How to fix our failing high streets

Just two sectors are keeping Britain's high streets alive – estate agents and restaurants. Now, even their numbers are dwindling. But things can still be fixed, says Matthew Lynn.

861_City-View

Old-style high streets must adapt or die

Credit: Gregory Wrona / Alamy Stock Photo

Boarded-up shops. Endless charity outlets. Bank branches closing because only a few 80-somethings ever come in. Walk down the average British high street, and you could be forgiven for thinking that its prospects could not get much worse. The trouble is, you'd be wrong. Two key sectors have kept our town centres on life support: the British love affair with property means that most towns have plenty of estate agents; and new restaurants have been springing up everywhere. You can hardly move for Costas, Stradas, and so on. It often seems as if many people's idea of a good day out is a spot of house-hunting, followed by pizza or a gourmet burger not a bad way to spend the weekend. Yet those days may soon be over.

There are already signs of a looming "Rest-apocalypse". Over the last decade, there have been 10,000 restaurant openings (net). The "eating out"market in the UK is now worth £87bn. On top of that, there are 22,000 places to get frothy lattes up 6% on last year. Yet the market may finally be saturated. Food and drink sales are flatlining. This year growth is expected to slow to 1.7%, compared with 2% and 2.7% in the last two years. Several chains are in financial trouble. Handmade Burger Co has gone into administration (although it has now been sold), while The Restaurant Group, which owns brands such as Frankie & Benny's, last week reported falling sales and tougher trading conditions.

This is only likely to get worse. Leaving the European Union may drive up wages in a sector that relies heavily on cheap migrant labour. Business rates are likely to rise further, and there is little sign of strong growth in real (after-inflation) wages to boost consumer demand. The growing popularity of delivery services may hit demand too. So it seems inevitable that there will be some consolidation and restaurant closures.

The risks to the high street do not end there. The estate agent is also under threat. There are 16,500 across the UK, with 2,900 in London alone that's more than there are independent butchers, greengrocers and fishmongers. Yet the internet is finally eating into this industry as well. Venture capital is pouring into "prop tech" start-ups that cut out traditional agents. Two Yopa and Habito raised £45m last month alone. Some serious money is starting to disrupt what looks like a very old-fashioned business model. If even 10%-20% of transactions moved online, it could cripple those high-street agencies.

Add in the fact that the banks are still closing branches, and the outlook for the high street is grim. Its share of consumer spending has already dropped from 50% in 2000 to 40% now, according to the Centre for Retail Research. A mixture of sales drifting online, out-of-town shopping centres, punishing business rates, and tough parking restrictions has made impossible for many businesses to survive. If the restaurants and estate agencies that kept the high street alive for much of the last decade also fail, streets will look even more abandoned and the fewer businesses there are in a town centre, the less incentive there is to visit.

There is still a solution. As those chains retreat, we must allow the space to be radically redesigned. The UK has a crippling shortage of houses. It is also witnessing a boom in small business start-ups those fledgling firms need somewhere small and cheap to house their first staff. Old-style high streets should be rezoned, with retail and restaurant space redeveloped as flats and small offices and workshops. Otherwise the high street will rapidly turn into a wasteland and once that happens it may be impossible to save it.

Recommended

Everyone wants more leisure time – but is that possible?
Investment strategy

Everyone wants more leisure time – but is that possible?

One of the effects of the pandemic is that everyone wants to work less – whether from home or in the office. But is that possible over the long term?
26 Nov 2021
Backtracking on HS2: the state of high-speed rail in the UK
UK Economy

Backtracking on HS2: the state of high-speed rail in the UK

The government has found a reverse gear on the controversial high-speed rail project. But does backing out now make sense?
26 Nov 2021
What Europe’s fourth wave of Covid means for investors
Economy

What Europe’s fourth wave of Covid means for investors

A fourth wave of Covid infections is spreading across mainland Europe, with many countries re-introducing restrictions. Saloni Sardana looks at what i…
25 Nov 2021
What do Turkey’s tumbling lira and America’s oil raid have in common?
Global Economy

What do Turkey’s tumbling lira and America’s oil raid have in common?

Joe Biden’s confirmation that Jerome Powell will stay on as Fed chair has sent jitters in markets from Turkey to Texas. John Stepek explains what’s go…
24 Nov 2021

Most Popular

Inflation forecasts mean interest rates should be on the rise – so why aren’t they?
Investment strategy

Inflation forecasts mean interest rates should be on the rise – so why aren’t they?

With inflation forecast to hit 5% next year, we might expect interest rates to be rising, says Merryn Somerset Webb. But central banks are holding off…
8 Nov 2021
Don’t worry about the global population explosion – it’s unlikely to happen
Investment strategy

Don’t worry about the global population explosion – it’s unlikely to happen

One of the many things we are taught to worry about is the fast-rising global population. But in fact, says Merryn Somerset Webb, the opposite is tru…
15 Nov 2021
Four of the best new investment trust listings
Investment trusts

Four of the best new investment trust listings

Diversify your portfolio and benefit from rising dividends with these four new investment trusts coming to the market soon.
15 Nov 2021