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News - 9 January 2009

How will Brighton fare in the recession?

Think tank Centre for Cities has released a report predicting how three UK locations, Bristol, Leeds and Brighton, will be affected by the recession in terms of job losses and economic activity. Will it really be as bad as it predicts?

The report suggests that Brighton’s heavy reliance on tourism and retail to provide the city’s unique selling point, not just for visitors but also for creative industries that have been established in the city, may have a greater effect than simply rising unemployment as consumers pull in their horns and retail jobs are lost.

The plethora of small shops in distinctive trading areas like The Lanes and North Laine are generally seen to be an important part of the city’s “sense of place” that distinguishes it from other towns. The report suggests that the closure of too many of these small businesses may dent our reputation as an attractive, vibrant place to live, work and visit and have a knock on effect to the wider economy.

Using projections from Oxford Economics it also suggests that job losses in a short recession could be up to 2,400 by the end of 2010 and up to 7,400 if the recession is longer than one year.

ECONOMIC PARTNERSHIP COMMENT

It is important to bear in mind that, although this report singles out three very different cities for analysis including Brighton, the issues it explores are not Brighton problems but rather national problems.

Unemployment will increase everywhere over the next year or so. The loss of a job is a personal tragedy for every individual but Brighton as a city is far stronger going into this recession than it was during the last one. It has a broader economic base, albeit still too dependant on a couple of key sectors (business & financial services and the public sector), it has a lower unemployment rate and a larger number of businesses in general but especially in the creative industries many of which are less vulnerable to recession.

The report also makes much of the importance of tourism and retail to our reputation and it is true that, with the largest concentration of independent retailers on the south coast, we have a unique retail environment that greatly influences the nature of the public realm and the overall destination offer. Like everywhere else, the city will certainly suffer in the recession but the picture isn’t clear-cut. Weak sterling (assuming it lasts) makes Britain very attractive for Euro holiday-makers and language students from anywhere on earth. And UK residents may well holiday closer to home as the £ slumps against the Euro and the dollar.

Also, excellent work by the local authority’s destination marketing and events departments has secured the Labour Party Conference and The Corporate Games in 2009 which will bring tens of thousands of visitors to the city.

Retail will suffer a double whammy of reduced consumer spending and an increase in the cost of stock that is imported from abroad and there will undoubtedly be more causalities to add to the list that currently includes Woolworths, The Pier, Zavvi, Envy, USC and others.

But the Centre for Cities predictions about the longer term damage to retail and the role if plays in creating a USP are overblown. No one wants to see businesses go under but if shops have to fail and retail units remain empty for prolonged periods there is an upside. Many of the owners of the small retail units in areas like The Lanes and North Laine are owned by private landlords and the rent from their shops is their personal income.

Altough it is obviously no consolation to the business that has gone under, if shops remain empty for long periods, private landlords reduce the asking rent and when new retailers are tempted to take a lease their reduced rent sets a new precedent, which determines the “going rate” for rental values in a street. This prevents rents from being increased when other retailers have rent reviews and, if enough new precedents are set, it can also contribute towards a reduction in Uniform Business Rates further lowering retail overheads.

So to take a simple example the 1990s recession reduced the going rate for rent in Bond Street in the North Laine from £45/sq foot (Zone A) to £35/sq foot (a 22% decrease). Fifteen years of a relatively buoyant economy later it has risen to £60/sq foot (an increase of over 70%). If the 2009 recession persists for any length of time this will become the peak and rents will decline, as they will throughout the entire North Laine, to start the whole cycle all over again.

But of course, the best recession survival plan is to ensure that as many businesses as possible make it through the next year or so and are ready to take advantage of the upturn when it comes. The local authority’s recession package for small businesses is a big step in the right direction and there are other agencies that are also making a contribution and they are not all public sector bodies (see earlier story about Brighton Visitor Card).

Brighton will weather the storm and it will come out of the other side with its reputation, and its destination offer, fully intact if a little bruised.

To read the Brighton section of the report click below  

Click here to download Into Recession


Read related items on:
Retail, pubs, clubs and restaurants
Tourism, entertainment and hospitality
Recession
Centre for Cities


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