Scotland’s Retail Sector

– in the Scottish Parliament on 26th October 2021.

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Photo of Liam McArthur Liam McArthur Liberal Democrat

T he next item of business is a statement by Tom Arthur on Scotland’s retail sector. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.

Photo of Tom Arthur Tom Arthur Scottish National Party

There is less than two months to go until Christmas. The run-up to the festive season is the most critical trading period of the year for retail. The impact of the pandemic on the sector has been enormous. It has changed the way in which staff work and businesses operate.

For some businesses, this Christmas could mean make or break, given the disruption of Covid on top of the challenges associated with Brexit. Since the start of the pandemic, businesses have benefited from more than £4.3 billion in Scottish Government support. That includes a generous non-domestic rates relief, which has been extended for the retail sector, along with hospitality, leisure and aviation, throughout 2021-22.

Today, I will set out a range of further policies and programmes that will support retailers and those who work for them to make a fair and prosperous recovery.

Retail is important to each and every one of us. It creates jobs, as one of the largest private sector employers in Scotland, with more than 233,000 workers, which is around 9 per cent of Scotland’s entire workforce. It creates wealth, contributing £5.8 billion in gross value added to the Scottish economy, according to the most recent statistics. More than that, it is part of the fabric of our communities and our society.

There are almost 14,000 retail businesses, which are located in every part of Scotland. Shops are often the cornerstones of our communities, as has been demonstrated during the pandemic. We relied on retail workers during lockdown for the foods and essential supplies that we needed. Many of them went above and beyond, particularly to ensure that our most vulnerable citizens did not go without. Their efforts were nothing short of heroic, and I am sure that all members in the chamber would offer their thanks.

Through the success of the vaccination programme, we have been able to lift many Covid restrictions, and that has allowed individuals and businesses to get back to something much more like normality. However, Covid-19 has not gone away, and we remain in a difficult position. It is necessary to retain some safeguards for now, while we recover and rebuild for the future. Recovery and rebuilding are crucial for the retail sector, which was subject to restrictions for many months. The Scottish Retail Consortium estimates that some retail businesses were closed for up to 220 days during lockdown.

While I recognise that there are still challenges, there are signs of recovery. According to monthly gross domestic product statistics, retail output is 10.8 per cent higher than it was 12 months previously, and 4.8 per cent higher than it was in July 2019, before lockdown measures were introduced. However, more than 21 per cent of wholesale, retail and vehicle repair businesses are reporting decreased turnover compared with what is expected at this time of year. Figures from the Scottish Retail Consortium that were published last week show that retail sales are down 9.1 per cent compared with September 2019. Those depressed sales figures are compounded by wider challenges, including Covid-related global supply chain disruptions. Others—labour market shortages, in particular—are the result of the United Kingdom Government’s decision to leave the European Union in the midst of the pandemic. Urgent action is clearly needed, and we continue to press the UK Government on that.

We must consider the changes that continue to impact and transform retail. Technology is influencing consumer behaviour and is being harnessed by retail. Online shopping now accounts for more than a quarter of all retail sales, compared with 3 per cent in 2007, when the first iPhone appeared on the market. Innovations such as self-scanning checkouts, automated stock control and digital sales and marketing are now commonplace. Covid might have accelerated the transformation, but some of our biggest retail brands, such as Debenhams and Topshop, have not kept pace and have disappeared from our high street. We therefore need a forward-looking, co-ordinated, collaborative response to support the future retail sector.

Earlier this month, the Scottish Government published its Covid recovery strategy, which states that

“A strong sustainable economy goes hand in hand with a fair and equal society.”

Our forthcoming 10-year national strategy for economic transformation will set out the ways in which we will support business, create new and good green jobs and build the industries of the future. Key to that is constructive collaboration. For the retail sector, that collaborative effort is being delivered through the development of our retail strategy.

We are harnessing the expertise of retail businesses, trade unions, academia and public sector and trade organisations to identify the challenges and opportunities for retail in Scotland. While the strategy will be published later in the year, I want to highlight one of its key components. The Fair Work Convention’s “Fair Work in Scotland Report” highlighted the fair work challenges that the retail sector faces. It also stated that

“a sectoral approach, building on the core principle of joint working, would support progress towards achieving our aim of becoming a Fair Work Nation by 2025.”

I can confirm that the strategy will look to establish a sector-led group that will work jointly with partners, including trade unions, to focus on addressing the key challenges that retail faces and that, in particular, it will be tasked with improving fair work across the sector.

I turn to a matter of considerable interest to colleagues in the chamber: new year’s day trading. The Union of Shop, Distributive and Allied WorkersUSDAW—petitioned for a consultation on whether the Scottish ministers should use existing order-making powers under the Christmas Day and New Year’s Day Trading (Scotland) Act 2007 to close large retail stores on new year’s day. The matter was considered by the Public Petitions Committee in the previous parliamentary session and, this summer, the Scottish Government honoured our commitment to consult. Although I am sympathetic to the campaign to legislate, the limits of the 2007 act are clear. Having carefully considered responses to the consultation, the prevailing economic conditions and the options that are available to us under the legislation, I regret to confirm that we will not be making an order.

We have been consistently clear that, in line with the statutory requirements of the 2007 act, a decision on new year’s day trading will take account of the prevailing economic conditions, which remain difficult for the retail sector. Employment law is, unfortunately, currently reserved. As such, the legislation would restrict trading only in stores over a certain size and it would not give all retail workers a day off. The legislation would not even cover all workers in large retail. Simply closing stores would not prohibit restocking, deliveries or online shopping, so employees could still be required to work. Crucially, the legislation would also not guarantee that those who got the day off would be paid for it. I am clear that the legislation cannot deliver what the Scottish Government and the unions want: better conditions for all workers. We are unable to guarantee paid time off or to protect all workers under the 2007 act.

We want to go further than the legislation allows and to put fair work principles at the heart of the retail sector. Fair work principles should apply to those who work in all stores and in all parts of retail operations. The retail strategy will have fair work at its core, which will benefit retail businesses by making them more attractive to workers and more resilient, productive and profitable. As I have outlined, that requires a coherent, collaborative and long-term approach involving retailers, trade unions and employees. I am happy to discuss that further with MSPs with an interest in the statement.

Retail is a vital part of our town centres and cities, and we must support them. Through the work of the town centre review and the city centre recovery task force, we are supporting those economies to become more diverse and sustainable as they face the challenge of changing and evolving retail patterns.

Earlier this summer, I launched the Scotland Loves Local fund, which will help to bring creative projects and activity into our towns and neighbourhoods, thereby building wealth in local communities and attracting the footfall that is essential for shops and businesses. With up to £2 million of investment this year, the fund will enhance the Scotland Loves Local marketing campaign and gift card scheme. I look forward to announcing the awards from the fund, for which I understand that there have been 242 applications.

I am pleased to announce that the Scotland Loves Local gift card is now available to consumers, backed by the next phase of the Scotland Loves Local marketing campaign. I encourage people to support their local businesses, especially in the run-up to Christmas.

The national planning framework 4 will provide updated planning policy on retail that recognises its role in the economy and for communities, which is linked to 20-minute neighbourhoods—connected, compact and accessible places that contribute to community wealth building. We will lay a draft of NPF4 in Parliament and carry out extensive consultation later this autumn.

Our vision is of a thriving retail sector. The policies and programmes that I have set out today will support retailers and other businesses to recover from the impact of Covid and Brexit by increasing footfall and activity while revitalising local places and town centres, but our recovery must be progressive. It must improve the lives of people and their families—of people who work in retail and the customers they serve.

I want the retail sector in Scotland to become an exemplar for inclusive economic growth. Through the retail strategy, the sector will play its part in creating a fairer, greener and stronger Scotland.

The Deputy Presiding Officer:

The minister will take questions on the issues that his statement raised. I intend to allow about 20 minutes for questions. Members who wish to ask a question are kindly requested to press their request-to-speak buttons or to place an R in the chat function.

Photo of Elizabeth Smith Elizabeth Smith Conservative

I warmly welcome the Scottish Government’s response to the new year’s day trading consultation. The minister knows full well that the retail sector’s overwhelming view was that such a statutory closure of shops on new year’s day would be a retrograde step at the very time when we are doing everything possible to get the sector back on its feet. Such a closure would also have sent a contradictory message to tourists, who we encourage to come to Scotland in the festive period.

I have three specific questions that have arisen from evidence that the Finance and Public Administration Committee has taken recently. What is the Scottish Government doing to assess the changes in consumer purchasing behaviour—not just the technological changes that the minister mentioned—as a result of the Covid situation? Those changes have huge implications for the retail sector and it is incumbent on the Scottish Government to assess them.

The minister was right to mention Scotland Loves Local, which has strong cross-party support. Will he spell out what action the Scottish Government is taking, in line with local authorities, to ensure that our schools, hospitals and other public bodies do an awful lot more to enhance public procurement of local produce? The record on that is not particularly good.

What measures is the Scottish Government taking, in line with the banking sector, to address the high level of debt in some smaller firms in the retail sector as a result of Covid?

Photo of Tom Arthur Tom Arthur Scottish National Party

I recognise Liz Smith’s first point, which was about changing consumer activity. She will be familiar with the evidence that the Scottish Retail Consortium has provided about different patterns of spending. We have now seen an uplift in goods that were not in demand as much during the pandemic. In lockdown, purchases of food and at garden centres increased, but goods such as clothes and footwear were purchased less. That is changing; we are monitoring the figures closely and will consider the situation as part of the work on the retail strategy.

I am happy to take away Liz Smith’s point about debt so that I can speak to colleagues and look into it further. We have provided extensive support—more than £4.3 billion—to businesses throughout the pandemic, and a lot of businesses on our high streets and in town centres will continue to benefit from our comprehensive package of non-domestic rates relief.

On Liz Smith’s second point,

I could talk at length about the subject. We have a commitment to taking forward community wealth building legislation later in the parliamentary session. As Liz Smith knows, a key pillar of community wealth building is procurement. I want to work with local authorities, our health boards, other public bodies and the private sector to leverage their financial clout so that the money goes in to support local economies. I very much look forward to having a conversation about that with Liz Smith and other members across the chamber in due course.

Photo of Daniel Johnson Daniel Johnson Labour

I thank the minister for early sight of his statement. I also point members to my entry in the register of members’ interests, given my interest in the retail sector and my membership of USDAW.

My fellow members of USDAW will feel let down and betrayed by the Scottish Government’s failure to act on new year’s day trading. Does the minister recognise that the Government entirely fails to grasp the point by referring to website, administration and stockroom staff? It is the shop-floor staff in the very large stores, on which he says that the legislation does allow him to act, who are affected by unpredictable and antisocial hours and who would get a day off if the Government chose to act. Does he think that it is fair to force shop workers to work on new year’s day, given the work that they have done through the pandemic?

Does the minister also recognise that this is a missed opportunity? Although a 10-year strategy will undoubtedly be welcome when it arrives, with footfall down by a fifth and supply chain costs up by a third, many retailers will simply not survive long enough to see the benefits of such a strategy. Retail requires a recovery and survival plan, and it needs one now. Will he commit to come back to the chamber with something substantive and meaningful in order to allow retailers to survive into the new year?

Photo of Tom Arthur Tom Arthur Scottish National Party

I thank Daniel Johnson for his question and recognise his interest in the area and his sterling work on his member’s bill during the previous session of Parliament.

On Daniel Johnson’s last point, I will come back to the chamber with the retail strategy when it is published. It is being developed in collaboration, including with representation from USDAW. It will be a substantive document—yes, for the long term but also to help us to meet our fair work objectives by 2025 and to support Covid recovery in the immediate term.

I am hugely sympathetic to the first points that Mr Johnson raised. However, as I said in my statement, although is a matter of regret, the issue with the legislation is that it does not, in my opinion and in the opinion of the Government, deliver what those advocating for it to be implemented are seeking. It does not guarantee retail workers a day off. As we know, many people who work in retail are not in customer-facing roles, and could still be required to work on the shop floor and in stockrooms on new year’s day. Indeed, in the consultation response, 43 per cent of businesses indicated that they would still require staff to work on new year’s day.

I would much rather that we had powers over employment law in this Parliament, so that we could have a broader look at fair work practices, including holidays in the festive season. However, we are unable to do that in this Parliament, which was recognised as the legislation was going through Parliament 14 or 15 years ago.

I sympathise with the calls of USDAW members and with the points that Daniel Johnson made. I hope that he can trust that I am acting in good faith, because I simply do not believe that the legislation can deliver what USDAW, Daniel Johnson and many of us would like to see.

Photo of Audrey Nicoll Audrey Nicoll Scottish National Party

During Scottish business week, I visited retailers in my constituency, one of which no longer has a post office.

That has resulted in a surplus of floor area, which is now partitioned off to form an empty but usable space. What can be done to support or incentivise businesses such as supermarkets to ensure that unused floor space can be used for community benefit?

Photo of Tom Arthur Tom Arthur Scottish National Party

As we all are, I am very keen to see community benefit wherever possible. I am conscious that some large retailers have, for example, partnered up with local suppliers to create pop-up stores, which is an excellent example of the kind of activity that can take place.

More broadly, we are seeking to provide a supportive tax landscape around non-domestic rates. We are also taking action through the Scotland Loves Local campaign, such as the local gift card. The work that we are doing more broadly in planning and town centre regeneration will also help to increase footfall, which will be of benefit to all retail.

Photo of Douglas Lumsden Douglas Lumsden Conservative

The Scottish retail industry employs more than 240,000 people and makes a huge contribution to the Scottish economy. However, the pandemic and lockdown have resulted in almost one in six shops closing down permanently. Shopper footfall has fallen by 27 per cent and shop vacancies have spiked to a six-year high, all of which is contributing to an increase in the number of empty shops on our struggling high streets.

What the minister announced today does nothing to stop the rot. There is as yet no strategy, no plan and no mention of our business improvement district.

Photo of Douglas Lumsden Douglas Lumsden Conservative

The minister said that the next two months could be make or break for many retail businesses, so when will he open his eyes and provide real help to the retail sector?

Photo of Tom Arthur Tom Arthur Scottish National Party

I assure the member that my eyes are wide open, and I engage regularly with the retail sector. As he will be aware, the challenges that are faced by retail are not unique to Scotland, or even to the United Kingdom. During the pandemic, we have seen the acceleration of existing changes for the retail sector that had been taking place over a prolonged period. The challenge is about what comes next.

I agree that there is a need for immediate support, and that is why, as I made clear earlier, the Scottish Government has spent £4.3 billion supporting businesses, including with a comprehensive package of non-domestic rates relief to support the retail and other sectors throughout the pandemic. We are also taking action, such as the Scotland Loves Local campaign, to increase footfall and motivate more people to shop locally, and we will ensure that such activity is synchronised as we move towards Christmas and the golden quarter for retail, which is a term with which I am sure the member is familiar.

We are taking that immediate action and, in the autumn, I will be bringing national planning framework 4 to the Parliament. In consultation with partners, including the Convention of Scottish Local Authorities, we are preparing a review of the town centre action plan. Later this year, we will publish the retail strategy, and I would be happy to come back and discuss that with members in more detail.

As I said in my statement, I am happy to meet any member to discuss the issues, because I am passionate about making Scotland a vibrant and flourishing place for the retail sector.

Photo of David Torrance David Torrance Scottish National Party

The economic impact of the pandemic has been felt across Scotland, but there has undoubtedly been a disproportionate impact on areas with pre-existing inequality. What steps can the Scottish Government take to counteract such inequalities?

Photo of Tom Arthur Tom Arthur Scottish National Party

I thank David Torrance for his question, which covers a huge area. On 5 October, the Government published its Covid recovery strategy, which sets out an ambitious vision and plan for Scotland’s recovery from the pandemic and is focused on bringing about a fairer future for all.

The strategy details three outcomes that are central to achieving that vision of a fairer future: increasing financial security for low-income households; enhancing the wellbeing of children and young people; and creating good, green jobs and fair work. That work will also be taken forward through the national strategy for economic transformation.

We recognise the key role that convenience stores can often play in our localities, particularly in supporting vulnerable groups, which will be reflected in the retail strategy.

I am happy to discuss the matter further with the member, should he be interested in doing so.

Photo of Colin Smyth Colin Smyth Labour

The minister said that the run-up to Christmas is the most critical trading period of the year for retail—it is make or break for many. However, there was nothing in his statement to ensure that it is a case of make, rather than break.

Why has the Government not considered a proper high street voucher scheme, which has been called for by Labour and the Scottish Retail Consortium, to give a real stimulus to our high street, rather than the very limited Scotland Loves Local gift card, which consumers have to pay for themselves?

Photo of Tom Arthur Tom Arthur Scottish National Party

I appreciate that Colin Smyth has raised the issue before. We will look closely at what is happening in Northern Ireland and monitor its impact. We know that consumers spend a lot of money during the festive period. The gift card will help us to channel that money into our local economies—that is what we are trying to incentivise.

Aligned with the gift card is the Scotland Loves Local campaign, which will seek to drive more people to use the gift card and spend money locally, thereby supporting local retail.

Photo of Michelle Thomson Michelle Thomson Scottish National Party

In my constituency of Falkirk East, many retailers did a great job of being innovative throughout the pandemic, and demonstrated their fundamental value to our communities. However, at present, small local retailers are at a huge disadvantage compared with online-only giants, who can avoid local taxation, often do not pay anywhere near their full share of national taxes and do not invest in local communities.

Will the minister write to the UK Government to ask whether it has managed to make any progress to ensure that online giants such as Amazon pay their fair share of taxes and provide value to society? Will he also look at ways in which the Scottish Government can encourage large companies such as Amazon to increase their contributions to very worthy causes in Scotland?

Photo of Tom Arthur Tom Arthur Scottish National Party

I am happy to write to the UK Government to raise those issues.

I will pick up on the point that Michelle Thomson made about recognising the tremendous contribution that has been made by retail, particularly local retail, in our communities. I would have wished to also make that point in response to David Torrance’s question. Local convenience stores play an important role in supporting people in our communities across Scotland. Often, there is a long-standing relationship between customers and the people who work in those establishments, but the real value that retail adds to our communities can sometimes be overlooked.

The issue around online giants that Michelle Thomson raised is important, but as she will be aware, it is a global issue that requires a global solution. I welcome the announcement made by the G7 finance ministers in June to address the issue. The UK digital services tax, which the UK Government introduced in April 2020, was a step in the right direction, but it is a short-term solution. We need concerted global action to address the issue. Of course, the Government is committed to exploring the options for introducing a digital tax within its existing powers.

Photo of Willie Rennie Willie Rennie Liberal Democrat

If the Scotland Loves Local gift card is to have a meaningful economic impact on retail, it needs to operate at scale; otherwise, it will just be tokenistic. How many businesses have made bulk purchases of the card for their employees, and how many cards has the Government bought for its employees?

Photo of Tom Arthur Tom Arthur Scottish National Party

Willie Rennie makes an important point that the gift card will work only if it operates at scale. I do not have specific answers to his questions but I will see whether I can source the data and will write to him if we have it.

The Scottish Government is making 5,000 of the cards available to each local authority to kick start the project. The cards are now available to buy online and we are working in partnership with Scotland’s Towns Partnership, which administers the scheme, on ways to expand opportunities for people to procure the gift cards going into the new year.

I will look to see whether we can provide the data on the specific points that Willie Rennie raises. If we can, I will do so in writing.

Photo of Christine Grahame Christine Grahame Scottish National Party

I refer to the proposed retail strategy and note that local authorities are not specifically listed as possible consultees. However, the decisions of planners—especially in rural towns such as those in the Midlothian South, Tweeddale and Lauderdale constituency—have a major impact on small retail businesses. Will the minister confirm that local authorities will be part and parcel of developing any retail strategy?

Photo of Tom Arthur Tom Arthur Scottish National Party

I am happy to confirm that we engage regularly with a range of partners, including COSLA, and will take into account the views of all partners in forming the retail strategy. The strategy will be driven by the work of the steering group. I hope that that reassures the member.

Photo of Maggie Chapman Maggie Chapman Green

I thank the minister for his statement and USDAW for the petition. The Scottish Greens continue to support statutory holidays over the Christmas and new year period as a workers’ rights issue. All workers have not only the right to spend time with loved ones at times of important celebrations but the right to decent time off and a good work-life balance.

As the idea of the high street changes, with big brands such as Burton and Debenhams disappearing, the need to reimagine our town centres and the retail sector becomes increasingly pressing. Does the minister agree that concepts such as the four-day week show a shift in values from working all that we can to focusing more on a better work-life balance? Will he provide an update on the work that is being undertaken to shift to a four-day working week?

Photo of Tom Arthur Tom Arthur Scottish National Party

As Maggie Chapman will be aware, the Government has a commitment to pursue a four-day week. My party stood on a manifesto commitment to provide £10 million to support it, so we will take that forward. I would be happy to write to her and provide more details on the matter.

Our high streets are changing. That is why NPF4 will have the concept of 20-minute neighbourhoods at its heart. I look forward to the wide-ranging discussions and debates that we will have on NPF4, including its specific policies on retail, when it is published later in the autumn.

Photo of Tess White Tess White Conservative

Will the forthcoming retail strategy address the marked decline in retail and customer service modern apprenticeship starts that Skills Development Scotland has highlighted? They are nowhere near pre-pandemic levels.

Photo of Tom Arthur Tom Arthur Scottish National Party

There is a specific skills work group and theme within the retail strategy, so the strategy will not only address the issues that Tess White raises but consider more broadly skills within the sector in line with our broader commitments on fair work. I look forward to further discussion once the strategy is published.

Photo of Paul McLennan Paul McLennan Scottish National Party

I welcome the minister’s comments on steps that the Scottish Government will take to promote fair work. Will he expand on how the Government will engage with the retail sector and stakeholders as it continues to develop its approach?

Photo of Tom Arthur Tom Arthur Scottish National Party

As I mentioned in my statement, we are committed to taking from the work of the retail strategy steering group the point about a sector-led group. The form of that group will be agreed in discussion with the sector. However, the strategy will be a live document and we look to work in partnership with business, trade unions and employees to ensure that the sector delivers. Fair work will be at the heart of the strategy.