UK High Streets in Crisis?UK High Streets in Crisis?

Professor Neil WrigleyProfessor Neil Wrigley

University of Southampton, UKUniversity of Southampton, UK

UK consumer confidence index 2002-09UK consumer confidence index 2002-09

UK town centres & high streets have adjusted in UK town centres & high streets have adjusted in complex and not fully understand ways to sharp complex and not fully understand ways to sharp drop in CCI, plunge into recession, shallow and drop in CCI, plunge into recession, shallow and uncertain recovery, and emerging reality of uncertain recovery, and emerging reality of ‘‘austerity Britainausterity Britain’ ’

That adjustment has come on top of: That adjustment has come on top of:

Decade-long progressive increases in Decade-long progressive increases in online salesonline sales & processes of & processes of substitutionsubstitution, , complementaritycomplementarity & & modificationmodification impacting high street retailers impacting high street retailers

Impact of 15 yrs tightening of retail planning Impact of 15 yrs tightening of retail planning regulation and implementation of regulation and implementation of ‘town centres‘town centres first’first’ policies policies

Portrayal of UK high streets fundamentally Portrayal of UK high streets fundamentally changed since mid-2000s changed since mid-2000s

from buoyancyfrom buoyancy

To cataclysmic decay To cataclysmic decay

Characterised by ‘dying high streets’ where Characterised by ‘dying high streets’ where boarded-up shops outnumber those still openboarded-up shops outnumber those still open

The High Street is Facing a Decade of GloomThe High Street is Facing a Decade of Gloom

By By Geoff FosterGeoff Foster

“ “Desperate retailers have slashed prices by up to 75pc Desperate retailers have slashed prices by up to 75pc in an attempt to lure shoppers, in the biggest in an attempt to lure shoppers, in the biggest squeeze on incomes since the 1920s”.squeeze on incomes since the 1920s”.

““Worries about employment, low or non-existent Worries about employment, low or non-existent salary increases and faltering property market have salary increases and faltering property market have affected consumer spending - retailers will have to affected consumer spending - retailers will have to fight for shoppers’ disposable cash for ten years as fight for shoppers’ disposable cash for ten years as households feel the squeeze”. households feel the squeeze”.

10 June 201110 June 2011

Government appoints Mary Portas to review the Government appoints Mary Portas to review the future of the High Street future of the High Street

TV's TV's Queen of ShopsQueen of Shops appointed to lead independent appointed to lead independent review into the future of the High Street by PM review into the future of the High Street by PM

17 May 201117 May 2011

Will travel around the UK reporting to Ministers in the AutumnWill travel around the UK reporting to Ministers in the Autumn

with brief that “with brief that “ the need to take action to save our high streets the need to take action to save our high streets has never been starker”. has never been starker”.

But to what extent does available evidence support this But to what extent does available evidence support this view?view?

What is known about the What is known about the differentialdifferential performance of high performance of high streets during the economic crisis?streets during the economic crisis?

Which types performed better or worse than the average?Which types performed better or worse than the average?

The need for evidenceThe need for evidence

Although descriptive analysis available - Although descriptive analysis available - Local Data Local Data

Company Company grown to fill the needs of press/media – grown to fill the needs of press/media – academic analysis almost totally missingacademic analysis almost totally missing

In this paper will outline findings of first? such study In this paper will outline findings of first? such study - an analysis of the differential performance of 267 - an analysis of the differential performance of 267 town centres/high streets in 4 regions as they town centres/high streets in 4 regions as they adjusted to shock of economic crisisadjusted to shock of economic crisis

Like previous descriptive studies we find evidence ofLike previous descriptive studies we find evidence of gathering storm gathering storm of of rising vacancy rates, hard hit rising vacancy rates, hard hit

‘comparison retail’, and vulnerable regional ‘comparison retail’, and vulnerable regional economies of ‘northern’ UK least able to support economies of ‘northern’ UK least able to support their ‘pre-crisis’ centres/high street configurationstheir ‘pre-crisis’ centres/high street configurations

But But notnot uniform view of cataclysmic decline painted uniform view of cataclysmic decline painted by media – rather a more differentiated picture ofby media – rather a more differentiated picture of

some centres performing strongly & against trendsome centres performing strongly & against trend certain types of retail & services increasing – certain types of retail & services increasing –

across UK as whole or just in ‘southern’ regionsacross UK as whole or just in ‘southern’ regions

Our analysis offers some surprising insights into Our analysis offers some surprising insights into what factors associated with better performance. what factors associated with better performance. We suggest conceptualising what has/is taking place We suggest conceptualising what has/is taking place in terms of ‘in terms of ‘adaptively resilient high streets’adaptively resilient high streets’

Data Structure Data Structure

267267 centres with Experian centres with Experian Goad retail composition Goad retail composition surveys done surveys done before & before & afterafter the collapse of CCI the collapse of CCI

119 in South West 119 in South West

93 in North West93 in North West

31 in East Anglia31 in East Anglia

2424 in West Yorkshire in West Yorkshire

Pre-crisis Pre-crisis surveys carried surveys carried out in out in 2006/72006/7. . Within-Within-crisiscrisis surveys in surveys in Q4 2008Q4 2008 (27 centres) or (27 centres) or 20092009 (240) (240)

Included range of Included range of regional, district and local regional, district and local centrescentres

Descriptive measures of changes in retailDescriptive measures of changes in retailcomposition composition

Relative Change in Retail/Service Units Relative Change in Retail/Service Units - - difference between the unit numbers of a difference between the unit numbers of a particular type recorded in the two Goad particular type recorded in the two Goad surveys – ‘pre-crisis’ and ‘within-crisis’, surveys – ‘pre-crisis’ and ‘within-crisis’, relative to the ‘pre-crisis’ numbers as a relative to the ‘pre-crisis’ numbers as a base.base.

Absolute Change in Retail/Service UnitsAbsolute Change in Retail/Service Units - - simple basis-points increase/decrease simple basis-points increase/decrease recorded between two surveys in recorded between two surveys in percentage of units of a particular type in a percentage of units of a particular type in a centre/high street. centre/high street.

Relative & absolute change by retail category - ‘pre-’ to ‘within-crisis’Relative & absolute change by retail category - ‘pre-’ to ‘within-crisis’

Relative change in Relative change in comparison retailcomparison retail categories – ‘pre’ to ‘within-crisis’ categories – ‘pre’ to ‘within-crisis’

Relative change in Relative change in convenience retailconvenience retail categories – ‘pre’ to ‘within-crisis’ categories – ‘pre’ to ‘within-crisis’

Relative change in Relative change in leisure servicesleisure services categories – ‘pre’ to ‘within-crisis’ categories – ‘pre’ to ‘within-crisis’

Multivariate analysis of vacancy rate changes Multivariate analysis of vacancy rate changes across 4-region sampleacross 4-region sample

Number of vacant units between Number of vacant units between ‘pre-’ and ‘within-’ crisis went:‘pre-’ and ‘within-’ crisis went:

upup in 185 (69.3%) centres in 185 (69.3%) centres

downdown in 61 (22.8%) centres in 61 (22.8%) centres

remained remained unchangedunchanged in 21 in 21 (7.9%) centres(7.9%) centres

Change in vacancy rates Change in vacancy rates computed for both - fixed and computed for both - fixed and variable boundariesvariable boundaries

The average absolute change in The average absolute change in vacant across sample was: vacant across sample was:

+2.2 bp for fixed boundaries+2.2 bp for fixed boundaries

+1.9 bp for variable boundaries +1.9 bp for variable boundaries

Explanatory variablesExplanatory variables Differential changes in vacancy rates result of filtering ‘shock’ Differential changes in vacancy rates result of filtering ‘shock’

of economic crisis through of economic crisis through two two systems/structures:systems/structures:

1.1. Regional economic systemRegional economic system in which centres are located in which centres are located

- potential explanatory variables which relate include:- potential explanatory variables which relate include:

North – South divide – captures growth dynamic of region North – South divide – captures growth dynamic of region Affluence of catchments or demographics favouring higher Affluence of catchments or demographics favouring higher

rates consumer demandsrates consumer demands

2.2. Existing economic structuresExisting economic structures of the centres themselves of the centres themselves

- potential explanatory variables which relate include:- potential explanatory variables which relate include:

The mix and interdependencies of businesses The mix and interdependencies of businesses Local supportive/unsupportive institutional structures & Local supportive/unsupportive institutional structures &

business practice environments business practice environments Physical configuration of town centre/high street and Physical configuration of town centre/high street and

extent to which that facilitates re-configuration and extent to which that facilitates re-configuration and renewalrenewal

Determinants of retail vacancy – Findlay & Sparks (2010)Determinants of retail vacancy – Findlay & Sparks (2010)

* ** *parameter estimateparameter estimate significant at 1%, significant at 1%, ** significant at 5%. R squared = 35.6 N = significant at 5%. R squared = 35.6 N = 259259

P-value for normality test of residuals =0.84P-value for normality test of residuals =0.84Durbin-Watson d value = 2.17 Durbin-Watson d value = 2.17 Condition index value = 28.61Condition index value = 28.61

* ** *parameter estimateparameter estimate significant at 1%, significant at 1%, ** significant at 5%. R squared = 35.6 N = significant at 5%. R squared = 35.6 N = 259259

P-value for normality test of residuals =0.84P-value for normality test of residuals =0.84Durbin-Watson d value = 2.17 Durbin-Watson d value = 2.17 Condition index value = 28.61Condition index value = 28.61

Explanatory Variable Explanatory Variable Parameter Estimate Parameter Estimate Standard ErrorStandard Error

T-valueT-value

Constant

-0.076 0.019

-3.998**

South-North divide

-0.016 0.004

-4.170**

Centre size (Log ) 0.013 0.002

5.743**

Retail diversity pre-crisis

-0.027 0.013

-2.139*

Corporate food store entry -0.008

0.004

-2.081*

Retail vs services % pre-crisis

0.095 0.021 -4.463**

Structural vacancy pre-crisis

0.060 0.010 6.130**

Std Aver Store Size x Std magnet store floorspace

-0.349 0.082 -4.243**

A parsimonious theoretically-grounded model of vacancy rate changeA parsimonious theoretically-grounded model of vacancy rate change

Findings of the model Findings of the model Centres/high streets more likely to have performed Centres/high streets more likely to have performed

better and sustained their vitality & viability in better and sustained their vitality & viability in face of the ‘shock’ of econ crisis if they:face of the ‘shock’ of econ crisis if they:

were were of of smaller sizesmaller size and were located in and were located in ‘‘southern’southern’ England England

were were diversediverse in pre-crisis period (had large % of in pre-crisis period (had large % of small & specialist independent retail) small & specialist independent retail)

experienced experienced corporate foodstore entrycorporate foodstore entry

had had lower proportion lower proportion structural vacancystructural vacancy pre-crisis pre-crisis had had smaller proportion of smaller proportion of retail relative to retail relative to

servicesserviceshad larger average store size and had larger average store size and in addition:in addition:

(multiplicative impact) that floor space occupied (multiplicative impact) that floor space occupied by 20 key/’magnet’ retailers by 20 key/’magnet’ retailers

What do the results meanWhat do the results mean

1. 1. Being in ‘southern’ rather than ‘northern’ centre reduced vacancy rate by -1.6b

2. Being in smaller rather than larger centre reduced 2. Being in smaller rather than larger centre reduced vacancy rate by -1.3bpvacancy rate by -1.3bp

3. Being in a ‘diverse’ centre (with higher % of small 3. Being in a ‘diverse’ centre (with higher % of small independent specialist stores)independent specialist stores) reduced vacancy rate reduced vacancy rate by -0.8bpby -0.8bp

4 Experiencing corporate foodstore entry decreased 4 Experiencing corporate foodstore entry decreased vacancy rate by -0.8bp vacancy rate by -0.8bp

How can differential performance of town How can differential performance of town centres/high streets be conceptualised?centres/high streets be conceptualised?

Draw on alt concepts of the Draw on alt concepts of the resilienceresilience of economic systems of economic systems

Engineering resilienceEngineering resilience – ability – ability of a system to be resistant of a system to be resistant to external shock and ‘bounce back’ to prior configuration to external shock and ‘bounce back’ to prior configuration

Ecological resilienceEcological resilience - scale of shock a system can absorb - scale of shock a system can absorb before it is destabilised and pushed beyond its ‘elasticity before it is destabilised and pushed beyond its ‘elasticity threshold’ to a new configuration.threshold’ to a new configuration.

Adaptive resilienceAdaptive resilience – self-organizing anticipatory or – self-organizing anticipatory or reactive reorganisation of form and function of a system to reactive reorganisation of form and function of a system to minimise impact of destablising shock – places focus on minimise impact of destablising shock – places focus on resilience as a dynamic and evolutionary resilience as a dynamic and evolutionary process.process.

InIn full research paper used by Dept of Business – under full research paper used by Dept of Business – under review for review for Envir & Plann AEnvir & Plann A - we outline vision of - we outline vision of ‘adaptively‘adaptively resilient high streetsresilient high streets’ and their evolutionary trajectories’ and their evolutionary trajectories

Contributions of the researchContributions of the researchWhile accepting difficulties UK high streets face as the While accepting difficulties UK high streets face as the combined impacts of: shock of economic crisis; combined impacts of: shock of economic crisis; progressive increases in online sales, and complex effects progressive increases in online sales, and complex effects of ‘town centres first’ planning policies’ work through – of ‘town centres first’ planning policies’ work through – research adds value byresearch adds value by

Providing new and higher level evidence on high street Providing new and higher level evidence on high street performance during econ crisis.performance during econ crisis.

Offering a more differentiated picture of that performanceOffering a more differentiated picture of that performance tempering the popular vision of uniform cataclysmic declinetempering the popular vision of uniform cataclysmic decline

Also significantlyAlso significantly extends available knowledge extends available knowledge by offering by offering novel insight into the effects of: novel insight into the effects of:

diversitydiversity of a high street’s retail structure of a high street’s retail structure

entryentry of corporate food stores of corporate food stores

Contributions of the research Contributions of the research Findings provide evidence that Findings provide evidence that bothboth small independent store small independent store ‘diversity’‘diversity’ and alsoand also corporate food store entrycorporate food store entry, despite often , despite often being portrayed as polar opposites, equally associated with being portrayed as polar opposites, equally associated with enhanced resilience of UK high streets during econ crisisenhanced resilience of UK high streets during econ crisis

Full research paper - under review by Full research paper - under review by Envir & Plann AEnvir & Plann A - - provides conceptualisation of differential performance of UK provides conceptualisation of differential performance of UK high streets and vision of their evolutionary trajectories, in high streets and vision of their evolutionary trajectories, in terms of terms of ‘adaptive resilience’‘adaptive resilience’ At core of ‘ At core of ‘adaptively resilient’ adaptively resilient’ high streetshigh streets is ‘ is ‘complementaritycomplementarity’ raised levels of quality& ’ raised levels of quality& service, and new forms of symbiotic relationship between service, and new forms of symbiotic relationship between small independent stores and corporate food retailers small independent stores and corporate food retailers

Leads us to suggest that policy recommendations emerging Leads us to suggest that policy recommendations emerging from the UK Gov’s ‘from the UK Gov’s ‘Revitalising the High StreetRevitalising the High Street ‘ initiative likely ‘ initiative likely to have greatest leverage if they are sensitive to/ work ‘to have greatest leverage if they are sensitive to/ work ‘with thewith the graingrain’ of evolutionary trajectories becoming clear before the ’ of evolutionary trajectories becoming clear before the ‘shock’ of global economic crisis‘shock’ of global economic crisis