Abolish Town Centre First policies

Shadow Business Secretary Chuka Umunna is the latest politician to jump on the anti-retail-chain bandwagon, claiming that Britain is ‘in danger of sleepwalking towards monostreet’.

Umunna delivers a textbook example of clever political rhetoric. It is the kind of message which is too bland, too vague, and too fluffy to upset anyone (‘I don’t think the balance is quite right’; ‘I worry about it at the moment’; ‘a national conversation about what we want’), but which is nevertheless guaranteed to be celebrated as ‘thoughtful’, ‘courageous’ and ‘thought-provoking’ by the media. The Independent newspaper muses that ‘his views will prove controversial’. Will they?

Britain is ‘confused’, Umunna claims: ‘We’re worried about high streets, yet we continue to shop in these big brand shops. We’re complaining, but we haven’t stopped and thought.’ He humbly admits that he is guilty of a bit of hypocrisy, because he also shops at the Co-op and Tesco. As for his policy recommendations: ‘He wants politicians to help equip shopkeepers with the right skills to cope with a new era’, and ‘I think we have to do more to promote them [small businesses].’ Now there’s a plan.

It is a shame that the Shadow Business Secretary does not go beyond testing the tricks he learned in the rhetoric seminar, because the issue is real enough. One could dismiss the alleged ‘confusion’ Umunna detects as the mere difference between stated preferences and revealed preferences: We tell the survey interviewer how much we hate big retail chains, because that is what everybody else says, and what we think we are supposed to say. When we actually buy something, though, we are more concerned with price and quality.

But in this case, there might be a bit more to it. Presumably, what happens is simply that we enjoy the lower prices, greater variety and reasonable quality that retail chains offer, but we do not find them aesthetically attractive. We want to shop in these places, but we’d prefer them to disappear once we’re done.

And there is a way in which we could get a bit closer to this: abolish Town Centre First (TCF) policies. TCF rules are there to steer retailers away from the town fringe and towards the centre. As long as there is retail space in the town centre, planning permission will usually not be granted for opening a site on the edge of town or further outside. Retail chains are, of course, the most likely candidates for opening stores in such places. Their whole business model is based on economies of scale, which applies not just to the organisation as a whole but also the individual store. It makes little sense for them to squeeze into premises which were built to accommodate corner shops, because such places do not permit them to unfold their full efficiency potential. But if they are not allowed to locate in the places most suitable for their business model, they will look for second-best (or fifth-best) alternatives in the town centres. There, they will compete with the corner shop for space, bidding up commercial rents and squeezing out the shops on the margins of profitability.

To get a bit of the best of both worlds, we have to get rid of TCF. Let big retailers open big stores and big retail parks on the edge of town. First of all, that would increase productivity in the retail sector, eventually resulting in lower consumer prices. Secondly, it would alleviate the pressure on high street rents, making some of the not-so-profitable businesses more viable. Of course, high street shops would still compete with the big players, in the sense that those who have already bought their weekly essentials in a retail park would no longer buy them from a corner shop. But the high street and the retail park would become more like separate markets, specialising in different niches and catering to different market segments. This is what happens in French towns, where the hypermarché on the edge of town competes only indirectly with the petite épicerie and the boutique on the high street.

That, however, would upset two groups of people: the luddites and the nimbys – which is why Chuka Umunna will probably steer well clear.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).