Welcome to this second panel in today’s hearings into small business strategy. In this panel, we are going to be looking in particular at the future of the high street, so thank you very much indeed for joining us. Daniel Thompson, if I could start with you, could you give us a sense of your perspective on this question? Is the high street now in terminal decline, or can we reinvent it?

It is the latter. It really is about that. It is an evolution rather a terminal decline. For context, I work for Greystar. We are a long-term investor. We are a rental provider of residential accommodation as well as student housing. Retail is part of our remit, but the evolution of that cycle and providing flexible space needs to be brought forward. It is a move from that traditional high street. It is definitely an evolution, but it is definitely not in terminal decline.

What are the principal factors driving the challenges for the high street?

At the moment, it is the flexibility of space. There is a lot of historic stock and the uses within the traditional high street are evolving. They are looking for different spaces, whether that is smaller or bigger spaces. Can old buildings be repurposed to provide that flexible space? That is the biggest challenge that we are seeing.

What is creating that inflexibility?

What we are seeing at the moment are viability challenges. It is about the ability to get from a start to a construction to allow occupation. Over the last 24 to 36 months, that process has become prolonged, which is leading to uncertainty. That is what is holding up development on our side.

So it is just too expensive to reformat things, given the yield that there may be ahead.

That is part of it, but it is also just the uncertainty and the timing to go through from a planning perspective to then line up tenants and work out through the work. There are cost challenges as well at the moment. Those are all the factors that are delaying to the point where it is taking longer to get to site. That uncertainty from a landlord’s and a tenant’s perspective is what creates the issues.

So the base of future yields is in question, and you have a ton of risk as well to navigate.

Yes, indeed.

Jon McGinty, do you recognise that analysis?

I would agree that the high street is changing rather than in terminal decline. The 20th century was one of initially department stores and then chain stores. We are all shopping in different ways now, particularly since the pandemic. The high street is still thriving, but it is having to adapt quite rapidly to a changing world. Just to illustrate an example of Daniel’s point, we had a lovely art deco Debenhams building in Gloucester, which closed at the same time as all the other Debenhams stores. Our university took ownership of that building and has repurposed it into a new city centre campus, which is bringing a whole different footfall and driving other tenants into other void properties in the city. The NHS has also stepped in with a health and wellbeing suite in the same building, and the council library is moving into the same building. Old department stores are being repurposed in different ways throughout the country.

What you are describing there is the agglomeration of demand using novel strategies to, basically, bring a concentration of people.

The reason why people come to city centres is changing. The key point is that the nature of retail has changed. As place shapers in our cities and towns, we are trying to find alternative reasons for people to come into our city centres, so leisure and other destinations. The council put a lot of effort into activation of the city centre. We are seeing the revival of city centre living in some of our rural towns and cities, which were previously occupied by retail and other purposes. That provides an evening economy angle to it, so that city centres try to remain vibrant in the evening, as well as during the daytime.

What are the key things driving the decline of the current model?

In terms of the challenges, viability is definitely one that I recognise.

Do you want to just translate that into words that I would use down the Hunters Moon in Hodgehill?

Gloucester is a very historic city. As Daniel said, we have hundreds of heritage buildings. The cost of regenerating and repurposing them is quite challenging. We have had some success. I gave you the example of the Debenhams building. Another building that the council is involved with, with private sector partners, is being regenerated with the help of levelling-up funding from Government. If you dig in Gloucester, you basically hit a Roman or medieval body. The cost of brownfield land remediation is significant if you have a city with either contamination or heritage to remediate, when you are trying to knock down a building and regenerate.

In terms of the main barriers getting in the way of regeneration, does it simply come down to the availability of finance to deal with some of those constraints?

That is problem number one. Problem number two is diverse land ownership. One of the challenges that we have when we try to regenerate some of our streets is trying to understand who the landlords are, and their sometimes not just being diverse but very distant. We have a lot of international absentee landlords.

Just help us understand this problem. This is the country that invented the Domesday Book, so we have been pretty good at property records for a long time. How is it that we do not know?

We are trying to do a master plan for a part of our city. We know who all the book owners are of each property, but we are writing to overseas addresses and not getting any responses. We have very little way to follow that up to try to get some action to do some co-ordinated work in that street. Your last fall‑back option is then compulsory purchase activity, which is very challenging, particularly for councils. We find that there are a lot of legal and financial challenges. You do not find many councils doing a lot of work in the compulsory purchase order space, because of the challenges that we face using those powers.

What else would be on your list of barriers?

The other thing that I would probably highlight is permitted development rights, which are powers to convert retail or commercial premises into residential. In and of itself, it is a good thing. We are keen to see more city centre living, because it does create eyes on the street and a new life for our high streets. What we are seeing in practice are very poorly brought-forward proposals that we have no power to have any say over. These are buildings that do not meet space standards or have any daylight. They have shared kitchens. They are not places that people would choose to live in. They are really just cheap alternatives to regenerating our high streets in creative and value-added ways. In themselves, permitted development rights are a good thing, but the nature of the ways in which they currently operate is not helping us.

Nick Plumb, what is your perspective on this first question as to why high streets are in decline?

I agree with my fellow panellists that the high street is not in terminal decline. The retail-dominated model of the high street is in terminal decline. That model is over. I just want to start with a few bits of data that bring this to life. First, in terms of public sentiment on the state of the high street, Power to Change did polling with More in Common at the back end of last year. Some 73% of people think the high street has gotten worse in recent years. The nature of the way that we shop is changing and has changed completely. We are looking at 27% of retail sales being online today. It was 2.6% in 2006, so that is a huge change. Some estimates have looked at there being a 40% oversupply of retail space across the country, which is an indicative figure of the way that our high streets are changing and need to continue to change. Power to Change has been around for 10 years. We work with community-led business, so locally rooted, locally accountable organisations that trade for the benefit of their community. A community-led model is the way forward: not communities doing everything themselves, but recognising that people want a stake and a say in what their high streets and town centres feel and look like. These are really important spaces and places for people. They have historic relevance and real emotive sense for people in their local areas. In recent years, we have been working on some of the ways that communities can transform their high streets in partnership with local authorities, developers, and others.

Are there any other barriers to regeneration that you would flag?

As well as working at Power to Change, I was on the board of the previous Government’s high streets taskforce. One of the most enlightening bits of data from the work that it did was going across the country, working with towns on their regeneration plans and working out what challenges they were facing. Some 60% of places cited lack of strong partnerships in place as a barrier that was preventing them from doing more.

What does “lack of strong partnerships” mean—partnerships between whom?

From our perspective, in some ways, it may be slightly crude to divide things into community, council and private sector, but, broadly, those are the three categories of players that have an interest in the nature of the town centre or high street. Although not always, there will often be slightly different drivers in the behaviour of those players. Getting those three groups together in a productive way is where some of that was lacking. That is what came up through the high streets taskforce.

Certainly, one of the things that we hear when we speak to community businesses is that the traditional business rates regime is not working and is too costly. The proposal to change the business rates regime in favour of bricks and mortar businesses is a good step. We see as a potential challenge the definitions of retail, hospitality and leisure, which is often where the groups that we work with slip between the cracks a little bit. For the organisations that we work with, which are community-led businesses that have multi-purpose use, the ways in which these organisations are categorised are often not clear. We would like to see a business rates relief regime that recognised social purpose businesses that have an asset lock, so community benefit societies or community interest companies.

One thing that we have been really pleased with at Power to Change is the proposed introduction of a community right to buy through the English devolution Bill. We see that as having real potential to bring forward negotiated sales, which is often what has happened north of the border, in Scotland, where they have the community right to buy. Also, where assets are sitting vacant for a long time, it has the ability to move things in the right direction. We are really keen to see funding and support sit alongside that new right, so that communities can take advantage of those powers when they come onstream.

Can I just check something? Jon McGinty, you said that there is a real problem with vacant landlords—people who own property and who are impossible to track down. How does that interact, Nick, with the ambition for community right to buy if you cannot find someone to buy it from?

I was going to get on to the quite opaque question of property ownership, which is a key barrier for us as well. We were pleased to see the previous Government introduce the register of beneficial ownership, although we are yet to see it have the impact that we would hope. There is more that Government could do to push that to be enforced. The tale that we hear so often from community-led businesses is that they do painstaking work to work out how a property might be owned within a trust and within another trust. They have eventually got in touch with the owner and managed to negotiate sales, and then done amazing things in terms of turning those around, but I completely agree that the community right to buy is reliant on the asset owner wanting to sell.

I would slightly challenge the view that communities struggle to raise finance. It is something that they require support on. The community ownership fund that the previous Government introduced was a really good example of the ways in which public money—community ownership funding was in the form of a grant—also leveraged in lots of private and community investment, whether through charitable funders, through loans, or often through the community share model, where communities go out and sell shares to local members. That is a great way of raising funding. The model that we would like to see for any future community ownership funding is one that recognises that there is a cocktail of funding that communities can pull together, but public funding can be a real anchor for some of that.

Just picking up on the point that you made in the beginning—I will start with you, Nick, and then come to the other panellists, because I know that they will have something to add here—we know that we need partnerships between everybody to work, because you can get more things achieved. You have already mentioned that there is some scepticism there. We are partly interested in the questions around how effective they are at the moment and what those barriers are, but I am also interested in how different places will have very different outcomes. In Tamworth, we have a borough council. It is small. It does a lot of work to try to make sure that it is working with the community, but it is limited. The way that councils have sometimes been reduced in their ability to scale these over the last few years with the funding challenge means that they may have the intentions, but they are still struggling. That is why it is so important to have those partnerships with the private sector, but the community also needs to have ownership and to feel that it has agency. Could you talk a bit more about that? You might have some examples. I would certainly be interested in the experience from what you have been doing in Gloucester. Could I start with you, Nick?

So you want examples of partnership and where it is working well.

Yes—or not.

There are a couple of examples that I would like to draw on. I was in the English devolution Bill Committee earlier today and mentioned this same example, but it is a really interesting one. Power to Change has been calling for something that we call a community covenant, which is a partnership that involves the local authority, in some cases the town and parish council, and voluntary and community sector organisations. The example that I drew on earlier and will draw on now is from a place called Market Drayton, in Shropshire. The group there involves 20 organisations from across the town that are all interested in the development of a family and community hub. One of the bits of feedback that we have had from the local authority is that there was a bit of scepticism initially, because it was a real task of letting go of some control and engaging on an equal footing with these 20 partners. The feedback that we have had since is that this has felt like a real gift—that is the language that the council has used—because it feels like it has been able to get more done over a short period than it would have if the council itself was holding things. That is something that we would like to see replicated elsewhere. The English devolution Bill could help bring that into being with new layers of neighbourhood governance. For me, engaging on an equal footing from the very beginning feels really important, and we would like to see more of that.

Jon, you also gave an example of where you have amalgamated, so do you have any thoughts to share on that point as well?

Gloucester is not much bigger than Tamworth as a council. We have the same budget, but we have recently completed a £100 million regeneration scheme in the city centre in partnership with a private sector partner and with some help from Government through the levelling-up fund. Small district councils can be ambitious. One of the keys to partnership that we have found, and one of the barriers that we have helped overcome, is landholding. The city council has taken ownership of two of the big shopping centres in the city centre. We did that not because we have some barmy idea that retail is going to suddenly make a comeback, but because we see them as cornerstones to place shaping and are using them to drive regeneration. Our private sector partners—the Reef Group in the case of the Forum development—have also taken a significant landholding. There has been a shared vision for the place. There has been partnership and a commitment through ownership, which has helped transform that particular development. We had, 20 years ago, a heritage urban regeneration corporation, similar to the mayoral development corporations that are being talked about in the new Bill. Those are good things as well. In our case, it helped regenerate Gloucester’s rundown docks area in a significant partnership with the Peel Group, which came to Gloucester only because the council was willing to commit funds and resources and to be the anchor tenant in the docks regeneration. That was what enabled Peel to have the confidence to invest in the city alongside us, so partnerships are key. We have done some stuff that I could also talk about in terms of how we have got round the voids thing with some community groups. The business rates system does need looking at to enable pop-ups and community groups to make use of void premises. Partnerships are definitely key, but you do not have to be big to have successful partnerships.

Greenford Quay, which is one of our big developments in Ealing, is a great example of exactly what we have talked about here, which is partnerships. Going back to the original question about the high street, residential is definitely part of that in terms of bringing forward that critical mass. When you look at our residents coming in, one of the first questions that they will ask is, “What retail is available?” It becomes a bit of a chicken and egg. You have to get to that critical mass to be able to say, “The retail can support itself,” so the residents can equally say, “I want to move in. I am not going to wait for phase two when whatever services are delivered.” It is a 26-acre estate that is open to the public. There are community facilities brought into part of that as well. There is a school and a health centre. Over the nine years of the life of that project to date, those needs have changed, in terms of the timing as to when that school could come forward or whether the health centre could come forward. That is not just our development influencing that, but the wider community as well. We have had a great partnership with Ealing and the GLA to really work at that and to ask, “How can we work together?” Just picking up on your point about the funding side of it, it has been really useful to say to the local residents that there is a nearby playground that we are going to refurbish as part of it. There is a new level crossing to make access to it much better. We have been able to allocate and ringfence our section 106 contributions to deliver that, so suddenly the council and the community groups can say, “We are going to get that. We can see the timing.” Ours is a multiphase development because of its size, and there is a fair trade-off to ask, “At what point during the lifecycle can those facilities come?” That stakeholder engagement just allows them to see that it is not just residential that is coming and “I don’t get anything out of it.”

This is a really important lesson. Can I just check something? For many people, particularly those in the statistics that Nick Plumb quoted, the high street will be quite a small parade of shops in quite a rundown place, in a derelict precinct that is ridden with crime, with no CCTV. Basically, it will feel out of control. The kinds of partnerships that you are describing are alluring, but what is the minimum size to get a partnership away of a scale that you would be interested in?

Greenford is a large-scale, 2,000-unit redevelopment across 26 acres. Equally, we could be a much smaller provision of that, but it would need other neighbouring developments to come forward. That is where the partnership comes in. Where there are multiple site owners, you need the local authority to take that lead to be able to say, “Let us bring it together,” and maybe there is a considered master plan between developers. It is about having an proactive approach. As part of that, Ealing was great at coming to the table to say, “What we want to see at this development is these facilities. Is it retail?” There were small centres nearby but they did not want to be overshadowed, so it is about getting that right balance. As part of that, the conversation was that the ground floor activation that we both mentioned does not just have to be retail. It can be residential. It can be servicing. It can be other opportunities that are in there. On some schemes, we have seen almost an overprovision of retail, because it is ground floor, it needs to be activated, and, therefore, retail is the only answer. Going back to the terminal decline point, that is the evolution that you are seeing, and that needs to change.

Following on from the Chair’s point there, Mr McGinty, when you were talking about what you were doing in Gloucester, it did strike me that you are a decent-sized city. I really want to re-emphasise the same point that the Chair was making. In my constituency of Bognor Regis and Littlehampton, we have two much smaller towns. We have two town councils that are doing their very best, but the purchase by the council of the types of buildings that you are talking about, or entering into property partnerships in the way that you are talking about, feel quite a long way away from where we are at, particularly with HMOs being approved in the area. The concern that the Chair pointed out is that we have town centres that communities are worried about going into at the moment. Looking around the room, I think a more typical town centre is going to be much smaller. We would really welcome your thoughts on the stepping stones to getting the finance in place. For a much smaller area, how do you go about getting the finance in place to even think about purchasing these properties? Once you do, do you go bankrupt if the plan does not come through? How much risk are these town councils expected to take?

I would describe it as a calculated risk. To give another town as an example, Stroud, which is near Gloucester, is about the same size as Bognor and is doing some significant regeneration work there. Again, I would make the point that scale is not necessarily the barrier. You have to take a calculated risk. When we purchased the shopping centres, we knew that the days of retail were going, so we were purchasing them thinking, “What is our regeneration ambition? What do we do with these as and when the retailers move out?” In the city council’s case, we have moved out of the civic suite and into the offices above the shopping centre, and repurposed them. You can repurpose estates in any sized town in that way. In terms of the minimum size question, Daniel’s point is key. People will not go back to living in town centres unless they know where their school is, where their doctor is, where their dentist is and where their shops are. The shops are the easy bit to tick, but those public services need to be part of the conversation. It cannot just be the council operating on its own. It has to be co-ordinated with lots of public services. You might need a minimum size to reopen a school in the town centre. You need all the partnerships and agencies working together. One reason why small district councils do quite well at this is that they are passionate about and understand their place. They have a great power of convening to bring different partners together into a place to talk about its future. Q279       Mr Reynolds: Jon, Daniel was talking earlier about chicken and egg, but there is also the chicken and egg in the sense that retailers will not move into a town because there is no footfall there, and people will not go to a town centre because there are not the retailers there. That says that we need to have more events and things going on in town centres. Is the answer to that just business improvement districts?

Just to give you another example in Gloucester, we had to show a demonstration of faith to enable our private sector partner, Reef, to see that we were committed to that part of the city centre. We spent £5 million on the public realm in an area called King’s Square. We reintroduced fountains for the kids to play in. It has a very Mediterranean, cosmopolitan feel. Reef needed to see the council put its money where its mouth was. There is no profit for private developers in public realm, so they are looking for the public sector to do those sorts of investments. If you do those sorts of investments with the right private sector partner, they will move in with you and will see that there is that shared vision and belief in the city or town centre. Q280       Mr Reynolds: One of the challenges out there is the £5 million of capital. Local authorities are going through a time of it. I am assuming that that was probably something like CIL funding or CIL moneys at some point.

In that particular case, we generated a capital receipt by disposing of a building somewhere else and reinvesting it in that part of the city, because that was our regeneration ambition. Q281       Mr Reynolds: For developers, town and city centre developments are probably some of the most expensive to try to do. It is a brownfield site, so you have added cost. Property prices are high in the town centre anyway, so having an old building that you are trying to buy to knock down is challenging. How would you get across the challenge of wanting a purpose-built, beautiful building that works for the town centre versus viability and affordable housing contributions? Where is the give and take for a local authority?

It is hard to give a generalised answer there. Each case is on its merits. There are trade-offs in terms of what you are trying to achieve in a place with section 106 and CIL contributions. There are viability challenges across the piece. It has not been easy to get a £100 million regeneration scheme off the ground, but, with the combination of some levelling-up funding, ambition and capital from the council, ambition and capital from the private sector partner, and a very robust business planning process, we have managed to get it over the line.

You have told us a very positive story about Gloucester, but you are also vice chair of the District Councils’ Network. What would be some of the challenges that your colleagues in district council land would highlight in bringing forward schemes such as this?

A concern that I have with the structural changes that are going on in local government is that the convening power is moving further away from the place. A lot of power is going to the strategic mayoral authorities. In Gloucester’s case, that might be the mayor who is currently sitting in Bristol, and we are then fighting with Bristol, Weston-super-Mare, Bath and all these other places around there to try to work out how much regeneration Gloucester needs in that bigger scale of things. At the moment, you have a council that is solely focused on Gloucester and is passionate about the place, understands the place and the community networks, and has created a compelling vision for that place. My concern, and the concern of the District Councils’ Network, is that, with the move of local growth planning and regeneration funding to strategic mayoral authorities, some of the smaller towns and cities, despite their local passion, may not succeed when they are part of a bigger discussion.

So what is needed is double devolution: devolution to mayoral authorities, and mayoral authorities down to districts, if not lower.

Yes, possibly. The power that districts have is their absolute passion for their place. Even without strategic mayoral authorities, districts have always shown more inclination to do economic growth and regeneration projects than county councils have in two-tier areas. District councils and unitary authorities have shown a passion for a place that is not necessarily exhibited at higher levels, because they have broader sets of responsibilities and a broader geography.

When I talk to businesses in my constituency of Warwick and Leamington, the points that come up from all those in the centre of the town are concerns about rents, business rates, parking, and a few other issues. I am surprised at how little I have heard from the three of you about those points. Six years ago, I remember asking Mike Ashley, who was at a similar Committee, about what will happen if you allow change of use. He said that what will happen is that you will support the rents in a town centre. If the market should be allowed to run, would rents not come down and make it a more level playing field between out of town and in town?

There has been some evidence that that has happened and is happening. One of the things that you are referring to may be the provision in the English Devolution and Community Empowerment Bill for upward rent reviews. We have seen some evidence of a recognition across the market that rents within town centres have ended up being too high, with negotiations between asset owners and occupiers leading to lower rents. There is also provision in the English Devolution and Community Empowerment Bill to stop the ability to insert clauses into contracts around upward rent reviews, which we do not hold a strong view on. We certainly hear from community businesses that there is a challenge around getting the balance right between the rates that community groups are able to pay and those that asset owners are looking to rent buildings for.

Again using Greenford as a good example, and going back to your point about £5 million on public realm, we will happily front-load our public realm, because we want to establish the place and get it going. At Greenford, there is a large central square that allows both our events and community events to be run. To your point, can you point to the profit from that money in the short term? You probably cannot, but, longer term, you will definitely see the value come in. When you question overall scheme viability—and this comes back to retail as well—we are having to push the schemes to be able to stack up against an affordable housing viability question. If we could widen that viability question to include retail and public realm, and front-loading of those spaces, and then broaden that out to say that you might not have as much affordable housing, but we are going to focus on retail being part of that place-making and community environment, you could definitely do that.

Jon McGinty, we used to be a nation of shopkeepers, apparently. Under the current system, are we not denying all manner of citizens the opportunity to have their own business on the high street?

The point that fellow panellists were making earlier is that the business rates system does not effectively support that. There is an imbalance between online trading and bricks-and-mortar trading, and that is the fundamental challenge. For as long as it is cheaper to just operate out of your bedroom or a shed, you will do that, so something needs to be done.

We need to sort out rents. We need to sort out business rates. What else?

In terms of parking, connectivity is an issue. Good towns and cities need to have good connectivity. It needs to be easy for people to get in there and, when they do, they need to feel safe and secure. Those are two other key metrics. Again, without wishing to go on about Gloucester—but I will—we invested in and built a new bus station. Even though we are not a transport authority, we saw that as key to having a welcoming environment for our customers and our public to come into.

So a good town centre would have really good connectivity, easy access and public transport. What else?

A reset of the business rates system, so that the imbalance between online and bricks and mortar is rebalanced in a way.

I wanted to highlight one thing, building on some of those earlier conversations in relation to how you get the conditions right for big regeneration. The other way in which it is important to look at this question, to your point, Matt Western, around what is needed, is that high vacancy rates have the potential to lead to a spiral of decline. It is the chicken and egg question. If people do not feel that it is a viable place to invest, vacancy rates can go up, and we have seen that so many times. Something that has a real role to play—and we have seen this in some of the places where we have worked—is really effective meanwhile use. If you have a property sitting vacant, how can you activate that for a year or two, so that it ups people’s ambitions for the town centre? We have seen a great example of this in Bristol. While not always seen as a struggling place, the Broadmead shopping centre area of Bristol is one that has suffered from antisocial behaviour and decline. An organisation there has moved into an old Marks and Spencer store. It is now called Sparks and has a whole range of community-led activity in there, which is slowly changing people’s perceptions of that high street and town centre, in thinking that this is a place to invest in rather than to withdraw from.

That has been extremely helpful. Thank you very much indeed. If there are any further case studies of how, in particular, deal structures have been stacked up, and observations on some of the things that would perhaps have made those deals easier to get over the line, we would be really grateful for that evidence. That concludes this panel.