Scotland’s retail industry is undergoing seismic change. Structural, economic and regulatory forces are at play, driven by changes in shopping habits, meek levels of real pay growth, and burgeoning costs.
The retail market is fiercely competitive, with consumers benefitting from falling shop prices, greater transparency over pricing, plus quality and service. All this is testing every retailer, and despite remaining the country’s largest private sector employer official data shows 3,500 fewer retail jobs in Scotland over the past year.
The ability to invest is being held back as regulatory costs have mushroomedDavid Lonsdale
These changes require substantial outlays from retailers on digital infrastructure, with internet shopping expanding by double figures each year and with £1 in every £5 spent on non-food shopping now taking place online. It also requires a more highly skilled workforce and revamped logistics and distribution capability. This is hugely challenging against a backdrop in which demand is weak, shop prices are falling and tax and regulatory costs keep ratcheting up.
It is in this context that Scotland’s retailers look to the Chancellor in his Budget on 16 March to prioritise measures which will help consumer spending take wing, as well as action to bear down on costs and assist the industry to invest.
Household finances are improving but our Scottish sales data points to a continued weakness in retail spending. People are still paying down debt and only in the past two years have earnings started to surpass inflation. The government needs to think carefully about the impact of policy decisions which could put further strain on disposable incomes.
Retail accounts for 14 per cent of commercial investment and a healthy, thriving industry is good for jobs, for our town centres and for tax revenues. It also provides routes to market elsewhere in the UK and overseas for domestic producers. But that ability to invest is being held back as regulatory costs have mushroomed. The business rates escalator is ratcheted up each year, and is now the highest commercial property tax in the EU. It’s little wonder one in ten retail premises is empty, leaving “gap-toothed” high streets with vacant units.
In April, the new national living wage comes into effect. For shopkeepers, wages and rates bills are among the biggest outgoings. When you place the living wage and ever-rising business rates alongside the soon-to-be introduced apprenticeship levy, it has been estimated Scotland’s retailers will need to find an extra £1 billion over the next four years.
How retailers manage the impact of all these policies will determine where we shop, how we shop and indeed how many people work in our shops for years to come.
The Chancellor should phase in the apprenticeship levy, and set out a firm timetable for reducing business rates to help firms cope. More regular revaluations would also make rates more responsive to changes in the economy. This would be good news for investment, for our town centres and for jobs.
• David Lonsdale is director of the Scottish Retail Consortium