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If Andy Burnham’s promise to deliver “Good growth in every postcode and hope in every heart” is to be translated into policy, few sectors offer a better test case than retail. At Michelmores, we advise retailers ranging from established high street brands to digital-first businesses on issues spanning technology, data, consumer law, employment, real estate, planning and construction, supply chains and sustainability. In discussions with retail clients, several common themes consistently emerge.
- Start by recognising that retail has changed
Today’s retailer is no longer simply operating a chain of shops. Stores are now fulfilment centres, click-and-collect hubs, marketing spaces and customer experience destinations. At the same time, retailers are investing heavily in AI, omnichannel commerce, data analytics, sustainability and increasingly sophisticated supply chains.
Government policy has not kept pace with these changes. Much of the tax and regulatory framework still reflects an economy where sales took place almost exclusively in physical stores. Retailers would like the next government to build a policy framework that recognises the multiple roles performed by retailers and reflects the realities of operating in an omnichannel world.
- Business rates reform
Business rates remain an important source of funding for local government, making abolition unlikely. However, retailers generally regard reform as long overdue, with the current system imposing a heavier tax burden on physical stores than on online competitors.
Retailers would like to see a more balanced system: lower rates for high street premises, a fairer contribution from large distribution and fulfilment facilities, and more frequent revaluations. That would better reflect structural changes in the market and encourage investment in occupied, active high streets rather than leaving units vacant.
Andy Burnham has already indicated that an overhaul of the business rates system is high on his policy agenda, but designing a system which supports investment in physical stores without undermining local authority finances is likely to be a difficult balance to achieve.
- Address the impact of National Insurance Contributions
Retail remains one of the country’s largest private-sector employers, relying heavily on large workforces, part-time staff, seasonal workers and entry-level roles, often against relatively thin profit margins. The reduction in the employer NIC threshold to £5,000 has disproportionately affected retailers, with many part-time and lower-paid workers now falling within scope. According to the British Retail Consortium, this has increased the cost of employing an entry-level full-time retail worker by more than 10%, and by around 13% for some part-time retail workers.
At a time when the UK is seeking to improve workforce participation, retailers would like the next government to consider restoring higher NIC thresholds for part-time workers, creating sector-specific employment allowances for labour-intensive sectors, or introducing targeted NIC relief for young workers and entry-level roles.
- Create a level playing field
It is not as simple as “bricks versus clicks”, successful retailers increasingly depend on both. The real issue is whether businesses competing for consumers operate under broadly comparable commercial and regulatory conditions.
UK retailers must operate within a demanding tax and regulatory framework: business rates, VAT compliance, employment law, minimum wage obligations, product safety rules, customs requirements and supply chain regulation, including modern slavery obligations.
Online marketplaces have transformed consumer choice and intensified competition, but UK retailers suggest that more could be done to provide stronger enforcement and ensure that overseas platforms and sellers competing in the UK market are held to equivalent standards, for example in relation to consumer protection, product safety enforcement and supply chain due diligence.
Consumers and retailers all benefit from competition, but retailers would like to ensure that competition is fair and that the government policy takes into consideration the cumulative impact of VAT, customs duties and the various legal and regulatory requirements affecting home-grown physical retail business.
- Reward investment in sustainability and technology
Another strong theme to emerge is the need to recognise and reward investment being made in sustainability and technology. Government understandably wants businesses to become more energy efficient, to decarbonise their operations, create more sustainable products and take advantage of technological developments.
We support retailers on technology and transformation projects ranging from AI-enabled customer solutions and intelligent inventory management systems to automated logistics platforms, supply chain digitisation initiatives and sustainability-driven procurement programmes. It is clear from the work that we do that retailers are investing heavily in technology to reduce waste and the impact on the environment as well as many other sustainability benefits.
The question, however, is whether policy will encourage and reward those investments. Enhanced capital allowances, targeted grants and tax incentives for energy efficiency, decarbonisation and circular business models, together with greater regulatory certainty in relation to the use and governance of AI technology may accelerate change more efficiently than imposing additional taxation or reporting obligations.
As retailers increasingly adopt AI-enabled solutions, regulatory certainty around AI governance, data use and consumer-facing technologies will also be critical to ensuring that innovation can be deployed with confidence.
- Make town centre regeneration a growth strategy
Andy Burnham has made no secret of the importance he places on local place-making and the regeneration of town centres. Successful high streets are no longer purely retail destinations. They combine shops, hospitality, leisure, housing, culture, public services and well-designed public spaces. The retail sector will be wanting to see how policy supports and enables this vision.
Potential measures would include planning law reforms that encourage productive use of vacant premises, greater flexibility for mixed-use developments and incentives that encourage landlords to prioritise long-term occupation over empty units awaiting premium rents.
Equally important is accessibility. Integrated public transport, sensible parking policies and attractive public spaces all influence where consumers choose to spend their time and money.
- Protect the people who make retail work
One issue that has become impossible to ignore is retail crime. Organised shoplifting and increasing abuse directed towards frontline colleagues are affecting businesses across the country.
Protecting retail workers should not be seen simply as a policing issue. It is about employee wellbeing, customer confidence and encouraging continued investment in town centres.
Retailers will rightly expect stronger action against organised criminal networks and greater protection for colleagues working on shop floors. That means better police response, more consistent prosecution of organised retail crime, improved data sharing between retailers and law enforcement, and recognition that abuse of retail workers is a workplace safety issue as well as a criminal justice issue.
A partnership for growth
Retail has already demonstrated extraordinary resilience. It has adapted to digital transformation, Brexit, the pandemic, inflation and rapidly changing consumer behaviour, while continuing to innovate and invest. The next government has an opportunity to harness that entrepreneurial spirit.
Through our work with retailers across the UK, we see first-hand the pace at which the retail sector continues to evolve. Retail businesses are investing heavily in technology, sustainability, customer experience and new operating models, while simultaneously navigating increasing regulatory complexity. The businesses that will thrive are those able to adapt quickly and innovate with confidence, supported by a legal and policy framework that keeps pace with change.
Michelmores’ multidisciplinary retail team advises on the full range of issues affecting modern retailers, including real estate, planning, employment, technology, consumer regulation, data protection, supply chains and sustainability. As retail business models continue to evolve, legal and commercial issues are becoming increasingly interconnected. We will continue to monitor developments and work with retailers as the policy landscape evolves.
Anne Todd is a Commercial Partner at Michelmores, specialising in technology, commercial contracts, data protection and digital transformation projects. She advises retailers and consumer-facing businesses and suppliers to the retail sector on technology procurement, AI, supply chain arrangements, sustainability initiatives and regulatory compliance.