The Retail Sector - Business, Innovation and Skills Committee Contents

Appendix: Government Response


The Government would like to thank the BIS Select Committee for its inquiry on the UK retail sector, and welcomes its recommendations. We are pleased that the report reflects the importance of the retail sector's significant contribution to local, regional and national economies.

The Government is committed to enabling continued, focused investment in the long-term drivers for growth to ensure that British businesses can thrive and compete on a global scale.

The Government response to the Select Committee highlights what is happening and what is being planned in the areas focussed on by the committee. Our response groups together recommendations, outlined on page 54 of the Select Committee's report, into the following sections:

1.  Business rates and other rate reliefs

2.  High Street and Portas Pilots

3.  BIS retail strategy and cross departmental working

4.  Local Enterprise Partnerships (LEPs)

5.  Skills

On business rates, the Select Committee recognised the importance of considering how the burden of business rates could be reduced and how the business rates system as a whole could be improved. In Autumn Statement 2013, the Government committed to do both, as part of the biggest package of business rates support for twenty years. The government has also consulted on improving the appeals process and has committed to clear 95 per cent of outstanding cases as at September 2013 by July 2015.

The Government published a discussion paper on 10 April[1] on longer term reform of the administration of business rates. This directly responds to many of the issues raised by the Select Committee's report and to concerns raised with Government.

The Government wants to hear from businesses, representative bodies, local authorities and ratepayers about how the system can be made simpler, more transparent and more responsive to economic circumstances. We wish to encourage organisations that provided evidence to the Select Committee to contribute to this discussion and help inform the Government's work on the future of business rates.

Business rates support the long term stability of the economy by providing sustainable tax revenues to fund public services, and by raising revenue in a way that creates less distortion than many other taxes.[2] The business rates retention scheme introduced in April 2013— under which councils retain a proportion of the business rates that they collect—can play a fundamental part in promoting local growth.

The business rates announcement in Autumn Statement 2013 built on the £11 billion per annum cuts the Government has announced to help business since 2010: to corporation tax; employer National Insurance Contributions; and fuel duty—helping businesses to invest and expand. As recognised by the Select Committee, this business rates announcement provided particular support for the smallest businesses.

Our high streets are going through considerable change, evolving with changing customer habits and changing business models. The Select Committee recognised that high streets are no longer just about retail and retail is not all about high streets. This presents both challenges and opportunities for businesses and consumers. BIS's 'Strategy for Future Retail'[3] highlighted the many opportunities for UK retailers who are already investing heavily in omnichannel approaches to reach consumers far and wide.

The relationship between retailers and the world's consumers is changing permanently, and the opportunities have never been greater for UK retailers who want to internationalise, to grow their businesses, and to secure their long term prosperity. UK Trade and Investment (UKTI) are helping retailers to exploit overseas opportunities through exporting, e-commerce and physical investment.

Cross-government working on retail issues was raised by the Select Committee. BIS, as the Department for economic growth and also the lead Department for the retail sector, works across government to help ensure that retail continues to thrive and to grow, thereby contributing to the national and local economies and providing extensive employment opportunities.

BIS is taking steps to further improve collaboration with other teams in Whitehall Departments. Retail interests are diverse and wide ranging, spanning across policies on business rates, high streets, food supply competitiveness and retail engagement in Local Enterprise Partnerships to name but a few. Strong sector partnerships provide support for all industry sectors to help increase global competitiveness, support innovation and maximise export potential. We will continue to monitor with industry the effectiveness of government-industry collaborations in identifying key challenges to growth across the UK economy.

Local Economic Partnerships (LEPs) provide clear vision and strategic leadership to drive sustainable private sector-led growth and job creation in their areas. Partnership working is key to an integrated approach to growth and economic regeneration. The government cannot prescribe what LEPs should or should not do to enhance expertise (for example in appointing their boards), or to deliver their strategic economic plans. Nor can government force retailers to work with LEPs. We can however encourage LEPs and retailers to work more closely together where there are mutual interests and potential benefits, such as town centre regeneration.

On skills, the government invests in skills and education to help businesses in all sectors to succeed—to promote trade, boost innovation, and help people to start and grow businesses. The retail sector in the UK employs around 3 million people and offers a breadth of career paths and flexible working opportunities to people of all ages. The Government is engaging with retailers in the design and piloting of new or evolving skills and qualification initiatives and processes—for example apprenticeships at all levels and traineeships. We recognise that digital and data analysis skills are vital for retailers. People 1st, the Sector Skills Council for retail, has developed apprenticeship frameworks to include the skills needed for multichannel retailing—these will also be included in the Apprenticeship Trailblazer for retail.

1.  Business Rates and Other Rate Reliefs

Responses to specific recommendations

1.1  The delay in the planned 2015 Revaluation of Business Rates until 2017 has been severely criticised by many in the retail sector. The Government based its decision to delay the Revaluation on a 'high level estimate paper' written by Valuation Office Agency, which many organisations have criticised for its lack of firm evidence. Indeed the VOA itself littered the paper with caveats. The delay in the 2015 Revaluation of Business Rates means that, until April 2017, Business Rates will continue to be calculated on property rents set in 2008, before the recession took hold. In justifying the delay in revaluation, the Government referred to the fact that the retail sector represents only around a quarter of the businesses covered by Business Rates. This may be so, but it is a key quarter for driving the recovery. We urge the Government to ensure that during the time before the next revaluation, it works towards the complete reform of the revaluation system, one of the ambitions of which should be the annual review of Business Rates. (Paragraph 74)

The Government recognises that the business rates system could be made more responsive to economic circumstances. This is why we are considering the frequency of revaluations as part of our review of business rates administration. The Government has published a discussion paper which invites views from ratepayers on how to improve the system in the longer term.

We have asked business ratepayers how often, in their view, revaluations should take place. Some have suggested annual, 2-yearly, 3-yearly or 5-yearly revaluations. We are particularly interested to hear from ratepayers about how they view the trade-offs presented by more frequent revaluations, for example, a more up-to-date rateable value against the relative level of certainty and stability that the current revaluation cycle provides.

The Government will consider responses to the discussion paper alongside conducting our own analysis of possible options for reform and their impact. As part of this, we will also look at the practicalities of implementation.

Due to the lead-in times required under the current system and to the time taken to change the relevant primary legislation, it is not possible to implement any changes to the way the 2017 revaluation will be carried out. In 2012, the government postponed the 2015 revaluation until 1 April 2017 in order to provide greater stability for businesses during a period of economic downturn. The government's review of business rates administration is looking at options for reform that would come into force after the next revaluation, including possible changes to valuation approaches and the frequency of revaluations.

1.2  We welcome the Government's capping of the inflationary limit of Business Rates to 2% for 2014-15. However, because of the small business multiplier, those businesses in the retail sector that do not qualify for small business relief   will see their business rates bills rise by 2.3% next financial year. Furthermore, this cap will apply for one year only. We urge the Government to reconsider this limited timeframe, and to stop permanently the linking of Business Rates to a single month snapshot of the Retail Price Index (RPI). Furthermore, the Government should carry out a review to ascertain whether RPI or CPI is the more appropriate index to which Business Rates should be linked. The 12-month average of the CPI or the RPI in the previous year, with a cap at 2%, is a far more appropriate level at which to set the annual Business Rate increase. This would be consistent with the recent limits on council tax increases, and in line with the Bank of England inflation target. (Paragraph 78)

In the Autumn Statement 2013, the Government took decisive action to reduce the burden of business rates for all ratepayers in England, announcing the largest package of support in 20 years. This included a commitment to cap the annual inflation increase in business rates in 2014-15 at 2 per cent, at a cost of £1.3 billion to the Exchequer over the next 5 years.[4] All 1.8 million properties subject to business rates will benefit. Any decision to extend this measure would need to be considered as part of the normal Budget process and within the context of the Government's fiscal consolidation plans.

From 1 April businesses will feel other benefits from the Autumn Statement:

·  540,000 small businesses will benefit from small business rates relief, with 360,000 paying no rates at all

·  300,000 retail premises with rateable values of less than 50,000 will receive a £1000 discount off their business rates bill in 2014-15 and 2015-16

·  50 per cent discount on business rates bills for 18 months for businesses re-occupying retail property that has been empty for at least a year

·  3,000 small businesses will retain Small Business Rate Relief when they take on a second property

Business rates bills are generally adjusted in line with the increase in the Retail Price Index (RPI) measure of inflation. The RPI link provides protection for businesses because, during times of economic growth, tax increases are held to inflationary increases only. The government has committed to look at the RPI link once fiscal consolidation is complete.

1.3  While we welcome the measures introduced in the Autumn Statement 2013 to help small businesses further in relation to Business Rates, the Government is not addressing fundamental flaws in the way in which Business Rates are calculated. The short-term tweaking of the Business Rates system is building up problems for the future and, instead, the Business Rates system needs fundamental reform. (Paragraph 85)

The Government's review of the administration of business rates after 2017 will consider reforms to the system to make business rates work better in the 21st century.

The Government wants to strengthen business rates' responsiveness to changes in economic circumstances and the system's simplicity and transparency for business ratepayers in England.

As part of our review of longer-term administrative reform, the Government is considering the frequency of revaluations and looking at whether taking a different valuation approach —which maintains business rates as a tax on rental property values—could make the system simpler and more efficient.

Outside of this review, the Government continues to welcome views from business ratepayers and other interested parties about how the tax system can be improved. Business rates, as all other taxes, will be kept under review.

1.4  Government must study the level of taxation placed on small and medium retail businesses compared with the level of taxation placed on large retail companies. It should also provide clear guidance that Councils are able to, and should be encouraged to, exempt ATM cash machines, in line with arrangements for small business rate relief. (Paragraph 86)

The £1 billion business rates package announced in the Autumn Statement 2013 provided targeted support for small businesses and retailers.

While business rates exemptions are set out in primary legislation, in 2012, the government gave local authorities the power to grant discounts to any business ratepayer, including in relation to ATMs, which they wish to support in their local area. Councils know their local areas and are best placed to make such decisions. Where they grant discounts central government automatically funds 50 per cent of the costs.

Since 2010, the Government has spent up to £500 million a year on doubling small business rate relief; helping the very smallest businesses. From April 2014, 540,000 small businesses will continue to receive Small Business Rate Relief; 360,000 of those will pay no rates at all this year. In addition, the Government has relaxed the criteria for small business rate relief to encourage small businesses to take on a second property. We expect 3,000 growing businesses to benefit from this support this year.

The Government recognises that the retail sector is changing and high streets are experiencing challenges as they adapt to changing consumer preferences in how people shop. That is why the Government has provided particular support to retailers through the business rates system, including taking steps to help reduce the number of boarded up shops on English high streets.

Half of the £1 billion package of business rates support that came into force in April 2014 is supporting the retail sector.

From April 2014, 300,000 shops, pubs and cafes with rateable values of less than £50,000 will receive a £1,000 discount on their business rates bill up to State Aid limits. This is support coming direct from Government to high street retailers for the next two years. Further details are in 'Business Rates: Retail relief guidance'.[5]

These measures demonstrate the Government's commitment to supporting businesses, particularly small businesses, to grow and invest. The Government has announced major cuts to the other main business taxes (corporation tax and NICs) for the benefit of all businesses in the UK.

1.5  The high costs of Business Rates are preventing new entrepreneurial businesses from appearing on the High Street. We welcome the Autumn Statement's announcement that businesses moving into high street properties that have been vacant for a year or more will have their rates cut by 50% for 18 months. However, we believe that the Government must go further. We recommend a six months' Business Rates amnesty on businesses occupying empty properties. This support would be an economically viable model for the Government, as it would not only support those small businesses, but could also regenerate the High Street by occupying empty shops, and by giving local areas renewed vibrancy as community hubs. (Paragraph 92)

The Government agrees with the Select Committee's view that business rates relief can be used to incentivise more productive use of long-term empty retail property.

In December 2013, the government announced a new Reoccupation Relief which came into force in April. New occupiers of property formerly used for retail purposes which has been empty for a year or more will receive a 50 per cent discount on their business rates bill for 18 months up to State Aid limits. The Government carefully considered the design of this relief, including the eligibility criteria, the level of relief and the timescale for implementation. We believe that a relief granted over a period of 18 months will encourage sustainable use of empty property.

Further details are available online.[6]

In addition, any new occupier of an empty premise will benefit from the wider package of £1 billion business rates support, half of which is supporting the retail sector.

All ratepayers benefit from the 2 per cent capped increase to rates. If they occupy properties with rateable values of less than £12,000, they may be eligible for Small Business Rate Relief. Retail businesses in premises with a rateable value of less than £50,000 are eligible for a £1,000 discount on their business rates bill for two years up to State Aid limits. Councils can also use their local discounts powers to provide further targeted relief. Central government automatically funds 50 per cent of the costs where councils do so.

1.6  We support the emergence of PopUp shops; they are an excellent example of innovation in the retail sector, but are adversely affected by an inflexible Business Rates structure. In any review of Business Rates, specific attention should be given to PopUp shops, and ways in which more can be encouraged to participate in the High Street. (Paragraph 93)

The Government wants to see thriving and diverse high streets at the heart of local communities. That is why we have provided targeted support for small businesses and retailers, including PopUp shops, through the business rates system. On top of this support, councils have the power to grant discounts to any business ratepayer which they wish to support in their local area. The government automatically funds 50 per cent of the costs in councils that do this.

The Government notes that there are progressive local councils who are using this power to encourage local growth and investment in innovative ways and in conjunction with local businesses. We would urge more councils to consider doing the same—they know their local area best and can target business rates relief where it is most needed.

1.7  The pace of change in the Retail Sector means that the Business Rate system, in its current form, is not fit for purpose. The Government must act by carrying out a wholesale review of the current Business Rate system, which is urgently needed not only for the Retail Sector, but for other business sectors that are also being affected. The Department for Business, Innovation and Skills needs to initiate urgent discussions with the Treasury and DCLG, to prepare the ground for a full scale review and reform of Business Rates, which will allow retail businesses, especially small and medium-sized businesses, not only to survive, but to flourish in the current economic climate. The Government has widely praised the Portas Review, yet has not acted on what we believe is a vital recommendation—a review of the basis of the calculation of Business Rates. The Government must review the whole system—involving local government and retail sector organisations—and not simply tinker around edges by reviewing the administrative details of collecting Business Rates. Indeed, the Prime Minister has agreed that a longer-term reform of Business Rates needs to be looked at. The Government's review must include: whether retail taxes should be based on sales, rather than property; whether the retail sector should have its own form of taxation, calculated in a different way from other businesses; and how frequently the revaluation of Business Rates should take place. (Paragraph 113)

The government has committed to review the business rates system to make it work better in the long-term. This review is being run jointly by the Treasury, the Department for Communities and Local Government (DCLG) and the Valuation Office Agency (VOA) who involve BIS officials and officials from other Departments as necessary.

The Government's review will consider frequency of valuations and changes to valuation methods, as well as other aspects of the administration of business rates, as confirmed in the terms of reference on 13 February. A discussion paper on the administration of business rates in England was published on 10 April 2014.

The Government notes that the Select Committee suggests considering replacing business rates with a tax on sales. The UK has a sales tax in the form of VAT. Introducing a new sales tax alongside VAT would be double taxation which the Government wishes to avoid. Reforming the basis of business rates would be a significant undertaking. Creating a new tax based on sales is likely to be much more administratively complex and to have higher costs than the current system. Furthermore the Government believes that taxes on property are less distortive and less harmful for growth than other taxes. However the Government keeps all taxes, including business rates, under review. The Government has committed to look at the RPI link once fiscal consolidation is complete.

1.8  Charity shops play an important part in our High Streets, by raising much-needed revenue for good causes and by providing a community space for local shoppers and volunteers. However, charity shops benefit from 80% relief on business rates, and this blanket reduction has loopholes which can be abused by businesses purporting to be charities. It also has the potential for charities to threaten other shops, especially bookshops, which have to pay the full amount of business rates. The Government needs to outline tighter definitions on what constitutes a charity shop, and to report on its findings by the autumn of 2014. (Paragraph 97)

The government agrees with the Select Committee that charitable organisations play an important role in our local communities. That is why we fund business rate relief for charitable organisations which occupy non-domestic property. The government notes that there are a range of views represented in the Select Committee's report about the role played by charities and charity shops. We understand that some groups support greater use of charitable rate relief to encourage more charitable activities in local communities, while others propose policy changes to address what they describe as a 'threat' to other businesses and organisations. The Government has no plans to change the rules regarding charitable rate relief. Our £1 billion business rates package demonstrates our commitment to support all businesses on the high street.

2. High Street and Portas Pilots

Response to specific recommendations

2.1  The Government allocated £2.3 million to fund the Portas Pilots, yet has not been able to provide evidence of how or indeed whether that money has been spent by local authorities. In its response to this Report, the Government should include how much of that money has been spent, as was promised to us by the DCLG Minister in October 2013. There is no readily-available data on the allocation of the funds, and, as far as we are aware, no organisation is auditing the funds. While we appreciate the fact that the Department for Communities and Local Government is responsible for this funding, the Department for Business, Innovation and Skills has the policy lead for retail and must ensure that data is made available on whether and how the Portas Pilot funding has been spent. These are public funds and, therefore, the use of this money needs to be assessed for value for money, and effectiveness. Together, the BIS and CLG Departments must decide how this assessment is carried out. (Paragraph 14)

In the application process for the competition to become a Portas pilot and in line with the localist approach, all applicants had to supply the name of their respective local authority to which the funds would be paid if they were successful in their bid. Each local authority has agreed with the towns running Portas pilots on how funds will be allocated. Some pilots have formed themselves into Community Interest Companies while some submit individual invoices to the council. It is up to the respective local authority or the Greater London Authority (GLA) for the London pilots to ensure that the monies are spent appropriately and transparently.

While BIS are responsible for the retail strategy, DCLG are leading on taking forward the implementation of the recommendations of the Portas Review including the management of the Portas pilots and their spend. DCLG has a grant funding agreement in place with the Association of Town and City Management (ATCM) to offer support, guidance and practical tools to support all 27 Portas pilots, and the 333 additional town teams in England who received the £10,000 of funding. The pilots have a nominated town team advisor who visits and works with the pilot on their business plans, advices on events and marketing strategies, proof reads terms of reference and offers solutions for issues town centre managers have been dealing with for over twenty years. This support from ATCM runs until the end of March 2015.

ATCM also provides DCLG with information on progress on spend of the allocated funds by the Portas pilots. Government wrote to the Chair of the Select Committee in February with the latest spending position for the pilots before the report was published. As at March 2014, the Portas pilots have spent 54 per cent of their grant funding, with a further 29 per cent of funding committed to spend. Many pilots are still delivering their work programmes; there was no formal limit to the time in which the pilots had to spend their funding. The Government would rather that the pilots spent the money in the most effective way, than rush spending to meet an arbitrary deadline.

2.2  The United States has a different tax structure, but lessons could be learned from its approach to local taxation and rent. We appreciate that this is complex, but it is something that the Government should explore as an alternative to the current system. The Government should look into encouraging a more flexible approach from landlords, and discouraging upward-only rent revisions. This would result in a fairer and more sustainable system. (Paragraph 35)

The Government supports the Code for leasing business premises[7] which encourages landlords to consider a range of rent review approaches. We continue to support the commercial property industry in making commercial leases simpler and more flexible. The Small Business Retail Lease is an example of a freely available Code compliant model lease agreement, led by Royal Institution of Chartered Surveyors and industry owned. Since its launch the Code has been downloaded over 2,500 times.

3.   BIS Retail Strategy and Cross Departmental Issues

Response to specific recommendations

3.1   We are not convinced that the success of the Retail Sector should be given as a reason for it not needing an industrial strategy. As with other sectors where Industrial Strategies are proposed to build on areas of strength, there is an opportunity to use policy to support even greater success in the future. The Government should include the retail sector in its industrial strategy programme, and we recommend that the Government rectifies this omission at the earliest opportunity. (Paragraph 24)

The government welcomes the Select Committee's views on the importance of effective collaboration with major industry sectors. We agree with the Committee that the perceived success of a sector should not determine whether or not it is suited for a strategic partnership.

Industrial strategy is about the whole of Government working in partnership with industry to set out and deliver long-term plans to secure jobs and growth. Sectors were selected on the basis of where Government intervention could have the greatest impact on jobs and growth.

For other sectors, getting the most value from government intervention means no more than setting the business environment, removing barriers to growth, and leaving businesses to get on with what they do best. Where specific issues arise we can then work with the sector to address them.

Retail is a large and diverse sector with businesses of all sizes in fierce competition. Government therefore must avoid interventions that could have adverse consequences. 'A Strategy for Future Retail', published in October 2013 agreed actions with the British Retail Consortium and the Association of Convenience Stores which, between them, represent a broad range of retail interests. The strategy sets out the direction of travel on many opportunities for the sector in coming years—particularly in omnichannel models of retail, and growing consumer demand from overseas. UKTI is implementing the Retail International Action Plan, which aims to deliver £500 million of value to the UK economy over two years (to summer 2015) from retail exports.

BIS has a highly effective partnership with the retail sector in areas where BIS can most add value. BIS hosts the Retail Policy Forum (RPF) which meets three times a year. Membership includes a broad spectrum of retail businesses and representative bodies. Retailers and trade bodies have supported the work of the RPF in their evidence to the Select Committee. BIS will keep reviewing the sectors within industrial strategy, and is committed to ensuring effective implementation and ongoing development of 'A Strategy for Future Retail'.

3. 2  The BIS Minister, Michael Fallon, was keen to tell us of the regular meetings he attends in relation to the Retail Sector. The BIS Department employs just over 4% of its staff to work on the Retail Sector, and does not consider that retail should be included in an Industrial Strategy. BIS should be leading co-ordinated work with other relevant Departments, in order to facilitate a more practical and direct approach to the issues facing the retail sector, the most urgent and important of which is Business Rates. While the Department for Communities and Local Government has an important role to play in guiding local authorities on parking, pavement furniture, planning, and so on, which all have an impact on retail, the Department of BIS must take the lead in the strategic overview of the Retail Sector. (Paragraph 118)

BIS is the lead Government Department on the retail sector. BIS's retail team, like other sector teams, works strategically across many different areas of BIS and several Government Departments.

Ownership of particular policies rest with the relevant policy leads in the responsible Department—this is the case whether a policy is sector-specific, has an impact on certain sectors, or is a wider business landscape issue. The retail team interacts with government policy leads during policy development and implementation, advocating the retail perspective on issues such as regulatory inspection and enforcement, National Minimum Wage, business rates, planning, skills funding, and LEPS. As the Department for Business we also add value by assessing any potential impacts or unintended consequences on business success and growth. It should be noted that not all issues that impact on retail are captured in the retail strategy—there are many policy areas in which BIS works on an ongoing basis with retailers and with other Government departments.

Our joint working with other Departments has resulted in many successes, which recently include:

·  a new industry-led "Digital High Streets Advisory Board" is in place, helping to provide greater collaboration and coordination between retail, the technology industry, government and place management bodies on Digital High Street initiatives. This is alongside a new £8 million Technology Strategy Board competition for reimagining the high street. BIS, DCLG and the Technology Strategy Board all serve on this board;

·  setting up the 'Cities and Local Growth Unit' within the Government Local Growth Team—a partnership between Cabinet Office, BIS and DCLG to provide coordinated support for local economic growth;

·  successful extension of the Primary Authority scheme to cover more areas of restricted sales, which has been strongly welcomed by the retail sector.

BIS works in close partnership with DCLG on high streets issues. DCLG is the lead Government Department on high streets because it holds most of the policy levers that impact significantly on high streets such as planning (including the Town Centre First policy), use classes, business rates, local authority powers and business rates. Although retail plays an important role in the high street, it is only one of a range of primary interests—as demonstrated by the broad membership of the Future High Streets Forum. Also, whilst high street retailing remains an important part of the sector it does not represent the whole picture. This is reflected in 'A Strategy for Future Retail' where the primary focus is on opportunities for retail growth at home and overseas.

4. Local Enterprise Partnerships (LEPs)

Response to specific recommendations

4.1 The Government should call on LEPs to develop a strategy for retail, in order to demonstrate their commitment to the Retail Sector. (Paragraph 41)

The Government strongly supports all LEPs in their aim to drive local economic growth and performance. Although we do not determine the policies individual LEPs should pursue, we have asked LEPs to develop ambitious, multi-year Strategic Economic Plans (SEPs). These Plans will vary from place to place, and priorities will differ across the country. LEPs are identifying the growth sectors, opportunities to create new jobs, and to help business to develop and grow. In their Plans LEPs need to prioritise interventions, be clear about what they will deliver, and demonstrate effective relationships with the business community and relevant local partners.

Government will negotiate a Growth Deal with each individual LEP on the basis of its SEP. These Growth Deals will enable LEPs to access funding from the £2 billion Local Growth Fund. However Growth Deals are not just about securing money, but will also include greater influence, freedom and flexibilities over key levers affecting local growth. It should be noted however that a LEP's activity will not be limited to only what is in its SEP.

The 39 LEPs published their Strategic Economic Plans on 31 March, and several of those have recognised the contribution of the retail sector and town centres to their economies. Many include related issues such as improving sense of place, and supporting activities such as leisure and tourism (in which retail plays a significant underpinning role). But we recognise that there is more to do.

BIS is working in partnership with DCLG, the Association of Town & City Management, People 1st/The National Skills Academy for Retail and GFirst LEP to encourage LEPs and other local economic partners to be more engaged with retail and town centre issues, and to engage with other relevant organisations and businesses.

With our partners we are collaborating on a number of work streams to achieve this, some of which have already been published in "A Strategy for Future Retail"; others are under development. There are also several research projects coming to fruition over the coming months which should provide a stronger economic case for the importance of retail and town centres.

4.2 Given the substantial contribution of retail to employment, we recommend that all LEPs consider appointing a retail representative on their board. For independent traders, this may not be feasible. However, national retail businesses should do more to encourage their local or regional management to participate in LEPs. (Paragraph 42)

The Government notes the recommendation that LEPs should consider appointing retail representatives on their boards. Business people across the country are actively engaging with their local LEPs, and at least 50 per cent of LEP board members are from the private sector. We support and encourage LEPs to effectively work with the wide range of businesses in their localities to help them shape priorities for growth.

It is for LEPs to determine board membership, and for retailers to determine the degree of engagement they wish to have with LEPs. LEPs need to strike a balance between establishing a board that represents the diversity of the private sector locally, and a board that is of the right size to be an effective and strategic decision making body. The Government is clear however that LEPs should ensure that their boards have the necessary skills and expertise to deliver their growth plans.

We are discussing with retailers how best to maximise their engagement with and contribution to the 39 LEPs; this would however remain a commercial decision for the individual retailers.

5.  Skills

Response to specific recommendations

5.1   The changing nature of how people shop needs to be mirrored in the way in which staff are trained, to enable them to provide a more tailored service. The BIS Retail Strategy document published in 2012 made passing reference to skills needed for the retail sector, referring only to the need for a science, technology, engineering and mathematics (STEM) skills gap analysis. In its follow-up document a year later, A Strategy for Future Retail stated that an analysis of skills needed for high level mathematics, data analysis, and general digital skills to be completed by the Spring of 2014. In its response to this Report, the Government must outline the results of BIS's latest STEM skills analysis, and the timeline for the action that it will take. (Paragraph 55)

The Government agrees with the Select Committee that the evolution of multi-channel retail and advanced consumer engagement techniques means that it is vital for retailers to ensure that their staff have the right technical skills.

However, the arena of digital and mathematical skills is a fast-moving target—for example in only recent months a number of retailers have launched their own digital innovation hubs, others are rolling out cloud-based virtual networks across their organisations. The numbers and types of jobs that require these skills are changing all the time, and increasing as more retailers of different sizes and sub-sectors adopt these technologies and techniques.

As ATCM said to the Select Committee, "these top-level digital skills are only part of the story—there is a significant digital divide between SMEs and larger businesses, and if small businesses are to remain a powerhouse of our economy then it is absolutely essentially that digital up-skilling at all levels is a key priority for the country".

The Government is committed to work with the retail sector to ensure greater collaboration and coordination of digital skills initiatives and activities, and to gain a robust understanding of the skills needs for a range of occupations in the sector, as set out in 'A Strategy for Future Retail'. However the overarching—and most important—issue is to ensure that the right mechanisms are in place so that the needs articulated by employers can appropriately be met. We have a steering group in place comprising several major stakeholders, and together we are exploring these issues over the course of 2014.

There are a number of current and forthcoming activities that have a bearing on this ongoing work. These include:

·  ATCM and the National Skills Academy for Retail are currently rolling the Digital High Street Skills Project,[8] which has the aim of training 3000 SMEs in basic digital skills by the end of 2014.

·  On 14 April the Government launched the Digital Inclusion Strategy, which includes actions to help SMEs get online.

·  People 1st have developed National Occupational Standards in digital skills which will be incorporated in the new Apprenticeship standards under the Trailblazer.


The Government has undertaken consultation and research on STEM skills needs in industry. On 31 March 2013 BIS published a report on supply and demand for technical apprenticeships in STEM discipline:[9] In November 2013 the UK Commission for Employment & Skills published a report on supply of and demand for higher level STEM skills[10] and in the same month BIS published the results of the Perkins review into engineering skills.[11]

However it should be noted that the retail sector—whilst recognised as a user of STEM—has a low density of STEM occupations, so has not been a focus for this work.

5.2 Apprenticeships are being used more frequently in the Retail Sector. They allow retail staff, who often leave school with few qualifications, to gain transferable, interpersonal skills. However, retailing is becoming a much more sophisticated industry, and those who work in the sector need to be more comprehensively trained. We support the work that employers do in training their workforce. The retail sector should be more ambitious about skills training, encouraging more staff to be trained at Level 3 and above. Furthermore, given the importance of tourism to the United Kingdom, consideration should be given to developing language skills to enhance the international consumers' retail experience. (Paragraph 51)

The Government agrees with the Select Committee that higher level skills are important, and we are supporting the retail sector to provide these skills in several ways.

Most significantly, in March the Government announced a Phase 2 Retail Trailblazer, which is developing new apprenticeship standards for the sector. This is employer-led, and includes many retailers.

'The Future of Apprenticeships in England—the Reform Implementation Plan'[12] published 28 October 2013 set out how the Government will deliver radical changes to Apprenticeships to make them more rigorous and responsive to the needs of employers. Apprenticeships reforms will improve the quality of Apprenticeships at all levels, put employers in the driving seat, and simplify the system. Apprenticeship Trailblazer projects led by both large and small employers and professional bodies, are developing the new Apprenticeship standards for a number of occupations.

Higher Apprenticeships now provide a clear work-based progression pathway into Higher Education and professional careers. Higher Apprenticeships have the potential to deliver high level skills tailored specifically to individual business requirements. There is currently a Level 4 Higher Apprenticeship in Retail Management.

The Government will provide £40 million to deliver an additional 20,000 Higher Apprenticeship starts in England over the academic years 2013/14 and 2014/15.

5.3 We recognise the important work that employers, unions, and the Government do in supporting people already in the workforce to continue to work and develop their skills. We were therefore disappointed that the Department did not highlight this work in its Retail Strategy. We recommend that the Department commits to continued financial support for the Union Learning Fund, which enables unions and employers to work together, providing employee training and support. LEPs could provide valuable assistance in this work. (Paragraph 47)

The Government values the work of unionlearn—the Trades Union Congress's (TUC) learning and skills organisation. It has an important role to play in supporting the rigour and responsiveness of the Government's skills strategy. The primary focus of Union Learning Funding (ULF) projects are workers, many of whom have low skills or have literacy and numeracy needs—people who may be reluctant or may not know how to take advantage of the various development opportunities available to them.

BIS recognises the value of unionlearn; the Department awarded unionlearn a grant funding of £15.3 million in 2014-2015. The majority of this grant will fund 34 unionlearn projects with individual trade unions.

In line with all partner bodies BIS has moved unionlearn from a reliance on core grant funding to a contestable funding model. As a result unionlearn is going through a period of transition. The challenge for unionlearn is to present BIS with a sustainable business model that will secure funding in 2015 and beyond.

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4   The cost of the capped increase in 2014-15 will not be made up in future years and will continue to be funded by the Exchequer. Back

5   Business Rates: Retail relief guidance Back


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Prepared 16 June 2014