The issue that I raise tonight is crucially important to small businesses, not just in my constituency but throughout the United Kingdom. As all hon. Members know, Britain's small businesses provide the very bone marrow of our economy, and the retail sector alone—from the corner shops, which are the kernel of a local community, to the large retail chains—directly employs well over 2 million people. It is without doubt one of the most important engines for economic growth.
Britain's small businesses have suffered a number of powerful body blows in the past few years, not just because of the global recession but because of the uniform business rate—particularly in the south-west—and the sky-high real interest rates needed to bring down inflation. Not one of those factors, however, has had such a devastating impact on our small businesses as the antiquated and deeply unjust system of commercial leasehold that exists in this country, uniquely in the European Community.
The origin of the current crisis—I use the term advisedly—lies in the huge escalation that took place in rents for shops and offices in the late 1980s. As a result of a number of factors, the period between 1985 and 1990 brought huge and, as it subsequently turned out, unsustainable pressure on the demand for what was then a limited resource—prime shopping sites in our high streets. The market mechanism responded accordingly, and as demand increased, rents soared—way above the relatively modest growth in sales that took place even in the boom conditions that existed at the time.
It is a little known fact, but an extraordinarily potent one, that, between 1984 and 1988, retail sales grew by just 25 per cent., while rents rocketed by no less than 60 per cent. Even more dramatic is the escalation of retail rents between 1985 and 1990—up by 145 per cent., when the increase in RPI was just 33 per cent.
That was bad enough even before the recession struck, but when it did, demand for sites vanished and customer spending plummeted, unlikely ever to return to the unsustainable levels that it reached in the late 1980s.