industry now accounts for just under one third of the total number of people in low pay in the UK. The economic importance of the sector should therefore not be understated, and the Government should be doing more to support it. I am sure the Secretary of State will listen to my suggestions today, but I hope that when he speaks later he staggers me with a comprehensive plan to support the sector.

I will start my kind suggestions to the Secretary of State by saying that one of the most glaring omissions from the industrial strategy White Paper was an appreciation that an industrial strategy is not just about labs or hard-hats, but is also about low productivity service sectors, where the majority of people work. Investing in and talking about headline-grabbing hi-tech industries is of course critical, but this alone does not constitute an industrial strategy. Despite the Government’s intention to improve productivity, sadly the industrial strategy Green Paper mentioned retail only twice in 132 pages, and the White Paper only three times in 256 pages, with vague references to working

“closely with sectors such as hospitality, retail and tourism on each of the foundations of productivity”,

but with very little detail to match.

Many challenges are facing the sector, and I will touch on just a few key areas today. Retail firms have since the economic crisis come under increasing pressure. Things have got so bad that in the first three months of 2018 some 21,000 jobs in the retail sector were at risk. The drive towards online retailing, and indeed bad weather, have of course had a significant impact on our spending habits, but one reason for this that is rarely mentioned is a clear failure to sustain wage growth. Wages are not expected to return to pre-crash levels until at least 2022, and household debt has spiralled to unprecedented levels. This clearly has a significant impact on what people spend their money on, with many, sadly, relying on credit cards just to get by each week, never mind buy luxury items.

The Office for National Statistics has stated that consumer spending is worth around 60% of GDP, and it has been one of the driving forces behind the recovery of the UK economy. Interestingly, however, trends are showing that British consumers have stopped taking on more debt, and Credit Suisse recently told clients that it believes this trend will continue, which would damage one of the key drivers of GDP growth.

Another issue is the increasingly hostile business environment many retailers are now facing. But it is not just businesses that will lose out: communities are having their hearts ripped out and high street after high street is becoming littered with empty shops, charity shops and bookmakers.

[Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)]

Does my hon. Friend agree that another issue for high streets is that the banks have been leaving? Many retailers tell me that having an ATM beside their business makes all the difference to their takings. Does my hon. Friend think that the Government, as the majority shareholder in RBS, should step up to the mark and take action on branch closures?

[Rebecca Long Bailey]

I completely agree, and interestingly historically RBS had a last-man-standing agreement to be the last bank on many high streets, and that does not seem to have been enforced by the Government, so I call on the Secretary of State to look at this. My hon. Friend makes a pertinent point, and it is not just bank closures that are damaging the high street infrastructure; the closure of post offices is also a significant issue.

These issues are exacerbated even further by years of under-investment in many of our regions and nations. If the Government are not prepared to provide the tools businesses and communities need to provide a fertile environment for local businesses, how can we expect these fortunes to change? A worrying report by David Jinks called “The Death of the High Street” argues that, unless we see radical change within 13 years, the impact of online shopping and home deliveries will “destroy” over half of today’s town centre stores. His report also argues that between 2020 and 2030 half of the UK’s existing shop premises will disappear; 100,000 stores will close, leaving just 120,000 shops on our high streets.

Britain’s high streets are fading away because new shops are not opening fast enough to replace those that close. The Government attempted to deal with this issue through the Portas review, which advised that town teams be created to assist towns undergoing significant strain, but official funding for town teams ended on 1 April 2015.

The Government’s recent announcement to develop local industrial strategies was a welcome step forward. However, think-tank Localis stated last month that there was a capacity gap in Whitehall for developing these, leading to concern that a pipeline of local industrial strategies will face significant delays. I will be grateful if the Secretary of State provides clarity on this and confirms what resources are available to local enterprise partnerships and local authorities in taking these strategies forward.

EU funding has also been a significant supporting factor to many areas in decline; it has always been strongly targeted at less prosperous regions. The Government are currently failing to provide any certainty to business over the UK’s future trading relationship with the EU, the extent of regulatory alignment, or access to labour, but they have also failed to provide clarity on one key tool that previously helped spur the regeneration of many towns and high streets that had been starved of investment: EU structural funds. We know that the Government are planning a new fund to replace them when we leave the EU, but so far there has been no commitment on the scale of that fund, on how it will be administered or which investment it will be directed at. Will the Secretary of State give us more information on that today?

When we add to this massive uncertainty the significant cuts that local authorities have faced in recent years, we have a recipe for complete high street annihilation. That environment, and the lack of support that many businesses face, was made very clear in the shambolic handling of last year’s business rates revaluation, in which many businesses faced an unmanageable overnight hike in their rates. I am pleased that the Government have brought forward CPI indexation, but I urge them to go further by immediately introducing statutory annual revaluations, guaranteeing a fair and transparent appeals process and excluding new investment in plant and machinery from future business rates valuations. They must urgently evaluate and reform the whole system to make it fit for purpose and capable of addressing the changes that we are seeing in the sector.

Businesses were failed not only in regard to business rates; we also saw a failure to handle the scourge of late payments, which can lead to businesses struggling to cover costs or to invest, and sometimes going bust. We saw the effects of this recently in the collapse of Carillion, when huge swathes of supply chain companies faced a cliff edge due to late payments, often of up to 120 days. Many of those businesses will never see their money again. I urge the Government to adopt Labour’s position by ensuring that anyone bidding for a Government contract is mandated to pay their own suppliers within 30 days and by developing a robust system of binding arbitration and fines for persistent late payers.

As the retail sector struggles, how to boost productivity remains a major challenge. There are at least two schools of thought on this. The first concentrates on improving technology and ultimately automating many jobs. That involves automating warehousing, sales, deliveries and so on, and job losses could result. That was the view of Deloitte, which suggested that 60% of jobs could be lost. The jobs that would remain would require a range of skills such as operating advanced machinery, software and robotics. They are likely to be higher paid and involve higher skills.

The second model involves redesigning how business operates to boost productivity growth. Research from the Joseph Rowntree Foundation has shown that many capable employees in the retail sector are reluctant to move up the rungs of the management ladder, as that involves greater responsibilities without much of an increase in pay. Jobs need to be redesigned so that an individual performs a range of different tasks that straddle the staff-management boundary and pay is increased. In that way, talented individuals could be engaged in the management side, raising performance and productivity. Either of those models—or a hybrid of the two, whichever the Government chose to take forward—would require dedicated Government investment in skills training for employees, to enable them to navigate the changes.

[Rachel Maclean (Redditch) (Con)]

I agree with a lot of the challenges that the hon. Lady is outlining. My son works in the retail sector, and he has recently had a promotion to management level. He is only 18, so I give full credit to Zara for encouraging his talents. Does she agree, however, that the Government’s approach in bringing in T-levels has played an important part in tackling those challenges and that they are working with industrial partners to bring those changes forward?

[Rebecca Long Bailey]

I thank the hon. Lady for her intervention. Please will she congratulate her son on his recent promotion? Some of the Government’s commitments are welcome, including the national retraining scheme and the T-levels that she has just mentioned, but sadly they are meaningless in the context of the cuts that we have faced over recent years. For example, £64 million was announced for the national retraining scheme, but £1.15 billion was cut from the adult skills budget between 2010 and 2015. I hope that the Secretary of State will put forward proposals today to increase investment in skills, because if we do not invest in skills, we will not be able to take our employees on the journey that they need to make.

[Stephen Kerr (Stirling) (Con)]

The hon. Lady has been speaking for some time now, giving her analysis and talking about what the Government should do, but in her position as the shadow Secretary of State for Business, does she have any pearls of wisdom to give to retailers on what they should do to attract people into their retail outlets?

[Rebecca Long Bailey]

I thank the hon. Gentleman for his comments, and I do apologise for speaking for some time. If he listens, perhaps he will get some of those pearls of wisdom in due course. The point I am making is that the Government need to recognise that businesses need support. Businesses themselves need to innovate and to ensure that they drive productivity increases in-house, but the Government need to show dedication to providing the tools required to increase fertility in the business environment. Frankly, that is not happening at the moment.

An essential element in improving retail productivity is innovation, which is the best means of raising wages and boosting the competitiveness of British industry. Innovation is required by businesses themselves, as I have just pointed out to the hon. Gentleman, but the Government must commit more money to research and development spending. They referred in their White Paper to increasing that spending to 2.4% of GDP, which is welcome, but if they are really going to support low productivity sectors such as retail and ensure that we can compete on the world stage, they need to increase it to at least 3%, as other world leaders such as South Korea and Japan have done.

I also welcome the Government’s recent establishment of a Retail Sector Council, but I have heard very little information about it since its establishment. Will the Secretary of State update the House on how often the council has met so far and whether there have been any discussions with the Government about what role the Government can play in boosting innovation in the sector? Labour has pledged to establish a catapult centre in relation to retail, to lead on technological, managerial and employee innovation. This is important because the Fabian Society recently reported that increasing managerial innovation and sharing best practice in retail can drive productivity by improving quality, as well as sale and business growth, and I call on the Government to examine Labour’s catapult centre proposals.

Infrastructure investment is also a critical part of boosting productivity in the sector. We must recognise that the future of our high streets depends on quality infrastructure, transport links, parking amenities and high-speed broadband, as well as on the local anchor institutions that draw people in, such as entertainment and leisure facilities and libraries. The sums announced in the White Paper are sadly negligible, and the TUC has stated that public investment will be increased to just 2.9% of GDP, while the average invested by other leading industrial nations in the OECD is 3.5%. Again, I hope that the Secretary of State has some earth-shattering updates for me today, to restore our faith in what the Economic Justice Commission recently dubbed

“the most regionally unequal country in the whole of Europe”

in terms of investment in our regions.

This brings me to the subject of retail workers, who are vital to the success of the sector. They provide positive customer experiences, and a lack of staff can have an adverse impact on customer service levels. The impact of job losses in retail should therefore not be understated. They have a profound impact on families and communities right across Britain. Retail has traditionally provided entry-level, part-time and flexible jobs for millions across the UK, and it has often provided livelihoods for people who have had to leave declining industries in particular regions.

[Anna McMorrin (Cardiff North) (Lab)]

One of my constituents who is directly affected by this has written to me. Her husband works in retail, and she is appalled by the contract changes being forced on people working in the sector, particularly in Sainsbury’s, where 9,000 long- standing and loyal staff will suffer a significant pay cut of up to £3,000 and see their paid breaks and premium pay scrapped.

[Rebecca Long Bailey]

My hon. Friend makes a vital point, and I shall come on to that shortly.

For some people, working in retail may be their only viable employment option. If a chain goes under and the local store closes or relocates out of the area, they will either have to travel further afield to find work or decide that the journey is simply not cost-effective and be forced to give up work altogether. According to a recent report by the Fabian Society, forecasts for the reduction in employment in the industry suggest that women, who make up the majority of the retail workforce, will sadly be the hardest hit. Workers in the retail sector are vulnerable, as my hon. Friend has just said. When costs need to be cut, workers are usually the first to face the squeeze. Only recently, Sainsbury’s announced sweeping changes to contracts for up to 130,000 staff in stores across the UK.

[Mike Amesbury (Weaver Vale) (Lab)]

Does my hon. Friend agree that the likes of Lidl, which has its senior management at Manor Park in Runcorn, should allow access to the trade union USDAW, because a healthy workforce is a productive workforce?

[Rebecca Long Bailey]

My hon. Friend makes an important point about another key factor in improving productivity. This is about not just improving skill levels, but engaging with the workforce proactively and collaboratively. That is best done through trade union membership and allowing trade unions access to workplaces, so issues on the shop floor can be identified and dealt with quickly, increasing productivity overall.

[Kate Green]

I am a proud USDAW member, and will my hon. Friend join me in commending its “Freedom From Fear” campaign, which seeks to ensure that shop workers are safe at work, travelling to work and leaving work? Too many of them still risk abuse and unpleasantness from customers in the workplace.

[Rebecca Long Bailey]

I thank my hon. Friend and support what she says.

Going back to Sainsbury’s, staff will no longer get paid breaks or higher rates of pay for working on a Sunday under the new terms. Premium rates for night-shift work will be restricted to between midnight and 5 am, and shop floor staff will no longer be able to earn bonuses. It is interesting, however, that the freeze on bonuses is allegedly not likely to impact senior managers or the CEO, who will still receive their bumper bonus packages. There are also worrying reports that staff may be forced to resign if they refuse to sign these new contracts.

Sainsbury’s is not alone in this trend towards fluctuating terms and conditions and insecurity. As USDAW recently reported, a number of clear trends within the sector have led to the workforce feeling increased pressure. Many retailers, seeking to maximise flexibility to deal with fluctuations in customer demand, have introduced flexible, short-hours contracts. As a result, two thirds of USDAW members are regularly working additional hours above those that they are contracted to work, yet they have no guarantee that those hours and the associated income will be available to them in the future. The Bakers, Food and Allied Workers Union reports similar trends, with McDonald’s workers recently striking in a dispute over zero-hours contracts and working conditions.

The Government’s recent response to the Taylor review included a right to request more stable hours, which I referred to when the Secretary of State made his statement on the review, but how does that actually differ from the current position? Without an obligation on the employer to accept, it is meaningless and I urge him to reconsider.

[Justin Tomlinson (North Swindon) (Con)]

Coming from a family of shopkeepers and as a former co-chair of the all-party parliamentary group on retail, I have been listened very carefully, but the shadow Business Secretary has made hardly any mention of Amazon and the onslaught of online trading that has decimated footfall on the high street. The vast majority of her speech has been gibberish to people in retail, with no practical suggestions. I hope that there will be something in her conclusion.

[Rebecca Long Bailey]

With the hon. Gentleman’s knowledge of the sector, I am surprised that he says that, given that business rates are one of the critical issues affecting the high street. Retailers often tell me about the unfairness of businesses such as Amazon receiving skewed business rates valuations due to the size of their operations, so I have dealt with that point.

[Vicky Ford (Chelmsford) (Con)]

I have listened carefully to the hon. Lady, who has accused British retailers of lacking innovation. However, the UK is the third largest e-commerce market in the world. Digital taxation needs to be done on a cross-border basis, so will she join me in congratulating our Chancellor on getting 100 countries across the world to look at implementing a digital tax to allow us to address the level playing field between online and offline?

--- Later in debate ---

[Rebecca Long Bailey]

I have not in any way, shape or form suggested that any business lacks the capacity or drive to innovate—quite the contrary—but they do lack Government support to drive that innovation. As for making tax digital, I ask the hon. Lady to read some of the Library research. While the sentiment is credible, the implementation has been far from it, with numerous businesses reporting problems from start to finish, and that needs to be addressed urgently.

[Rachael Maskell]

Does my hon. Friend recognise that the retail sector suffers from offshore landlords charging exorbitant prices for property, forcing businesses off our high streets?

[Rebecca Long Bailey]

I referred earlier to the commercial retail property market, and the Government must recognise that they have to work collaboratively across the sector and with landlords to enable tenants to secure fair tenancies. In the current climate, many tenancies are unfair to retailers, forcing many of them over the edge. Offshore landlords are a significant issue that we have discussed at length in this Parliament.

That completes my whistle-stop tour of many of the issues the sector faces, and I hope that my comments have been helpful to the Business Secretary. He knows that retail is our largest industrial sector. It has the power not only to transform our economy, but to transform our communities, providing high streets and towns with the services and consumer choice that Britain deserves.

When I was little, my Uncle Ray was a butcher. He was proud of having his own business and the family were proud of him. However, he was not just proud of being an entrepreneur; he was proud of the services that he provided to his local community and to the people who came into his shop every single day. In all my life, I have never seen such profound change in the retail sector, and the alarm bells are ringing loud and clear. How many more Uncle Raymonds are there who want to start their own business but are frightened to do so in the current climate? How many more Uncle Raymonds are out there who are in business but are frightened of going bust due to the hostile environment they face? Once our high street is gone, it will be gone forever, and the basic lifeblood of an entrepreneurial nation from high street grocers and hairdressers all the way through to department stores will be in tatters. I urge the Business Secretary to act now before it is too late.