Thursday, 12 March 2009

New schemes under threat

The development of new retail centres seems, over the past decade or so, to have viewed by many authorities as a bit of a cash cow - certainly in the case of town centre or near centre developments they have often been promoted as economically essential improvements that also impact positively on the visual amenity and upgrades to local public space, something that I believe to be more than just slightly disingenuous.

It seems that the farm-yard animal has changed and it is now the chickens that are coming home to roost. Ben Cooper in 'Retail Week' has today reported on the fact that the City of Wakefield near the eastern fringes of West Yorkshire is having to come to terms with the fact that the principal financers (Anglo-Irish Bank) of the proposed new centre named 'Trinity Walk' have withdrawn the funding. In the current climate it is difficult to see how replacement finance will be procured. I have not had the time nor inclination until now to investigate how this scheme was originated nor how it was to have been implemented, but to judge by the already secured anchor store and those other retailers committed to the scheme it is not difficult to imagine that this was to have been another scheme that was dominated by the usual brands. I am left wondering what role Wakefield's SME retail community were to have played and what impact the development was likely to have had on their existing businesses upon completion?

In the same 'Retail Week', Ben Cooper's report has made mention of the fact that one of the the joint developers, Modus, had already last December announced that it wanted to sell its 50% share which is hardly a ringing endorsement of the scheme - but then they already had had the finance withdrawn on two other schemes in Warrington and Crewe. Is this trend telling us something?

One thing is certain, the City of Wakefield and other local authorities should pay much more attention to the risk management aspects of the processes that they employ in furthering these schemes. The money is never guaranteed, even in good times - and now is not that! Perhaps as I have said in this blog before, it is time that planning authorities took a more balanced approach to these things and considered how they can help incubate high quality new businesses in their new developments, because even if Trinity Walk had actually opened it is arguable that some of the original lease signatories may well not have survived for too long in the current climate and a poorly populated centre is not one which sends out positive messages to the visiting public. By this time of course, the traditional areas round these new schemes are invariably shot to pieces with vacant plots and over-priced rents and business rates, all acting as barriers to any smaller business wanting to open in the centre - here's a thought, how about a business rates moratorium on locally owned businesses for the first two years of their trading from a town centre site?

Tuesday, 10 March 2009

OK Mr Darling, let's see if I understand you correctly...

It's just that I'm struggling here Chancellor, and if you could just help me confirm my understanding...

You are quite adamant that the non-domestic rates rises planned for April will go-ahead as planned; you're putting the VAT rate back up to 17.5% in December and presumably there will be new measures to balance the books in the Budget in April too?

I suppose what puzzles me is the sheer scale of negative messages pouring from the Government and other agencies with whom they have a direct relationship with. You have told us Mr Darling that you intend making the non-domestic rate system fairer in the future, but the new ratings list will be published in time for the start of the tax year 2010 and many of us out here have warned often enough about the iniquitous rateable values and the real lack of fairness in the setting of these when comparing SME businesses with larger more erudite firms; yet here we are at the start of what is rapidly developing into the single worst depression since the dust bowl era and you assure us that the above inflation rise this year will magically be mitigated by a fairer system in the future - even though the next damaging blow is already well advanced in the planning and is already being readied for execution.

It would be interesting to measure the impact on all traditional town centres where the reduction in the overall number of SME retailers is already being trumpeted by employers' organisations. My guess is that the increase in rates, with the forthcoming increases in the rateable values (Of course I am guessing here that the Valuations Office Agency do not plan wholesale reductions in the 2010 lists) will all add to the general malaise in the SME retail world and will have the effect to scare quite a number of businesses away - to stop trading, to cease employing people! Then what? Under this Governments' regulations the landlord will have to pay the new rates on the empty properties - so the landlord, not being stupid, offers the premises to a charity at a heavily discounted rate and thus loses the burden of that cost. The sudden expansion of charity shops will in turn provide still further competition for the remaining small businesses, all of whom have to pay their rates and their staff as well as their stock! I am one of those who would describe this process as blight.

Then there's the VAT rate - with much cockolorum the government's announcement of the VAT rate reduction was met (as predicted on this blog) with an understandably muted welcome from the buying public. Surely it was never a serious idea that the 2.5% rate reduction would encourage spenders out into the shops? What is serious though will be the impact of the reversing of that process. Any retailer will tell you that a 10% discount off of the price of goods has a disproportionately smaller effect on sales than the negativity of a 1% increase in price. Imagine - you want to put 2.5% on just at the critical period for many retailers in what looks from my perspective to being another seriously low point in what will, by then, have become a growing depression.

We have all heard the mantra of the Prime Minister that this is a global problem, but what did the former Chancellor do in the relatively good times that the country experienced in the earlier days of New Labour? Did he reverse the policies of the previous Governments and invest heavily in new manufacturing industries that would actually provide real and sustainable growth - no, rather he continued to watch them reduce and decline. It is impossible now for the Government of the UK to avoid the criticisms and time for them to be honest and respond accordingly.