John Simpson: Planners face challenge if UK's high streets to survive
The demise of a number of well-known high street retail outlets has been a feature of the business news and it is expected to continue. Closures of BHS stores have left many town centre shop fronts looking unhappy. In Belfast, once-thriving stores such as Robinson & Cleaver and C&A are now just a memory.
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Even the surviving stores of Marks and Spencer and House of Fraser are parts of larger groups which are consolidating (or closing) their less profitable outlets elsewhere. And that's before we consider the impact in Belfast of the huge blaze at Primark, which has resulted in a likely four-month shutdown for 14 shops.
The era of a bustling and expanding high street with more multiples, banks, building societies and many independent retailers has passed. Now, all of these types of outlet are decreasing in number. A quick walk in centres will reveal an increasing number of coffee shops or other leisure based activities.
Conspicuously, the current success stories can be found in out of centre or suburban stores, where there is greater car parking convenience. Less conspicuously, some retailing is shifting to home delivery, as on-line shopping now offers a ready-made alternative.
The scale of the shift in customer demand has been considerable. The suburban location of multiples, together with some linkage to independent outlets, probably accounts for what was about 25+% of retailing in the Belfast commuter region.
The scale of online shopping is still increasing and across Northern Ireland may be deflecting 10-15% of retail spending. Out of the available spend from household incomes, which have not been increasing significantly in real terms, there is an obvious conclusion that there is now excess town and city centre retail capacity.
Empty shops in the areas where shopping is less convenient are, unhappily for landlords, no surprise. The arrival of 'charity shops' with favourable concessions on rates bills is understood. They offer some alternative trading activity. To no surprise, there have been a series of plaintive reactions.
Action should be taken to ensure the survival of the high street. A reduction in the number and variety of retail outlets is seen as having a serious adverse effect on the dynamic of urban centres and, instinctively, efforts to maintain, support or encourage the viability of town centres are being sought.
If, in the larger centres, possibly up to 30% of the retail turnover that might have taken place has moved, there is a harsh reality to accept.
Some of the most persistent responses to the emerging crisis in retailing in urban centres have focused on ideas that might reduce the operating costs of continuing businesses. This has taken various forms. Most directly, the appeal has been made to reduce the rates bill in areas where profitability has been reduced.
Second, there have been suggestions that on-line retailing should pay higher charges, because these warehouse stores have lower operating costs (in the absence of comparable rates charges).
These suggestions to try to tip the balance of advantage more to favour urban centres pose serious problems for Government (if and when we have one).
Any suggestion that rates bills should be reduced faces clear problems. If the total revenue from rates charges were to fall, what system of charges would replace rates?
In the devolved NI setting, within the Barnett formula, alternative sources of taxation on the same scale and in a form not having adverse consequences are not easily identified.
Could the distribution of rates bills be shifted to favour retailers against other contributors? Such a shift would challenge the basic principle that rates are defined by the potential use of property assets. That is a useful baseline, neutral with respect to end use.
Then there is the challenge of whether and how the shift to on-line retailing might be challenged: not easily.
Critically, any new ideas must start from recognition that retailing is changing and the inherited structures must change.
Revitalising the 'high street' is a major challenge to the ambition of planning officials.
Company Report: Novosco
Novosco Group has its registered address at Catalyst Inc and is an interesting example of a success story which has emerged from the (former) Science Park. The principal activity of the group is to provide managed cloud IT services, an important development in the advance of IT.
The group changed its structure during 2017 when it expanded by acquiring the share capital of Novosco Ltd, a related company in Dublin. The financial figures quoted here may not be exactly comparable year on year because the business, for 2016 and 2017 has reported as a group. Details for 2015 precede the formation of a group company.
This relatively new group has generated a significant increase in turnover, each year, and is trading profitably. The accounts reflect a modest reliance on borrowed funds largely offset by a useful margin of cash at the bank or in hand. The figures quoted for capital expenditure are the combination of investment in fixed assets and additions of intangible assets.
In 2017, the group took account of a significant reversal to credit negative goodwill of £227,000.
The group has a modest dividend expenditure of £317,000 each year. The retention of post-tax profits has contributed to continuing increases in the balance sheet values of shareholders’ funds, reaching £8.6m in December 2017.
In addition to a subsidiary in Dublin of the same name, another subsidiary is Network Defence Ltd, an English registered company which is thought to be the source of a recent major contract with the NHS providing IT structure and support services for Cambridge University Hospitals.
The group employed 158 people in the year 2017. Recently, the group stated that it expects to see the labour force increase to 330 in the next three years.
During 2017 the group completed the integration of National Defence. Also, during 2017 the group secured contracts for future years of £10m. After the year end, the group gained additional contracts of £100m for 2018 and beyond.