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.
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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.
Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
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