David Lonsdale of the Scottish Retail Consortium sets out what the industry would like to see from the next UK government.
Retail is Scotland’s largest private sector employer, accounting for 245,000 jobs. It’s an exciting, dynamic and diverse industry. Some 13 per cent of new firms are retailers, and one out of every eight pounds of commercial investment comes from the sector.
The industry provides routes to market for indigenous producers, and many Scottish retail brands are market leaders. It keeps down prices for households and millions of Scots benefit from a quality retail experience every day.
Indeed, there has rarely been a more favourable time to be a shopper in terms of the choice, convenience and prices on offer. However, these are testing times for retailers themselves, with conditions the toughest in a decade. Larger stores and retail chains often feel it most, and most of us can name household brands that are no longer on our high streets.
The number of shops has declined by four per cent over the past five years, and retail destinations further away from the largest conurbations are most at risk. This has implications for jobs, for the communities affected, and future tax revenues.
Higher taxes and increased regulation, coupled with weak consumer demand and shifting shopping habits, is making life tough for retailers, exemplified by the fact that business rates have escalated to a two-decade high.
This is upending many retail business models, and countless well-known brands continue to stumble or tumble.
Quality and price of food
The unveiling of the political parties’ general election manifestos over the coming days, and the formation of a new UK government next month provides an opportunity to think afresh about the policy approach. We need these to unleash the potential of the industry to grow, invest and create jobs.
So what do retailers want to see from the next UK government? Breaking the Brexit gridlock and delivering a lasting tariff-free and frictionless trade deal with the EU is paramount. This would help retailers keep down prices and ensure shoppers continue to have the widest possible choice on shop shelves. For example, grocery retailers will find it hard to maintain the quality, price, and durability of fresh food without a trading arrangement with key continental suppliers.
Brexit will also see new powers over things like food and nutritional labelling repatriated from Brussels to Holyrood and Westminster, leading to a more diverse policy environment for retailers and suppliers to operate in. These flexibilities should be aligned across the UK where it makes sense, minimising administrative complexity and compliance costs. Shoppers, retailers and their suppliers benefit enormously from our largely unfettered UK internal market, as economies of scale and regulatory consistency keeps down business costs, which in turn helps keep down the prices we each pay at the till.
Aside from Brexit, the economy needs an injection of confidence. Retail sales over the past year have been flat at best. Concerted action is required to support household disposable incomes, reduce the cost of doing business, and stimulate commercial investment.
Household finances continue to be under strain, with above-inflation rises in council tax impacting over recent months. Other rises in the cost of living are in the public policy pipeline, including new charges on drinks bottles and disposable drinks cups. Policymakers should be wary about heaping further pressure onto family finances over and above those planned. Instead, they should look at how they can help retailers to keep down the price of goods, perhaps with a reduction in VAT.
Wage-related costs are the largest outgoing faced by retailers. The industry is proud of its ability to bring people with fewer qualifications and less experience into the sector and set them on a career path. Many retailers provide a total reward package of pay, benefits, discounts and progression which are greatly valued by staff.
The next government should ensure the future direction for statutory minimum wage rates take trading conditions and affordability into account. Sustainable rises in pay ultimately rest with increasing productivity. That is made all the harder as firms grapple with a hodgepodge of government-imposed cost rises, such as successive annual increases in statutory minimum employer pension contributions. The recently introduced apprenticeship levy for example falls woefully short of what is needed to support higher skilled, more productive retail jobs. Here in Scotland it is little more than an employment tax.
Concerns over the environment will continue to be at the heart of policymaking. We have a shared interest with government on this – the same critical mass of voters calling for action on climate change are our customers. Our members are already taking forward a plethora of measures to reduce single-use plastics and carbon emissions, but government decisions will be crucial. The next government will have to reform the packaging system and incentivise the most sustainable way for products to be developed and brought to market, without inadvertently putting up the cost of goods for ordinary shoppers.
UK ministers should also join with us and their devolved counterparts in producing a retail strategy. A more coherent policy approach is crucial as new powers are repatriated following Brexit, and as both governments develop their agendas especially on the environment and public health. Both governments, at UK and Scottish levels, often share similar or aligned policy goals, and should work together collegiately to achieve consistency for those affected.
The December election provides a key opportunity. As political parties draw up their plans, they should spare a thought for local shops. For the quarter of a million Scots, those shops employ. For the five million people those shops serve. And for the hundreds of millions of pounds in tax those shops contribute. Supporting retail is not just good policy, it’s good politics.
David Lonsdale is director of the Scottish Retail Consortium