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How the Chancellor’s proposal for online sales tax demonstrates the plight of the UK highstreet


Predictions that the Autumn Budget would include a fundamental reform of business rates look to have come unstuck, as The Telegraph yesterday reported the Treasury floating the idea of a watered-down policy to support brick-and-mortar enterprises: an online sales tax. Designed to redress the balance between online retailers and physical shops on British high streets, the move is considered to be looked on favourably by Rishi Sunak, the UK Chancellor. Although the legislative vagaries of such a move would have to be thrashed out, it demonstrates in no uncertain terms the challenges faced by town centres in the UK and attempts by the British government and the retail sector to stop the rot in an industry which seems in terminal decline. 

A stroll round most British towns would reveal the growth of those horsemen of the apocalypse for the high street: the bookmakers, the payday lenders and the vape shops that creep in when retail has died away. More alarmingly however is how tired even the former shopping destinations of the UK now look, with Oxford Street looking particularly faded in its former grandeur. Undoubtedly the coronavirus pandemic has made matters worse, but arguably it has served more as a dramatic catalyst of a pre-existing trend than as a force in its own right. Already before Covid-19, the British shopping public was making more and more of their purchases online, and largely rejecting tawdry and old-fashioned shops that offered a failing model of expensive merchandise in an antiseptic setting. Even the phrase that appeared as the salvation of the retail sector, ‘experiential shopping’ – the department store model of attractions, restaurants, food courts and other destinations surrounded by merchandise people might incidentally buy – appears to have soured, especially as Debenhams collapsed last year and Topshop, once the king of in-store hype, went online. In an environmentally conscious age, the guilty pleasure that many associated with a day’s shopping have perhaps now been replaced by genuine guilt at the waste and packaging of retail, and a greater appreciation of the conditions endured by those that produce the goods to meet the developed world’s fast-fashion habit. And now that environmentalism isn’t just a question of staid moral responsibility, but is also rather fashionable, shopping in colossus flagship stores – the aircraft carriers of consumerism – seems a bit passé, with the popularity of Depop amongst young people showing a wider trend towards a desire of authenticity and a sense of not contributing to environmental harm. 

Understanding the existing state of physical retail is key to understanding the government’s mistrust of working-from-home – witness the Conservative Party Chairman, Oliver Dowden, urging civil servants to ‘get off their Peloton and back to work’ at the party conference a fortnight ago – and realising that the economic implications of a total collapse of the physical retail industry would be significant. As more and more people, especially the young, increasingly demanding work-from-home arrangements – with resignations at an all time high at organisations that force people back into offices, and by extension back into their commutes – it is difficult to see how this tide can be arrested. People in the UK and globally adapted to a year of being told to stay at home – they created home offices, came up with new domestic routines, found new ways of managing childcare, adopted new pets. The resulting reduction in footfall in urban centres, and the many incidental purchases that those working in offices made during the commute and throughout the day, have raised the interesting question of what now happens to town centres. But asking workers to go back into the office to prop up House of Fraser and Pret a Manger seems a little strange, and it remains to be seen if it will be effective. Meanwhile, the government continues to place their hopes in the survival of a brick-and-mortar approach to retail and commercial real estate. 

It remains to be seen what the settlement around business rates and the online sales tax will be in the budget. It also remains to be seen how British proposals to tax large online multinational retailers like Amazon will be met by the current administration in the US – but with Biden apparently lukewarm on the topic of an Anglo-American trade deal anyway, it becomes clear that the British government might not have anything to lose in spiting the Americans over taxing corporations. The drawing of binary distinctions between online and physical retail now seems a little strange, when most enterprises are a hybrid of both. Perhaps, post-covid, it will be a case of the high street is dead, long live the high street: but the sector was sleepwalking well before the pandemic. As the tug-of-war between employers and employees continues over the future of the office, we may have to be ready to wave goodbye to old models of work. Perhaps we should also wave goodbye to the high street, at least to the moribund form we have come to know in the last decade. Coronavirus saw some novel innovations in the way British town centres were organised, with increased pedestrianisation and more sympathetic licenses for pavement seating: where these worked, they created attractive new places to spend time. In light of this, it might be an attempt to save retail – and keep zombie brick-and-mortar firms afloat – that contribute to the continued drabness of the British high street.

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