The Forum of Private Business (FPB) is urging the Government to halt the decline of small shops in the UK. According to a new report the majority of independent convenience stores, newsagents, off licences and other specialist retailers could disappear by 2015.
After consulting with the FPB and other organisations, the Conservative Party's Parliamentary Enterprise Group has published the initial findings of its Commission into Small Shops in the High Street.
The interim report said that the greater buying power of bigger retailers has allowed them to keep their prices low, undercutting many small shop owners. Evidence from the Competition Commission (CC), which is due to publish the final results of its own investigation into inequalities in the groceries market this month, shows that since 2000, sales in supermarkets have grown in real terms by 26% and by 19% in convenience stores. However, specialist stores have experienced a 1% growth in sales.
"The Conservative Parliamentary Enterprise Group’s findings add even more weight to the argument that the Government must do more to support smaller retailers, or face up to the prospect of creating ever more ‘clone towns’, or desolate high streets," said the FPB’s Chief Executive, Phil Orford. "We are concerned that some of the Competition Commission’s proposed remedies have missed the point entirely. Increasing competition between rival supermarket chains, in order to drive down prices for consumers, is far from protecting smaller shops on the high street, many of which genuinely fear for their survival."
The Competition Commission has called into question some of the business practices of supermarkets, such as below-cost pricing, where large retailers significantly undercut market prices on the high street by selling certain products at a loss in order to soak up trade, making up these losses on other product lines.
It said that, between 1999 and 2006, the entry of a supermarket into a town centre had caused more existing independent grocers and local markets to seek alternative locations, than it had encouraged new retailers to move in. The same was not true of high street fishmongers, butchers, off-licences, delicatessens, convenience stores and health food shops.
According to the Competition Commission, since 2000 there has been a steady growth of 3% in new supermarkets owned by the UK’s five largest retailers. However, in 2006, the All-party Small Shops Group reported that up to 2,000 small shops were closing every year. It warned that, should the present rate of decline continue, most of the UK’s smaller retailers could be forced to close by 2015. In its report, the Parliamentary Enterprise Group repeated that warning.
"Small shops are the lifeblood of local economies and provide a lifeline to local residents – and their survival is vital," said David Cameron, leader of the Conservative Party. He encouraged local councils to ‘use their clout’ to keep small shops open.
The group also raised concerns about increasing crime against businesses, the growing burdens of tax and regulation, local planning barriers and land use issues. It considered the environmental and social impact of large, often out-of-town supermarkets, such as the tendency towards consumers’ heavy car use and increasing economic exclusion within communities.
Suggested remedies included encouraging more people to support their local shops, creating better town management through civic partnerships, and other measures to remove the ‘unnecessary pressure’ which forces small shops to close. The report called for local authorities to work more closely with businesses and residents, and for councils to be given greater powers to allow them stand up to the big supermarkets. One measure included retaining the ‘needs test’ required before any planning application is granted, which the Government plans to remove.
The FPB responded to the Parliamentary Enterprise Group’s investigation by seeking better payment practices and fairer contractual arrangements, as well as the removal of other unfair fees, such as charging suppliers ‘loyalty payments’ in exchange for shelf space. The FPB also believes that changes to legislation, taxes and planning are required to support smaller retailers. In addition, VAT avoidance by supermarkets on items such as hot takeaway foods and goods imported via the Channel Islands, exploiting a VAT loophole, should be prevented.
The FPB’s submission followed a survey of members in which 74% of respondents agreed that business owners should be guaranteed anonymity when giving evidence to Competition Commission and Office of Fair Trading (OFT) inquiries.
FPB member Mark Terrell has owned Regis Park Ltd, a small convenience store in Chippenham, Wiltshire, for more than 20 years.
"If the supermarkets are allowed to use their buying power from their superstores to gain better prices for the goods they sell via their convenience stores, then there has to be a cross-over between the two markets," he said.
Another FPB survey found that 96% of respondents called for a retail regulator devoted to the groceries market. In addition, 93% wanted to see the introduction of comprehensive codes of practice. As part of its initial recommendations, the Competition Commission proposed a retail ombudsman to oversee the sector, and enforce a revamped supermarket code of practice. The FPB is urging it to place the plight of small shops, rather than increasing competition between rival supermarkets, at the heart of its imminent report.
Read related items on:
Retail, pubs, clubs and restaurants
Forum of Private Business