The future of the high street, House of Commons, 10 December 2020

The COVID-19 pandemic has led to an acceleration of changes to the reasons people visit and use high streets. Data for November 2020 shows that footfall is at 45 percent compared to the same period last year. Before the pandemic, footfall had dropped over 10 per cent in the last 7 years. Internet sales had risen to 21 per cent of all retail sales at the end of 2019 compared to 7 per cent a decade earlier, and during the height of the national lockdown period in May this had jumped to nearly 33 per cent of all retail sales.


Key messages

  • The COVID-19 pandemic has led to an acceleration of changes to the reasons people visit and use high streets. Data for November 2020 shows that footfall is at 45 percent compared to the same period last year. Before the pandemic, footfall had dropped over 10 per cent in the last 7 years. Internet sales had risen to 21 per cent of all retail sales at the end of 2019 compared to 7 per cent a decade earlier, and during the height of the national lockdown period in May this had jumped to nearly 33 per cent of all retail sales.
  • As leaders of place, councils have already been working hard to repurpose their town centres and respond to longer-term trends in how our high streets are used. They recognise that the pace of change and intervention will need to quicken as a result of the pandemic.
  • Councils have taken an active role in supporting local businesses throughout the pandemic by distributing Coronavirus grant funding for small and medium businesses. This includes the Small Business Grants Fund scheme and the Retail, Hospitality and Leisure Business Grants Fund.   
  • Councils regard the long-term changes needed as an opportunity to reconnect communities with their high streets and town centres as well as meet other local priorities, such as housing, access to services and better public health. They want to do what they can to help all towns and cities to adapt to changes in the way we use our high streets and town centres but are held back by lack of resources and planning constraints at the national level.
  • The Government has rightly identified local authorities as having a critical role to play in the future of high streets and we welcomed the original and subsequent increase in funding through the Future High Streets Fund. The Stronger Towns Fund and Towns Deal funding will also help many places to adapt to changes and make the most of opportunities. However, the pandemic is likely to impact on many more places and those already shortlisted for support will require more ambitious and faster support.
  • The Government’s expansion of permitted development rights has undermined the ability of councils to bring about positive changes to their places by limiting their influence to repurpose town centre assets.
  • Town centres have a vibrant mixed-use and multi-purpose future and councils have concerns that the Government’s latest proposals, as set out in the Planning for the Future White Paper, may further erode the ability of councils to respond flexibly to the regeneration of their places.
  • Government funding that supports economic growth needs to be simplified and devolved as much as possible so that it can be better targeted towards local needs.
  • Councils would also like to see more fiscal autonomy. This should include both the power to raise more money locally, through a tourism levy or e-commerce levy, and greater control over how national taxation is spent, such as income tax or a share of fuel duty to invest in roads. Measures should be taken to ensure taxation is fair for both physical and online businesses.

Impact of COVID-19 on high streets

  • High streets and town centres have evolved as a result of changing consumer trends, technology and what communities want. For instance, the emergence of retail parks has had an impact and online shopping has changed the way we buy in recent years. High streets had been increasingly focused on improving the experience as an attractive place to dwell, shop, see friends, for eating out and entertainment.
  • The COVID-19 pandemic has accelerated some of these trends. ONS/ Springboard data for November shows that footfall is at 45 percent compared to the same period last year. Before the pandemic, footfall had dropped over 10 per cent in the last 7 years. Internet sales had risen to 21 per cent of all retail sales at the end of 2019 compared to 7 per cent a decade earlier, and during the height of the national lockdown period in May this had jumped to nearly 33 per cent of all retail sales. Increased homeworking has also had an effect as employers have either closed their offices or supported flexible working.
  • It will be some time before a clear picture emerges of the impact of social distancing on the public’s willingness to shop in high streets in the longer-term. Much will depend on how businesses respond once current Government support ends, such as the furlough scheme, the lease forfeiture moratorium and business rates relief for the retail, hospitality and leisure sectors. However, many retail and restaurant chains have already said that a significant percentage of their stores will close, and the impact on job losses is also expected to continue.
  • Before the pandemic, councils were already proactively working with their town centre partners to protect and enhance the vibrancy of their high street businesses and organisations. This included a range of measures, such as action planning, improving their understanding of how people use high streets, improvements in public realm, investing in regeneration, digitalising the town centre, master planning, making improvements in how people accessed high streets. There are several examples of this in the LGA’s revitalising town centres toolkit.
  • Looking ahead, there is more that councils would like to do to help their high streets and their local economies. Much of this depends on councils having access to further resources that they can spend effectively and efficiently, this should include:
    • Government funding that supports economic growth needs to be simplified and devolved as much as possible so that it can be better targeted towards local needs. Small grants from Government are often very specific, very short-term, and competitively accessed, limiting what councils can deliver. This is outlined in the LGA’s fragmented funding report.
    • To deliver joined-up, efficient, and effective services that can help high streets and local services, councils need the flexibility to put the needs of residents and local businesses firmly at their core, without the added burden of navigating a complex and fragmented funding landscape. They need longer-term certainty so they can plan effectively for successful local economies and vibrant town centres and not have to divert already stretched resources to competitive application processes.  
    • Many councils are in line to benefit from funding through the £1 billion Future High Streets Fund which has been earmarked for 101 towns. 100 towns have also been identified to receive funding via councils through the £2.6 billion Stronger Towns Fund. Whilst this funding was important to those places before the pandemic, this additional resource will become even more critical to help with town centre recovery. Given the speed at which high streets are being economically impacted councils are keen to be able to accelerate their spending and interventions now. The Government can assist local efforts by bringing forward allocations to all councils.
    • The pandemic is also likely to have a detrimental impact on many more towns and city centres. The impact will be felt differently from place to place depending on the local economy’s dependency on particular sectors. There will therefore be other places that will require further intervention and support as they respond to variable local impacts. The Government should therefore increase the funding and extend its town centres funds to more places.
    • The Government’s Levelling Up fund announced at the Spending Review 2020 is welcome although we are concerned by the prospect of a competitive bidding process at a time when councils want to be fully focused on protecting communities and businesses from the impact of the pandemic. The best way to make decisions about local investment is by working with councils, who know the needs of their areas best. We want to work with the Government to ensure this fund produces the best possible outcomes for local communities.

The planning system

  • Under resourcing of planning teams is a barrier for councils looking to do more to help their town centres and high streets. We continue to call for councils to have the ability to set their own planning fees, which will allow planning departments to become self-financing. Planning fees are currently set on a national basis with taxpayers subsidising the cost at a rate of nearly £180 million per year.
  • The Government has introduced further changes and expansions to permitted development rights this year. These include fundamental changes to town centre use classes which will enable greater flexibility to change use without the need to obtain planning permission. This comes in spite of the Government’s own research which highlights how conversions through change of use permitted development rights can fail to meet adequate design standards, avoid contributing to local areas and create worse living environments. Permitted development rights also weaken the ability of councils to shape and repurpose their town centres.
  • Nationally prescribed permitted development rights should be removed, giving councils and communities the ability to shape the areas they live in based on local knowledge and evidence.

Business rates

  • Business Rates were due to raise £25.6 billion to contribute towards local government services in 2020/21, both through retained business rates and amounts redistributed through the central share. That accounts for around a quarter of local government revenue spending, or up to 40 per cent if grants to education and the police (which are ring fenced or service specific) are removed. Following the measures announced in March 2020, 40 per cent of business rates in 2020/21 is being covered by retail reliefs (around £10 billion).
  • We welcome the fact that the Call for Evidence for the Government’s Business Rates Review acknowledges that business rates are an important source of revenue for local government and the impact on the local government funding system will be an important consideration in reviewing the tax.
  • Local government needs a system that raises sufficient resources for local priorities in a way that is fair for residents and gives local politicians all the tools they need to be the leaders of their communities. For councils, it is important that the tax system, including business rates, provides as much certainty as possible. An income which keeps up with demand is also important given the pressures on local government especially at this time.
  • Property continues to provide a good basis for a local tax on business. Business rates is efficient to collect and has been relatively predictable and buoyant in recent years. However, the changing nature of business alongside the nature of demand pressures on councils means that we cannot look to business rates to form such a substantial part of local government funding in the future and alternative means of funding councils will be needed instead or as well as a reformed business rates system.
  • Online businesses pose a challenge to traditional businesses and to business rates as a tax. If an activity can be carried out online without the requirement for premises this will reduce the yield of business rates which goes to both central and local government. However, it may lead to other activities that will pay business rates, such as distribution warehouses or businesses which start off online and then decide to open physical premises. Taxation should be fair for both physical and online businesses.
  • From 2013 local government as a whole has retained 50 per cent of business rates collected. We supported the increase to 75 per cent business rates retention planned from April 2021, and previously supported the Government’s aim, originally announced in October 2015, to introduce 100 per cent business rates retention by the end of the Parliament. However, in the light of recent events, the steady increase in reliefs and the belief of many that business rates pose too great a burden on business, the LGA now believes that the move to 75 per cent business rates retention only be revisited, if appropriate, once HM Treasury’s business rates review concludes. In addition, attention should be focused on developing new sources of finance for councils and different ways of incentivising growth. Although we recognise that the structure of the local government funding system, including Business Rates Retention, is outside of the scope of this review, we call on the Government to take early and decisive steps to provide councils with as much certainty as possible.