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Broadening Horizons - Retail and Leisure Post-Covid

Broadening Horizons - Retail and Leisure Post-Covid

Daniel Gregg 25 Apr 2023
It has been well documented that the retail and leisure sector in the UK has been through a turbulent period, compounded by Covid-19 and its aftermath. However, what has the impact been upon spending within the sector and what does the future hold?

Spending forecasts sign-post short-term turbulence and a slow recovery 

The UK retail and leisure sectors have experienced significant turbulence since the Covid-19 pandemic began in early 2020. The convenience (food grocery) sector benefitted during the lockdowns in 2020 with over 10% growth in expenditure, whilst the comparison goods retail and leisure/hospitality sectors suffered. The average shop vacancy rate in town centres across the country increased from around 12% to almost 15% between 2020 and 2022, with many businesses failing to re-open after the lockdowns.
During 2021/2022, there was a period of readjustment with expenditure growth in the convenience goods sector reversed. The leisure sector recovered strongly with 66% growth in expenditure per head during 2021/22, as people returned to pubs and restaurants to eat and drink and spent less in supermarkets. Growth in the comparison goods retail sector was more modest – although very welcome - at around 6%.
The latest Retail Planner Briefing Note from Experian sets out their forecasts on future changes in retail spending per person. To help illustrate both the impact of the pandemic upon retail spending and Experian’s views on how personal expenditure is likely to change going forward, their recommended growth rates are shown in the figure below.

Source: Experian – February 2023

The latest forecasts suggest a small reduction in expenditure during 2023 across all three sectors with sluggish growth thereafter in 2024 and 2025. With the continued growth in home shopping, the short-term market outlook for the high street will be challenging. Not least given that the above growth rates are before any allowance is made for continued growth in internet shopping, which will take a significant chunk out of the spending actually available to physical shops.

What does this mean for town centres?

These short-term trends are not entirely new but have been exacerbated by recent circumstances. Although the proportion of convenience goods (i.e. food/grocery) retail uses has increased slightly – buoyed by the number of smaller format stores opened by the large national operators - comparison goods retailing in town centres has declined steadily over the past decade. The proportion of town centre shop premises occupied by comparison goods retail outlets has reduced significantly - from over 41% in 2011 to only 28% in 2022. The banking/financial sector also reduced significantly. Conversely, the proportions of food/beverage and other non-retail services grew during this period.

The decline in comparison goods retail outlets has been experienced across all retail sub-sectors, but particularly significant for certain sectors, including clothing/footwear and books/stationery. Experian’s latest expenditure projections suggest that these trends are likely to continue. As indicated above, expenditure growth in the leisure sector is expected to be much lower in the next few years and local authorities will need to continually refine their strategies to seek to avoid, and where necessary, respond to further increases in vacancy rates.     

 

Retail is still very much alive

There will be locational differences with areas with high population growth or existing gaps in provision likely to be most resilient. Some sectors, including discount retail (both food and non-food) are continuing to expand, and it is important that local authorities are able to respond positively to these proposals – directing them to the locations which will best support their town centres. Aside from traditional retail, research from LDC confirms that fast food takeaways, beauty salons, nail salons and barbers were all in the top ten fastest growing categories in 2022, based on net change in units. This is not necessarily something to base a strategy around but certainly helpful to smaller centres around the country, in bringing increased diversity of use and new drivers of footfall.

But town centre strategies cannot stand still

Winners and losers will emerge as centres compete for market share. However, those areas which plan pro-actively to deal with the above challenges have the best chances of success.  Town centre strategies should continually be revisited, taking into account changes in consumer demand – the need to reduce reliance upon retail is accepted wisdom but it is not enough to rely on traditional leisure activities (and particularly food and beverage uses) either. A more imaginative approach is therefore essential.  
Lichfields has helped a number of authorities develop strategies to deal with the challenges facing their centres. In Stockton-on-Tees, we have secured outline planning permission for the redevelopment of a former shopping centre – acquired by the Council to address a longstanding vacancy problem – to provide a new urban park and mixed use development, connecting the wider town centre with the River Tees. Also on Teesside, and after helping secure £25m Town Deal funding for a package of measures in Redcar, Lichfields obtained permission for a new cultural and leisure hub, along with public events space - providing a year-round attraction with spin-off benefits for the wider town centre.
Any new strategies should be bespoke to each town’s needs, also taking into account market demand. Retail may still be part of the solution, not least where there is latent demand in the discount sector, and local authorities must ensure they have the resources to deal with such proposals. However, the latest forecasts from Experian confirm that it can no longer be the central feature. Leisure will play a part, but a simple glance at the definition of ‘Main town centre uses’ in the NPPF Glossary tells us there is a much wider range of uses which should come into the equation.
This includes offices, hotels and conference facilities, theatres, museums and/or concert calls. Whilst not strictly a main town centre use in planning terms, housing will inevitably play a role in most centres, and outdoor space offers the flexibility to perform a range of functions. Up to date evidence on retail and leisure spending will always be important but local authorities must take a much broader outlook to genuinely support their centres.

Image credit: Jonny Gios via Unsplash

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Failing to Plan or Planning to Fail? The State of Local Plan-Making

Failing to Plan or Planning to Fail? The State of Local Plan-Making

Simon Coop & Isabella Tidswell 20 Apr 2023
Our January 2023 blog highlighted the economic and social costs of the 33 Local Plans that had been delayed at that time. Since then, the trend for pausing plan-making has shown no signs of slowing down, with at least 10 further local planning authorities having paused work on their emerging plans since, the majority citing the Government’s proposed planning reforms as the reason for doing so. The potential impacts of the delays in plan-making have also recently been picked up in national media coverage including in The Times[1] and The Telegraph[2].
It is important to note that a few local authorities are bucking the trend; in some cases motions to pause plan-making have been defeated. For example, West Berkshire Council recently voted to submit their draft plan to the Planning Inspectorate despite concerns about soundness and the Government’s proposals for planning reform.
Despite some bold outliers pressing on with their plan-making, the overwhelming mood among local planning authorities seems to be a cautious one in terms of proceeding with their emerging plans, and we expect that more authorities will be pressing pause in the coming weeks and months. In some cases where plans are at examination, Inspectors themselves have suggested that authorities pause their work to consider the outcome of the Government’s consultation – for example Solihull and Mole Valley. As we highlighted in our previous blog, there are significant implications for society when LPAs put plan-making on hold, including:
Homes Foregone – we have estimated that we are forgoing c.11,200 homes per year in the absence of ambitious local plan-making (and this is likely to be a conservative estimate);
Economic Costs – the homes foregone figure translates into an estimated combined construction value of £11.09bn, which would support 8,700 direct jobs and 10,700 indirect jobs – and result in £145m of Council Tax per annum when the developments were completed (at today’s rates);
Other Societal Costs – new development, when properly planned for through local plan allocations, provides a whole host of benefits to society including new schools, health centres, green spaces and sports provision. In the absence of new housing, these benefits are not being delivered.

Looking ahead

Amid continuing uncertainty regarding the Government’s proposals for planning reform, this leads us to ask how many more local planning authorities might pause work on their local plans. As a starting point, we have referred to the list maintained by the Planning Inspectorate[3] to establish how many authorities are currently undergoing reviews; as of the latest update on 20 March 2023, 170 authorities are undertaking a review of their Local Plan, although 44 have already paused work.
We have then considered which authorities might be at risk of pausing plan-making; logically this would be those whose housing target might reduce as a result of the amendments to the NPPF. This includes:
London authorities – London currently delivers far less housing than its requirement as calculated by the standard method. Looking forward, NPPF proposals that relate to character could put the brakes on higher density developments, particularly in outer London Boroughs.
Other authorities subject to the 35% uplift – there are 19 other large cities which are subject to a 35% uplift to their Local Housing Need. With reduced scope to densify ‘out of character’ (as in London), no need to review Green Belt, and a weakened expectation for neighbouring authorities to address any unmet need, the impact of the NPPF proposals is that the housing requirement in these areas is likely to be reduced in the future.
Green Belt authorities – under the Government’s proposed NPPF reforms, there will be no requirement to review the Green Belt when preparing new local plans to meet housing need. There will also be less scope to build at high densities and weakened expectation for cross-boundary re-distribution. Consequently, authorities that are significantly constrained by Green Belt (over 50%) are therefore likely to be able to target lower levels of housing delivery.
Other NPPF ‘Footnote 7’ authorities[4] – with increased emphasis on protecting ‘character’ in the proposed NPPF amendments, authorities that are significantly constrained by ‘Footnote 7’ designations (i.e. where such constraints cover more than 50% of total area) are likely to have increased justification for strongly protecting these areas from development through reduced housing requirements.
In the short term, the potential opportunity to reduce local plan housing requirements may well prompt a delay to work on emerging local plans. Of the 126 authorities that currently still working on a review of their local plans:
  1. 22 are London Boroughs;
  2. A further five authorities are subject to the 35% uplift;
  3. A further 20 authorities are subject to significant Green Belt constraints (more than 50% of total area); and,
  4. A further 12 are subject to other ‘Footnote 7’ constraints (more than 50% of total area).
Therefore, in addition to the 44 authorities that have already paused work on their local plan review we estimate that a further 59 authorities are at risk of following suit. This would equate to a total of 103 of 170 authorities that have commenced a local plan review either pausing or being at risk of doing so as a result of the Government’s proposed planning reforms. This is a matter of very significant concern and should be viewed in the context of the Government’s recent consultation on reforms to national planning policy stating that “Our proposed changes for planning for housing are intended to support plan-making and in doing so help deliver more homes.”[5]
Ironically, the consultation itself, and the lack of certainty over the future of planning reform, has led to an impasse in plan-making across the country which will result in thousands of new homes along with the associated benefits and infrastructure being held up. By our estimates, almost two-thirds of the authorities currently reviewing their Local Plans are putting this process on hold or are at risk of doing so.

 

[1] UK housing crisis: planning targets scrapped in ‘win for nimbys’, The Times

[2] Councils scrapping building targets will make housing crisis 'even worse', The Telegraph 

[3] Local Plan: monitoring progress, Gov.uk

[4] Footnote 7 of the NPPF includes other designations which can provide a strong reason for restricting development, including Sites of Special Scientific Interest, Areas of Outstanding Natural Beauty, National Park designations, designated heritage assets, and areas at risk of flooding or coastal change.

[5] Levelling-up and Regeneration Bill: reforms to national planning policy, Gov.uk (paragraph 6).

 

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