Tuesday, 20 July 2010

Changes in town centre management - a silver lining?

For some weeks now Welbeck has been exploring the range of difficulties that will impact upon the management of town centres because of funding constraints which are evolving as local authorities gear themselves up for the Government's spending review in the Autumn.

There seems to be a great deal of real worry amongst staff, managers and elected members in councils across the land - here they talk of probable job losses, of retrenchment of programmes and cutting services. Welbeck is not entirely convinced that there is not actually a silver lining in this cloud somewhere - not for any staff losing their jobs, which is an awful experience at any time, but for the town centres and actually, in the longer term, for councils too!

In any period of relative prosperity processes and organisational traits develop in many larger organisations that in more straitened times would not be adopted for reasons of cost. That's not to say that anyone is necessarily guilty of profligacy but if it make life easier, why not take a more costly but eminently affordable route. When the economy hits the buffers then things change, and they change rapidly. The most important thing at that point is to be clear about what is necessary - because it is all to easy to make the opposite mistakes during periods of constraint and the proverbial baby gets ejected with the bath-water.

The challenge now for town centre management schemes and for their managers is to produce the levels of service that you would aspire to in the good times but without the cost implications. The issues for TCMs and their authorities are many, but especially include communications with all stakeholders - from council tax payers (and voters) to businesses and other organisations operating in their areas, especially those with whom they are in some sort of 'partnership' arrangement; they include also the need to support drivers to the local economy; they have myriad legal responsibilities as an authority, alone or in concert with other statutory authorities, which each bring a crop of underlying problems that are aggravated by a reducing expenditure budget. During the past few weeks Welbeck has been undertaking an investigation that is highlighting some interesting conundrums and for which answers may already be at hand. Watch this space, or if you are a local authority or other major town centre stakeholder contact us for a more in-depth conversation.

VAT crisis?

At the time of the 'Emergency' budget, the Chancellor of the Exchequer, George Osborne announced that the VAT rate on standard rated goods would rise in January 2011 to 20%. Without missing a beat there followed the predictable shouts of horror and predictions of gloom from among many in the retail industry. On 23 June in the Retail Bulletin there was a note saying that 81% of UK retailers believed that the Government would increase VAT and that if this were to happen then disaster would be manifest.

The costs of changing the rate in practice on the shop floor price indicators was cited as one of the major and most costly difficulties with the suggestion that one in fourteen retailers would slash jobs being another. These rather horrifying predictions were dumbed down a bit post-budget with the BRC amongst others saying that the retail industry did not want the rise but realised that the Government had no easy options - but jobs will be hit, consumer spending will be hit and these would contribute to a slowing of the pace of recovery and also fuel inflation. OK, so now that the dust has settled, the VAT increase will be with us in six months time; what is really likely to happen?

Clearly there is no precise model on which to base a fully reasoned appraisal, and it is entirely reasonable to suppose that the rise will have some effects. The effects on the retail industry concerning the implementation are real, there is always a cost when the standard rate of VAT is altered, but any retailer will tell you that a rate change is a real possibility at every budget and this risk therefore ought to be part of every retailers normal risk management strategies with their sytems geared up to enable a cost efficient rate change implementation. If it really is so burdensome that the implementation would take months, as some have suggested, then their systems are either poorly devised or badly executed.

Losing jobs is an emotive threat. I don't doubt that there will will be implications for jobs in some sectors, but mostly those firms who lay people off will be doing so for reasons of corporate efficiency rather than merely the impact of VAT rises - I have seen no arguments put forward yet that are not open to serious question except the more general trend arguments that the rate rise will impact on discretionary spending and that this and related issues may depress the levels of trade in the short term sufficiently to warrant reductions in overall staffing. Even with these though, the most efficient of firms will be able to withstand the impact with perhaps the need to minimise hours worked rather than actual job losses.

It is easy to understand why the government has decided to take this step, and it is only the cynic deep inside me that believes that at least part of this has been to provide the government with a wonderful tool to use towards the next election - the announcement that the fiscal measures taken by them have been gloriously successful and they are now able to reduce the rate to say 17.5%, which will be hailed by all as a miracle - and will, I guess, promote far fewer complaints by retailers about the costs of implementation than the rate rise has done.