Meeting of the Parliament (Hybrid)

Meeting date: Thursday, March 24, 2022

Official Report 1134KB pdf

---

Retail Strategy

The next item of business is a statement by Tom Arthur on a retail strategy for Scotland. The minister will take questions at the end of his statement, so there should be no interruptions or interventions.

14:29  

I am pleased to announce the publication of our retail strategy for Scotland today. The strategy recognises the importance of retail to Scotland’s communities, society, environment and economy, and it has been developed in collaboration with business, trade unions, academia and the public sector. I am thankful for the contribution of each person who has been involved.

Our shops often support neighbourhoods and communities. In rural areas or on our islands, the local shop is often the provider of lifeline products. Shops attract people into towns and cities and support other economic sectors such as tourism, culture and hospitality.

Retail also offers many people successful and flexible careers, from a first job in a local shop through to a career in distribution, supply chain businesses, large stores, ownership or management. With more than 240,000 employees—almost 10 per cent of Scotland’s entire workforce—retail is our largest private sector employer. It contributed £6.1 billion gross value added to the Scottish economy in 2019.

There are more than 15,500 retail businesses in Scotland, with growth of almost 2,000 since 2018. A strong, prosperous and vibrant retail sector is essential to fulfilling the vision of a wellbeing economy that we set out in Scotland’s national strategy for economic transformation. However, there is no doubt that our retailers and their staff have had a challenging time over the past two years. I have been incredibly grateful that so many of them went above and beyond for their customers and the most vulnerable in society during this exceptional period.

Since the Covid-19 pandemic started, the Scottish Government has done what it can to help businesses, including providing more than £4.5 billion of support. We are the only Government in the United Kingdom to offer 100 per cent rates relief for the past two years without any cap and are preventing a cliff-edge return to full liability by extending that support for retail through rates relief for the first three months of 2022-23. We are also supporting our high streets through the £10 million Scotland loves local programme and the £80 million Covid economic recovery fund, which encourages people to use and support their local businesses.

The pandemic has accelerated longer-term trends in, for example, online shopping, sustainable practices and the changing face of the high street. There remain challenges ahead, with staff shortages, rising inflation and the growing squeeze on living standards and business costs as a result of global trends and, of course, Brexit. Our retail strategy sets out actions that are designed to support the sector to rebuild after Covid, address longer-term challenges and maximise opportunities to fulfil its potential.

As we have seen during the pandemic, our retailers have been agile and creative in their response to meeting customer needs. Many have expanded their online and delivery capability. Many have switched to more ethical and sustainable products, packaging, sourcing and distribution. There are more retail businesses now than before the pandemic. That innovative and enterprising spirit will stand the sector in good stead as it evolves to meet the challenges and opportunities of the future.

Having set out in our strategic framework update how we will move beyond the pandemic, the time is right to publish the retail strategy. It builds on the national strategy for economy transformation and the Covid recovery strategy, and it sets out a shared vision for retail to become an exemplar for inclusive economic growth and play its part in creating a fairer, greener Scotland.

The retail strategy seeks to do that by building on the sector’s strengths so that it is successful, resilient, sustainable and profitable to the benefit of all in Scotland. We want to support innovation and entrepreneurship and to seize opportunities from new technology and markets to boost productivity and grow businesses. In that way, our retailers can benefit from and contribute to the bold programme of actions that will transform our economy over the next decade.

At the heart of the strategy, and a successful sector, are our people. As we further orient our economy towards wellbeing and fairness in order to significantly reduce poverty, we want to make fair work and skills development cornerstones of retail in Scotland. We want all retail workers have fulfilling and secure jobs. As I said in my statement to Parliament on 26 October last year,

“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.”—[Official Report, 26 October 2021; c 45.]

Unfortunately, employment law is currently reserved to the United Kingdom Government. With powers in that area, we could do more to protect and enhance workers’ rights, tackle poverty and increase fairness through legislation. However, we are determined to do all that we can, with the powers that we have, to make a difference.

I can announce today that we will work in collaboration with the sector and with trade unions to deliver a fair work agreement to which retailers can sign up to demonstrate an on-going commitment to fair work principles. That will include providing good-quality, secure employment and giving employees an effective voice. I expect that employers, in doing so, will take action to improve fair work conditions across retail and contribute to the reduction of in-work poverty.

Retail is a great choice for many. It offers opportunities for entry into the workforce, career progression and flexible working. It is vital that our workers have the right skills to enable them to have rewarding and secure careers and to grow businesses. That means strong customer service skills, which drive sales and business profitability. It also means new skills—for example, to harness the potential of new technology such as self-scan checkouts and online order systems. That is why we will work with Skills Development Scotland, the Scottish Funding Council and other partners to develop a retail skills audit and action plan. It will support reskilling and upskilling as jobs change in order to meet the needs of retail businesses and the careers of the people whom they employ.

A further aim is to strengthen retail’s contribution to the economic and social success of our local communities. Different locations have bespoke needs, and our retail sector has a pivotal role to play in helping to create and maintain successful places. We know that the pandemic has driven down footfall in some places, while others, including many local high streets, have thrived. There are already a number of place-based programmes to support retailers, such as the Scotland loves local campaign and business improvement districts. The actions in the strategy will support our retailers to think local—to work collaboratively in their communities; support local businesses and supply chains where possible; promote town and city centres; and consider creative responses to vacant retail units. We believe that that will build greater wellbeing in our neighbourhoods and in our town and city centres.

Reducing Scotland’s carbon footprint is essential to achieving our climate change targets and securing a just transition to a net zero economy by 2045. Our retailers have a crucial role in that regard through building secure local supply chains, adopting circular practices, increasing repair-and-reuse options and improving sustainable operations. Many retailers are already decarbonising their supply chains, setting their own net zero targets and encouraging customers to lead lower-carbon lifestyles, which is great to see. The strategy builds on that. We will, for example, develop a just transition plan for retail that will progress an environmentally and socially sustainable sector in the economy of the future.

The strategy rightly has a strong delivery focus and we, as a Government, will play our part in that. However, we cannot—and should not—be the sole vehicle for change. That is why we will establish a new industry leadership group for retail. Building on the collaboration that was involved in creating the strategy, the industry leadership group will oversee the development and delivery of strategy commitments such as those that I have just mentioned. It will focus on the actions in the national strategy for economic transformation that will directly support the retail sector. The leadership group will also agree a delivery plan, which will include a critical review process and timelines for measuring success. I will co-chair the group, and I look forward to that work getting under way.

The title of the strategy, “Getting the Right Change”, is more than a play on words. I make it clear that the publication of the strategy is just the beginning. It is the start of a new conversation with businesses and trade unions, customers and workers about how to support our retailers to overcome challenges and seize opportunities as we rebuild after Covid, and about how our recovery should improve the lives of people and their families—people who work in retail and the customers they serve.

Our vision is for a thriving, successful and profitable retail sector in Scotland that is an exemplar of inclusive economic growth. The strategy can make that vision a reality and ensure that we do, indeed, get the right change.

The minister will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions. It would be helpful if those members who wish to ask a question press their request-to-speak buttons now and, at the same time, check that their cards are in.

I thank the minister for early sight of the statement and welcome the collaborative approach. The minister knows as well as the rest of us that, towards the end of last year, businesses and industry were saying that the Scottish Government had not consulted them enough. Therefore, it is good to hear that there is a change in direction to address their concerns.

I have three areas of questioning. First, on a short-term basis, businesses are obviously desperate to receive support as quickly as possible. However, what analysis has been taking place of some of the successful schemes? For example, the high street scheme in Northern Ireland has generally proved to be successful. In addition, what analysis has been undertaken on the business improvement district schemes in Scottish towns? I am aware of some in Mid Scotland and Fife that have been particularly successful, but there are, sadly, others that have not been successful. It would be interesting to know why some have worked and some have not, so I would be interested to hear what the minister has to say about that.

Secondly, what commitment has the Scottish Government made to look at transportation issues? People will not come to some of our town centres unless good-quality transport is available. I would be interested to know what discussions the minister is having with his colleagues in the transport portfolio.

Finally, in the long term, there obviously has to be a commitment to addressing some of the rising costs that businesses are facing, which are their main concern. Does the Scottish Government have a firm plan to look at reform and modernisation of the business rates system, which many businesses find extremely complex?

I thank Liz Smith for her question and welcome her support for the collaborative approach that we are taking through an industry leadership group. That collaborative approach will be fundamental to realising the ambitions in the strategy. I will address the points in the order that she raised them.

Liz Smith asked about short-term interventions and, in particular, how our analysis of those interventions is informed. As I outlined in the statement, we have provided a range of support over the past two years during the pandemic. Most recently, the £80 million Covid economic recovery fund has been provided to local authorities, giving them an opportunity to support businesses in their areas in a way that is specific to them.

I note that reference was made to the voucher scheme in Northern Ireland. We have the Scotland loves local fund and the Scotland loves local gift card and I know that Glasgow City Council is looking at that mechanism for delivering support. What I see as fundamental is ensuring that we work in partnership with local authorities. They were members of the steering group and there was local authority engagement throughout the process of designing the strategy via the steering group.

We need to ensure that there is flexibility, because although retail will face certain common challenges in all parts of Scotland, some of the challenges will be unique to particular localities. We need provide support to local authorities to enable them to support and work with business, which often happens in other ways as well. The place-based investment programme provides capital support and there will be £10 million over five years for the Scotland loves local programme.

We are grateful for the work that Scotland’s Towns Partnership undertakes in delivering business improvement districts. We provided more than £500,000 during the pandemic to support BIDs. We recognise that there have been some challenges, so I am committed to undertaking continuous engagement with Scotland’s Towns Partnership to learn what lessons we have to from the pandemic about how we can strengthen the support that we provide for BIDs.

On the issue of transport access to town centres, some of that will be captured in what we are doing around the forthcoming town centre action plan. Ms Smith will also be aware of our transport aspirations with regard to 20-minute neighbourhoods, as contained in draft national planning framework 4 and consistent with the sustainable travel hierarchy as set in national transport strategy 2. We recognise that that is important. Ultimately, with regard to development, we would want to see an infrastructure first approach and a town centre first assessment. Again, that has been a long-standing element, but it is a fundamental part of our approach to 20-minute neighbourhoods in the national planning framework.

On the long-term issues around non-domestic rates, I appreciate that there were lengthy exchanges over the matter at the Finance and Public Administration Committee on Tuesday. Our position is that what businesses require right now is stability. A revaluation is forthcoming. As I said in the committee, we welcome the work of the Fraser of Allander Institute on its review of the small business bonus scheme. Although we are committed to that scheme for this parliamentary term, we will establish a short-life working group to reflect on the report that the Fraser of Allander Institute has provided. We all recognise that more data will allow us to be more bespoke in the design of our policies and ensure that all our policy interventions on non-domestic rates and other taxes deliver the maximum impact that we want to see.

I apologise for not being in the chamber in person for what I consider an incredibly important statement. I also refer members to my entry in the register of interests, as I am a director of a company with a residual retail interest and I am a member of USDAW—the Union of Shop, Distributive and Allied Workers.

I welcome this report earnestly and I agree with the preamble that the minister has provided. I also add a really important element, which is that retail is fundamentally the interface through which people’s salaries get recycled into the productive economy. Therefore, retaining retail is vital not just for the people who are employed in the sector or for the people who obtain goods and services from it but for the whole supply chain of a productive economy.

The report is useful and it identifies the right areas, but I question whether it identifies clear and new steps to address them. First, on productivity and technology, we know that there is a significant issue especially among small retailers with regard to technology uptake. Why, then, are no new initiatives identified to provide the flexible and clear support that they need? Likewise, on skills, we need more than just an audit of skills programmes. I wonder whether the new leadership group could have been empowered to design and deploy new skills programmes that would deliver the focus and flexibility that retail employers say is currently lacking.

On town centres and place, the linkage between office workers and retail footfall is key. In the short term, will the Scottish Government undertake a public reassurance programme to encourage people to get back into offices and deliver footfall, and will that element be incorporated in future iterations of the strategy?

Finally, I reiterate the points about business rates. As we discussed in committee, the link between non-domestic rates and business performance in retail, and indeed even business rents in the retail sector, is broken. Does the Scottish Government not realise that it fundamentally needs to review that levy?

Before I call the minister to respond, I point out that we have used up quite a lot of the limited time that is available with front-bench questions and answers. Although I will allow a bit of latitude, we really need to allow all MSPs who wish to ask a question to have their chance. I now call for succinct answers, minister, and for further succinct questions when I call other members.

Certainly. I will endeavour to be succinct, but I am happy to meet any member who wishes to discuss any aspect of the strategy in more detail when they have had further time to consider it.

To address the specific points that Daniel Johnson raised, we have a commitment to a skills audit, which will be followed up with an action plan that we will develop in partnership with Skills Development Scotland, the SFC and other partners. The International Logistics Group will lead on that work too.

The member is correct to recognise the essential role that retail plays; it is a fundamental part of the broader ecosystem of our town and city centres.

Daniel Johnson made a point about the return to the office. Obviously, it will be for businesses to take a hybrid approach and we all recognise that the experience of hybrid working has proved to be very useful and beneficial for many people. Individual businesses, along with public sector organisations, will take their own decisions about how they incorporate hybrid working in the future. I encourage people to go out and shop in their high streets and city centres in support of local businesses.

I already touched on points around business rates in my answer to Liz Smith’s question, so I will not repeat what I said.

My final points on encouraging people into town centres are that community wealth building features throughout the strategy and that there is power in anchor institutions—both public and private sector—playing a role in drawing people into localities, which can support retail and the wider economy.

Given that our town centres have been struggling for many years because of the combination of online shopping and industrial shopping estates opening up outwith town centres, does the minister agree that small independent retail businesses play a crucial role in providing essential services for our communities?

I agree entirely. There is a crucial role for small retail businesses, which has been exceptionally apparent during the pandemic, when they have provided lifeline goods and services, including to people who are vulnerable or shielding. I reiterate my thanks to all those who have gone above and beyond for the communities that they serve.

The actions in the strategy will support our retailers to think local and work collaboratively in their communities, and to support local businesses and supply chains, in line with the community wealth building approach. As I said in my statement, it is a people-centred approach to local economic development that seeks to ensure that wealth is less extracted from the local economy and more redirected back into it.

Will the minister advise members who will make up the new industry leadership group for retail, how much progress it has made in appointing a co-chair and when he expects the first meeting to take place?

I will update the Parliament in due course. My aspiration is that the ILG will meet for the first time prior to the summer recess.

I put on record my support and thanks to all the small retailers in Midlothian South, Tweeddale and Lauderdale for coming through the terrible challenges of Covid. Given the vital contribution that small business retailers in my constituency make to the wellbeing of our town centres and the local economies in Melrose, Galashiels, Peebles and Penicuik, for example, how can they contribute to Scottish Government thinking and the strategy?

Key to that will be the industry leadership group, details of which I outlined in my statement. There will be an opportunity for industry leaders, as well as trade union representation, to feed into that. I want to see a wider conversation and discussion follow on from the publication of the retail strategy, and I encourage everyone who is involved in the retail sector—people who are employed in the sector and those of us who use the sector—to feed into the approach. I am happy to meet Christine Grahame, as I am happy to meet any member from around the chamber, to discuss that in more detail.

Following the collapse of major retailers and larger retailers rationalising by closing stores, how will the retail strategy deal with the ownership of large, empty units, such as those that I see across my region, in a way that avoids speculation and incentivises investment?

It is an excellent question. At the heart of that will be our community wealth building approach. We obviously want to stimulate our local economies to increase demand for vacant units. We will take a range of actions to help to realise community wealth building as a central element. Some of the things that we will do include planning reform, land assembly, compulsory purchase and our support for regeneration through the place-based investment programme.

A range of measures will be put in place but, fundamentally, we must increase the demand for units. Central to that will be the stimulation of local economies and the community wealth building approach, which is well embedded in many local authorities in Scotland. We will move from an extractive model to one with more wealth circulating locally and being retained by local communities.

The retail sector has sustained and is facing damage from Brexit, the pandemic, the cost of living crisis and, now, the war in Ukraine. Given the impact on business costs and produce availability, how optimistic is the minister that the retail strategy is comprehensive enough to provide confidence to the retail sector?

It is an excellent question. We are living in unprecedented times and have been doing so for the past five years. The strategy is not a panacea, although it recognises and diagnoses some of the long-term systemic challenges that the retail sector has been facing.

Mr MacDonald is absolutely right to highlight the challenges that we are facing through the cost of living crisis. The strategy will be a living document and one of the first tasks of the ILG following its establishment is to develop a delivery plan that can take into account emerging events, including, for example, the cost of living crisis.

Rural, remote, and island areas rely on local shops that are often at the heart of the community. I also pay tribute to their hard work. They are also faced with barriers such as high delivery costs, minimum ordering that does not always align with storage and sales capacity limits, and planning that allows new supermarkets to be built on their doorsteps. Can the minister assure me that, given those issues, local community shops such as those found in my constituency and in other island and rural areas will be listened to by the new leadership group and that their voices will not be squeezed out?

Absolutely. I assure Beatrice Wishart that the industry leadership group will not just represent the breadth and diversity of the sector but the breadth and diversity of the geography of Scotland, and its different localities.

As in other places, the retail sector in East Kilbride has been struggling for years, with companies such as Debenhams going bust, and others reducing the number of stores. How will the retail strategy benefit towns such as East Kilbride, which has a shopping centre rather than a high street, and help to revitalise a really important part of our town?

The heart of so much of our approach to local economic development is place based—creating communities and places where people want to visit, live and shop. That will be vital to the recovery from Covid of retail, culture, hospitality and tourism. Whether it be in high streets or shopping centres, retail is vital to our local communities, so the loss of anchor stores has an impact, as the member highlighted. We want retail businesses in all locations in our local communities to be successful and profitable, by being more productive and innovative, supporting entrepreneurship and driving business growth.

The shopping centre in East Kilbride has good public transport connections and a large community living in close proximity, in the same way as other towns.

We also have a number of place-based programmes that can support retailers and shopping centres, such as Scotland loves local, and business improvement districts, all of which are supported by the Scotland’s Towns Partnership.

I thank the minister for his statement and for the helpful discussions that we have had about the strategy prior to today.

We are all aware of the challenges of automation in relation to job destruction, so I am pleased to see that the strategy discusses opportunities for automation to drive up product standards and reduce waste. Will the minister outline his thinking about how automation can also improve working conditions in retail and help us to meet wider sustainability goals? Can he also confirm what trade union representation there will be on the industry leadership group?

I am sorry, but I did not pick up the very last part of Maggie Chapman’s question.

Minister, please resume your seat. Maggie Chapman, could you possibly repeat just the last part of your question?

Of course; my apologies. Can the minister confirm what trade union representation there will be on the industry leadership group?

I have already had constructive conversations with Tracy Gilbert of USDAW, and USDAW will be invited to be part of the group. I will be looking to ensure that we have maximum worker representation on the ILG. I will, of course, welcome any views from members across the chamber.

On the point about automation, Maggie Chapman is absolutely correct that it can be easy to focus on automation as something that displaces jobs rather than augmenting them. One of the opportunities that retail faces is using such augmentation to drive up standards and quality, to create new and more fulfilling jobs, and to create more opportunities. That is why we will take forward the skills audit and the skills action plan. It is also why the strategy aligns with our national strategy for economic transformation, particularly with the measures to drive up productivity.

I look forward to having such conversations in the ILG, and more widely with members across the chamber.

The strategy document claims that the Scottish Government has

“delivered future-proofed mobile and broadband connectivity in remote, rural and island communities the length and breadth of Scotland”.

That claim is laughable. Will the minister who is responsible for Scotland’s digital strategy say when the Scottish Government will deliver on its reaching 100 per cent programme commitments and ensure that rural retailers can take full advantage of the opportunities of doing business online?

The Government is taking action, although I remind the member that telecommunications is a reserved matter. If only we had more powers in the Parliament, we could do far more.

The final question is from Stephanie Callaghan.

I agree that the retail strategy represents an opportunity to advance Scotland’s wellbeing economy. How will the strategy feed into Scotland’s broader vision of an economic system that is based on wellbeing, fair work and community empowerment?

A strong, prosperous and vibrant retail sector is essential to the vision of the wellbeing economy, as described in Scotland’s new 10-year “National Strategy for Economic Transformation”. The retail strategy contains current initiatives and future actions that will fulfil that vision and rebuild after Covid in a fair and sustainable way.

It is important to support all retailers to align with the community wealth building approach, which includes local ownership and hiring of staff, adoption of fair work practices, engaging with community organisations, and considering local enterprises within the supply chain. Those are important elements of our approach, and they will ensure that local people and businesses have a genuine stake in producing, owning and enjoying the wealth that we create, moving us closer to the more just, equitable and sustainable society that we want as we rebuild Scotland’s post-Covid-19 economy.

Thank you minister. That concludes the statement on a retail strategy for Scotland. I thank members and the minister for their co-operation.