INTERVIEW: David Lonsdale, Scottish Retail Consortium
‘Business rates have gone from irritant to mission critical’
It has been said for some time that Britain is not so much a nation of shopkeepers, as Napoleon once declared, as a nation of shoppers.
The post-war development of consumerism, and the demand for more of everything, not only led to an explosion in retail activity, it transformed high streets, and then out of town malls, into destination venues as shopping also became a leisure activity.
All that has gone into reverse as the shopper is forcing another change. The internet has turned shopping into a home or office based activity and retailers are having to recalculate their needs and remodel their proposition.
The big players need far fewer stores when building a nationwide network. Those which had built huge property portfolios- such as JJB – were caught out and paid the ultimate price. Now we have gap-toothed streets scarred with vacant units, and retail park expansion plans put on hold.
David Lonsdale is in the box seat in Scotland, overseeing a retail sector coping with these structural changes and struggling to see any growth in spending. As such retailers wants the Scottish government to understand that they have some big problems and to do what it can to help.
Top of the list is a call for a reform of business rates which are becoming an increasing burden.
“There has been a profound change in the industry: weak demand, shop price deflation, rising costs and thin margins,” says Lonsdale, chief executive of the Scottish Retail Consortium. “Business rates have gone from irritant to mission critical for the industry.
“Now adding into the mix is the new national living wage and the apprentice levy.”
There have been well-publicised responses to the new wage levy, and a recent “outing” of those who fail to pay the current required minimum. Retail is a low paying sector and will therefore take the biggest hit from the new living wage.
Lonsdale says that whatever the arguments, the new minimum is now a given and the industry is making plans to absorb an estimated £2.5 billion in additional costs across the UK. He insists that retailers “want to pay their staff well”.
This also adds to the case for lowering the costs faced by retailers. The industry wants the Holyrood government to follow the Chancellor’s decision to review the business rates system in England. A review is also under way in Northern Ireland.
Business rates are a target for action because they account for such a large part of a retailer’s costs, as well as making up a quarter of all rates paid, about £700 million a year north of the border.
For that same reason, however, it will be difficult to persuade Holyrood to forfeit valuable income. Lonsdale understands the government’s dilemma but he says there are good reasons for the SRC’s case to be given a hearing.
The sector is one of the biggest employers in Scotland, but numbers are in decline – 3,500 fewer employed in Scottish shops year-on-year. Shop closures and vacant units are now part of the general streetscape. Short leases are more common as retailers become reluctant to commit to longer deals.
Lonsdale accepts that some of the decline in employment may be linked to the switch to online shopping, but he says high business rates will only accelerate this process, encouraging more retailers to close stores.
He points to action taken by Holyrood on stamp duty, replacing it with the land and buildings transaction tax, and to its ambitions to cut air passenger duty.
“There are precedents for cutting tax. We think business rates are overdue reform,” he says.
He acknowledges the help provided by rates relief for smaller businesses, but he says the system generally is too inflexible.
The SRC is not alone in demanding change. The CBI and the Federation of Small Businesses are also calling for action. There was some dismay that the government did not include a review of business rates when it set up a commission to look at alternatives to the council tax.
That commission is due to reveal its recommendations and Lonsdale is surprised that there has not been more publicity around the debate and issues involved, given its importance. It currently raises about £2 billion in Scotland.
There has been talk of new taxes being introduced, such as a festival or tourism tax, to supplement local taxation.
“Our interest is around the impact of the commission’s recommendations on disposable income. Will the total tax take be increased? What will be the repercussions on businesses? Will councils get these new tax powers?”
Some clear vision will emerge in the coming weeks, as will the plans for England. It is understood the Chancellor will make an announcement on business rates in the Autumn Statement on 25 November.
Birthplace: Whitehaven, Cumbria (moved to Scotland within a month)
Education: Napier University (Business and Marketing)
Career highlights: Sedgwick, Aberdeen; Scottish Chambers of Commerce; CBI Scotland (assistant director); Scottish Retail Consortium (since January 2014).
What do you find frustrating?
The whole nature of public policy is that it can take a long time to achieve anything.
What else keeps you occupied?
Member of the SCDI executive committee, the Scottish Tourism Alliance and the board of trustees of Work Place Chaplaincy Scotland
Have you ever worked in a shop?
No. The only selling I have done was when I was at school. I worked for a company, Eggs on Legs, which meant going from door to door selling eggs.
Photos: David Lonsdale (by Terry Murden)