Fears for Scotland's town centres as cost of living rise bites

Travel restrictions, social distancing guidelines and stay-at-home measures have made for a very tough two years for town centres. While some businesses lost the reliable footfall of office workers, others were mandated to keep their doors shut for months at a time to prevent the spread of Covid-19.

Like members of the public, businesses are also having to tighten their purse strings to deal with rising costs. Alongside incentivising customers to return to in-person shopping, they are rallying against paying rising utility bills on their premises, increased staffing costs, and a sudden rise in rent.

More than 4,500 commercial lots in town centres are currently unoccupied, according to data supplied by 19 local authorities. Glasgow City Council reported the most empty buildings — 1,701 out of 11,855 stood empty.

Vacancy rates were the highest in the town centres under the control of Fife Council, who reported 21 per cent of its retail and service floor area was empty in 2021. This eclipses the national average of 16 per cent in the same period, which was a record-high.

Aberdeen City Council reported the largest spike in vacancy rates in the last year, with 18per cent of its units standing empty compared to 13 per cent in 2020.

Falkirk and Perth and Kinross councils also returned high figures, sitting at 15 per cent and 12 per cent respectively. While Angus council’s vacancy rate dropped 0.9 per cent in the last year, it still stands at 14 per cent overall.

Experts warned swift action is needed to repair “gap-toothed” town centres, with the “stark impact” of the pandemic “laid bare” in the figures.

The government has launched an inquiry into the future of town centres at the beginning of February, designed to “identify the current challenges for high streets, and the barriers to their success.”

The findings give an insight on the pandemic’s impact on already struggling town centres, with gyms, shops, bars and restaurants dealing with an “exodus of office workers and dearth of shopper footfall,” the Scottish Retail Consortium said.

Fuel bill hikes hit small business

Lesley Landels, who owns Love Scottish Candles and has stores in Hawick and Melrose, said it’s “heartbreaking” to walk around her city centre.

“It was always vibrant, but now it has huge units empty,” she said. “The bigger units have gone because they're not under the rateable value, so they don’t get the discount.”

Vacant lots will stand still, she said, if bigger units are not under rateable value, and come with “huge, long leases”.

“When you’re a start-up, you don’t want to get into a five-year contract,” she added.

Without the right support to get on the next rung of the ladder, Landels said women in business are the hardest hit.

“The majority of women owned businesses – 51 per cent – are start ups,” she said. “Just 14 per cent get to the status of being an employer. That’s a massive tail off.”

While some smaller businesses have benefited from a surge in custom as stay-at-home measures meant more people spent time in their local neighbourhoods, they are concerned about turning a steady profit as Covid-19 measures relax, and utility bills are set to rise.

Businesswoman Vicky Gunn has witnessed the impact first-hand. Her local gym in Carnoustie shut its doors after stay-at-home measures took their toll, and the cafe next door reduced its opening hours to save on electricity bills.

Gunn, the owner of a dog shop and groomer, is grappling with four-figure utility bills, and is worried about raising her prices without losing custom.

“My utility bill was £1,000 last quarter, and I know they will go through the roof,” the owner of Millie’s Pet Services said.

“We can’t cut back on the clippers for our dog grooming service, or the freezers where we store fresh dog food. Staff costs will also go up as National Insurance contributions and real living wage rises.”

“The margin on the food is small – around 30 per cent – so when my electricity bill goes up in April, I wonder, will I be making a profit?”

While the bigger units stand empty, only a small number of businesses can afford them.

Lots over a certain rateable value don’t receive business rate relief, and planning permission to refurbish a former store costs at least £1000.

“I know a lot of businesses who moved online over the pandemic who have given up their premises,” she said.

“Whether you’re a small start up or medium-sized business, do you really want to be lumbered with those size of costs?”

Sourcing units

Julia Latif has given up on sourcing a commercial unit because of unaffordable rents.

Latif, who lives in Fort Augustus in the Highlands and runs Our House of Spice with her sister Nadia, said when utility bills are added to “sky-high” commercial rents, the only affordable lots are “ones without footfall.”

“We’ve moved online because we couldn’t afford to rent out a kitchen unit,” she said.

“Even though we want to scale up, we’d have to do it drastically to afford the thousands of pounds in rent and bills when our product is £3.50 to purchase,” she added.

A new town centre

As a slew of high street giants collapsed over the pandemic, community projects like Midsteeple Quarter stepped in to make use of long-standing vacant lots in Dumfries.

By refurbishing eight out-of-use listed buildings for businesses in the community, they have attracted custom back to the town centre.

Tenants sign licences of occupation instead of a formal lease, meaning business rates are slashed or not charged, sparing the organisation and the business the extra costs.

“We want to bring back local ownership, so the businesses running the buildings pump money into the local community,” executive director Scott Mackay said.

The organisation’s success has been noted by the government, who have submitted their work to the National Planning Framework as a blueprint for regenerating town centres.

While the project has gone from strength to strength, it has faced challenges from the landlords making a profit from vacant lots.

“We want to buy one empty building, but the landlord won’t sell it because the lease doesn’t run out for another five years, and they’re still getting capital,” Mackay said.

“We’ve been told we’ll have to wait until then, so it’s empty in the middle of the street, and no-one can do anything about it.”

North Ayrshire Council reported the second-highest number of empty units — 357 — but it has slashed its vacancy rate in half over the last year.

Empty buildings have been repurposed to house the likes of the leisure trust, a Covid-19 testing centre and a veterans’ drop in, with an emphasis on community ownership.

“The council is proactively seeking to bring privately owned sites back into public ownership,” council leader Joe Cullinane said. “This includes the historic Kings Arms pub in Irvine which will be transformed into new town centre council housing.

While Cullinane would “never claim to have solved all the problems that our communities face,” he said the work is injecting a community spirit into town centres.

“We are ambitious, and have the political will to make a difference.”

The future of the high street

Claire Baker MSP, convener of the economy and fair work committee leading the inquiry said “the increase in the level of vacancies is significant”

Commenting on the “alarming” vacancy rate figures, Baker, convener of the economy and fair work committee, said they “tell an all too familiar tale of what was once the heartbeat of Scotland’s communities.”

”We know the challenge is compounded by many of these being previously large high street retailers.

“I’d encourage businesses and members of the public to get in touch with us, so that we can learn how best to diversify and grow high street activity to ensure Scotland’s town centres can thrive once more,” she added.

While “there is nothing inevitable about the decline of our high street and town centres,” action is “needed swiftly,” David Lonsdale, the director of the Scottish Retail Consortium said.

“If ministers are serious about preventing closed up stores and gap-toothed high streets, fresh action is needed to deliver vibrant and attractive centres with compelling reasons for people to visit and spend money,” he added.

Andrew McRae, Federation of Small Businesses Scotland’s policy chair, said “there’s a huge amount of work to do to reduce vacancy rates and to make us proud of our town centres,” including “nurturing independent business” which has been “loyal to local high streets when big businesses deserted them.”

“With billions of pounds of spending power and a real understanding of local communities, it’ll be impossible to turn high streets around without our councils’ support,” he added.

But Leigh Sparks, professor of retail studies at the University of Stirling, stressed that local authority data is “only a partial” picture of retail performance. “We need clearer definitions about what a high street is, or what we consider a town centre in Scotland,” he added.

“We need to understand things like green spaces, and the non-commercial spaces that people value.

“Resolving these issues is impossible without a full set of data. If we had that, it would allow us to do much more positive things to help them.”

A Scottish Government spokesperson said: “While we know our economic recovery remains fragile, and that many retailers have had an incredibly challenging time over the last two years, the most recent industry figures show a slight decrease in the Scottish retail vacancy rate.

“The Scottish Government is firmly focused on supporting our economic recovery and for people to safely enjoy our high streets, town and city centres.

“Since the start of the pandemic, businesses including retailers have benefited from more than £4.4bn of business support.”

A city property spokesperson for Glasgow City Council said: “Whilst the last two years have been challenging, we continue to offer support to our tenants to help stabilise property vacancy rates and assist with pandemic recovery.

“We are also working closely with the council and other partners to seek new and alternative property uses with the aim of contributing to the growth of Glasgow’s Economy”.

A spokesperson for Fife Council said it is “working across town centres to bring buildings back into economic use, including support to businesses for Covid adaptations, public realm improvements, upper floor conversions, heritage renewal schemes, new housing for town centres and enterprise hubs”.

Priced Out is an investigation by The Ferret, co-published with The Herald, exploring the impact of – and reasons that lie behind – the cost of living crisis in Scotland. Become a member for £3 a month and discount code PRICEDOUT to get your first month free.