Scotland’s high streets should be enjoying their best trading month of the year. And, as travel and tourism picks up post-pandemic, there is reason for optimism for 2023.

But boarded-up shopfronts, early sales and quiet streets have been telling a different story. Transport disruption has added to the trading weakness that has been building up in Scotland’s biggest cities over the past year. Can Scotland buck the UK trend and regenerate these centres?

Not all of the factors undermining city centre activity are intrinsically bad. Hybrid working has reduced office attendance and presented opportunity for the suburbs and smaller towns. Relocating some of this business nearer to people’s homes should bring community benefits. But the vacant properties also represent lost revenue for city local authorities. The challenge is that regeneration needs public investment at a time when national and local budgets are under pressure and extra support is needed for those worst hit by the cost-of-living crisis.

Retail is the biggest private sector employer in Scotland, employing more than 240,000 people across 15,000 businesses. It was helped during lockdowns with business rates relief and in 2021 showed early signs of bouncing back. The winners were those that successfully linked digital and physical shopping. Click-and-collect services have grown, at a time when there are more sustainability concerns with online fast fashion, and e-commerce businesses themselves are realising that the cost of returns is uneconomic.

But footfall estimates of the drop in activity over the last three years shows Scotland as amongst the worst-hit parts of the UK. To the extent that this year might see a sales improvement over Christmas trading in 2021, that may just reflect favourable comparison with last year’s lockdown and the impact of price increases despite lower sales volumes this year.

Warnings of worse to come are in national retail sales data and trading updates from the major stock market-listed retail chains. Typically, the big UK groups have been anchor institutions for high streets and out-of-town malls across the country. Many chains are planning to cut back on their trading estate, leaving big gaps in high streets and shopping centres.

Staffing costs and increased energy bills are just part of the problem, with ongoing online e-commerce also continuing to erode business. To the extent that units are repurposed, it will take time to tell if new concepts work. The role of major recognised retailers in underpinning locations should not be underestimated.

While there have been some successful initiatives within Scottish retailing, such as Edinburgh’s St James Quarter, that development has sucked a lot of business from Princes Street. Department stores such as Debenhams, Jenners and House of Fraser have potential to be repurposed, but refurbishment takes time and it is not yet clear how much demand there will be for the planned mix of shopping, offices and event space. Certainly, high streets and malls will need to have more going on, in terms of events and demonstrations to draw in customers. But that transformation brings risks.

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There are signs that the future mix in high streets will have more cafes and restaurants. But what is in doubt is whether these can pay the same rents and rates as the retailers they replace. Even global chain Starbucks is embarking on a thorough review of strategic options for its business model. It has been rumoured to be considering the possibility of selling its UK units, suggesting the market may be saturated. Food costs and a tight labour market may limit the potential for high streets to pivot to hospitality.

High streets that work tend to have a mix of units with plenty that is unique or local, offering service and product not readily available online. Town centres need to be vibrant, rewarding experiences for consumers travelling in. Successful models can be seen in towns across Europe, and in a few exceptional locations in Scotland. The transition to this new model involves more than just pedestrianisation, planting a few trees and raising parking charges.

It will take active support for the businesses that have potential to add interest, possibly with financial encouragement. Local authorities must nurture a mix that works, servicing local citizens and drawing in visitors. Controversy over plans for Edinburgh’s George Street reveals big differences between different groups of users. In historic areas, scope for change is heavily constrained.

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Property trends move slowly, but it is hard to reverse momentum once established Despite worthy public and private initiatives, the damage to high streets in Scotland’s biggest cities over the past year has continued. Because businesses may for a time trade in loss simply because they cannot move their property overheads, some of the retailers currently trading may already be destined to close in the coming months. The full scale of the problem may only be evident in 2023.

It is understandable that local authorities protect core services, but scaling back of events and festivals that bring in tourists may prove counterproductive, undermining revenues. Programmes of festivals and city centre activity that have taken decades to develop have been unwound in just three years. Edinburgh Fringe ticket sales in 2022 were down by more than one-quarter from 2019 levels – that impacts retail as well as hospitality. Several Princes Street units are now shuttered.

In time, some city centre shops and offices may convert to residential to meet the need for new homes. This would make best use of the facilities and infrastructure that cities have. It should not happen piecemeal, but following consultation centre-by-centre, with public investment to repurpose cities alongside private redevelopment. It is understandable that investment, and even maintenance, were cut back in the lockdown. But if this becomes the new normal, Scotland’s cities and large towns will never recover previous activity levels. Reimagining high streets needs urgency, consultation and partnership.

Colin McLean is director of SVM Asset Management