Retail: A shot in the arm or a shot in the foot?

27 Nov 2020

Paul Barnes is a Partner at DRD and is Chief Executive of the Association of International Retail.

Paul, alongside flagship retailers, airports and hotels, has been leading the AIR’s campaign to review the government’s planned change to tax-free shopping in the UK at the end of this year.

High Streets Prepare to Raise their Shutters for Christmas Shoppers

As Britain’s high streets prepare to raise their shutters on December 2nd, the key to their future success is very simple. They need to attract visitors to come back and spend their money again.

Which makes the future of high streets look a bit bleak. Because the post-lockdown tiers are meant to keep people at home to allow for the 5-day stay-at-home Christmas bonanza.  And the probable post-Christmas lockdown threat will put a break on any momentum built-up over Christmas.

City centre shops, pubs and restaurants struggled to survive after the first lockdown was lifted. People’s fear of the safety of office working, public transport and possible crowds turned many centres into ghost towns.

With most of the country in tiers 2 and 3, bars and restaurants will remain closed unless you are willing to brave the winter weather to sit outside. Not a very attractive proposition, and not one worth risking your health for.

Until those vaccines get here, attracting visitors to town and city centres will be a hard task.

What can Government do to help?

Firstly, with income decimated, it can help meet major cost. Let’s hope those vaccines arrive before the end of March. Because high street businesses face a triple whammy of costs on April 1st. The furlough scheme comes to an end. The business rates holiday for retail, leisure and hospitality is over on March 31st. And the first quarter rents kick in for companies that haven’t paid rents for a year, protected by the soon to end moratorium on landlords seeking evictions.

This wave of cost may well overwhelm otherwise viable businesses that have struggled through a year with little or no trading and have used up all their cash reserves and credit facilities. The Seventh Cavalry vaccine may arrive just too late to save the last stand of many high street businesses.

But the key to long term survival is, as we said at the start, visitors. Government needs to do all it can to help town and city centres attract visitors to spend their money.

Which is why the Chancellor’s decision to end tax-free shopping for international visitors on January 1st is so perverse. These high spending visitors are very price sensitive and can choose to spend their money wherever they want. With the UK set to be the only European country not to offer tax-free shopping, the Chancellor has handed up £3 billion of shopping to France and Italy together with cash they would have spent on hotels, restaurants and a host of other attractions.

France has just lowered its minimum spend level and French media are expressing bemusement but pleasant surprise at what they see as an own goal by the UK government.

This week, the Chancellor announced that supporting and creating jobs was his number one priority, he will, next week, lay the Order which industry believes will needlessly cost 40,000 retail and manufacturing jobs early next year.

But to attract domestic visitors to town centres the key is confidence and experience.  Many are not confident to travel out and spend. Hopefully, the vaccine will help that. But even before COVID-19 lockdowns, many town centres were struggling to create an experience that would attract people away from the comfort of Amazon shopping. Now, with the likelihood of more units boarded up and business resources focused on just surviving, creating that attractive atmosphere is going to be even more difficult.

So, to kickstart these town centres, why doesn’t the Government go that extra mile and manage the logistics of positioning COVID-19 vaccination centres in town centres, not soulless sports halls in distant suburbs. With a little creative thinking and a lot of political will the vaccine could be a shot in the arm for the nation’s health and the nations high streets.