Written evidence submitted by ACS (PEG0100)

  1. ACS (the Association of Convenience Stores) welcomes the opportunity to submit evidence to the House of Commons Business, Energy and Industrial Strategy Select Committee inquiry on post-pandemic economic growth. ACS represents 33,500 local shops and petrol forecourts including Co-op, McColls, BP and thousands of independent retailers, many of which trade under brands such as Spar, Nisa and Costcutter. Further information about ACS is available at Annex A.

Impact of Covid-19

  1. Covid-19 has reaffirmed the value of local shops in supplying essential products and services to communities that would otherwise lack provision. The convenience sector provides groceries and services within all types of rural (37%), suburban (26%) and urban (37%) communities[1]. Local shops often trade in isolated locations (38%) providing the only shopping option for the local community and shops trading in residential areas can serve significant populations, most typically from small parades (42%)[2].

 

  1. The impact of Covid-19 on individual stores varies greatly depending on trading location. Many rural and neighbourhood stores have seen uplifts in sales but the outbreak is proving particularly challenging for stores in city centres, high streets, petrol forecourts and transport hubs more reliant on passing trade. Some stores in these locations are experiencing significant sales declines and require policy support to retain business viability and jobs within these exceptional times.

Recommendations: Executive Summary

        Recognise the policy needs of sectors that have delivered social and economic value throughout the pandemic. Convenience stores across the country have ensured access to groceries and key services in all types of communities, including millions of otherwise isolated vulnerable customers.

 

        The Government’s approach to economic recovery should prioritise incentivising investment via the business rates system and reducing the cost of employment to encourage new job opportunities. Existing Covid-19 business support schemes should be withdrawn gradually to prevent ‘cliff edges’ from stalling the recovery.

 

        Electric vehicle infrastructure will be key to green growth. Adopt an incentive-led approach to expanding the charging network to ensure new infrastructure is installed where sufficient customer demand is possible.      

 

        Embed industry within scenario planning to help government better understand key supply chains and boost preparedness for critical incidents. 

 

 

What core/guiding principles should the Government adopt/prioritise in its recovery package, and why?

 

  1. Business support schemes should be withdrawn gradually to prevent a widespread reversal of progress on preventing business closures and job losses. The cash grants scheme has contributed towards funding significantly increased operating costs while the business rates holiday has relieved financial pressures, particularly for stores trading from locations reliant on passing trade. However, the impact of the pandemic has yet to be fully realised and reintroducing full business rates bills too early would hamper retailers’ capacity to respond and adjust to new trading patterns and operating models. The reintroduction of rates bills should be tapered to avoid a huge spike in tax liabilities and negative impact on cash flow.

 

  1. The Government should refocus on incentivising business investment to support the economic recovery, for example via business rates. A common criticism of the business rates system is that it penalises investment by immediately increasing bills when retailers either expand their premises or invest in plant and machinery such as CCTV, fire safety systems, air conditioning units or other internal items[3]. These higher bills can subdue investments, reducing economic activity and preventing the positive benefits of store improvements from being realised, such as increased energy efficiency or reduced crime. This perverse outcome could be avoided by adopting a scheme similar to the Scottish Government’s successful Business Growth Accelerator Relief. We would support a scheme delaying increases in bills for two years to unlock further investment from the convenience sector.

 

  1. The Government should also consider how it can amend and simplify the wide suite of costs associated with employment to prevent redundancies and encourage job creation. A starting point should be increasing the starting threshold for employer National Insurance Contributions, which would result in more meaningful year-on-year savings for local shops than increasing the Employment Allowance to £4,000. Annex B demonstrates how taken together these measures could go some way towards mitigating an increasing National Living Wage, unlocking investment and employment opportunities further.

 

  1. The scale of the economic challenge posed by Covid-19 also requires a careful assessment of the National Living Wage’s target to reach two-thirds of median earnings of 2024, ‘subject to sustained economic growth’. Covid-19 has clearly initiated significant economic risks for the labour market; since the NLW was introduced in 2016 retailers have consistently reported cutting working hours to mitigate increased rates (see Annex C).

 

What measures and support will businesses need to rebuild consumer confidence and stimulate growth that is sustainable, both economically and environmentally?

 

  1. We understand the desire for green growth to form a key component of the economic recovery and central role of the fuel retail sector in developing a widespread national electric vehicle (EV) charging network. A balance needs to be struck between accessibility to charging points for EV users and costs being placed on businesses. An incentive-led approach to expanding the network should be adopted to encourage strategic placement on retail sites and a proportionate national infrastructure.

 

  1. The Government should ensure the deployment of EV infrastructure is based on where consumers want to use charging points, rather than imposing sweeping requirements to install charging points in set locations where they may not be used. For example, dwell time in a convenience store is often short, especially as only 9% offer indoor seating areas[4]. This could prevent the use of costly EV charging points at some petrol forecourt sites which could have been more effectively installed elsewhere.   

 

Whether the Government should prioritise certain sectors within its recovery package, and if so, what criteria should it use when making such decisions? What conditions, if any, should it attach to future support?

 

 

  1. The Government’s strategy on economic recovery should recognise essential business for sectors that have delivered unique social and economic value during the Covid-19 crisis. This would include convenience stores that are ranked by customers as the service with the most positive impact on local areas, behind only Post Offices which 21% host within their businesses[5]. We would not support conditions being imposed on future business support measures, especially where they could impact eligibility at short notice.

 

How can the Government best retain key skills and reskill and upskill the UK workforce to support the recovery and sustainable growth?

 

  1. The Kickstart Scheme announced at the summer financial statement is welcome and the temporary £2,000 bonus for hiring apprentices aged under 25 and £1,500 bonus for hiring apprentices aged above 25 is a positive move but should be considered alongside action on existing barriers to apprenticeships in the sector. The requirement for apprentices to spend 20% of their working hours undertaking off-the-job training outside of the business makes it difficult for retailers to offer apprenticeships to part-time staff. 72%[6] of shop floor colleagues work fewer than 30 hours per week and three-quarters (73%) have commitments outside of work which affect the number of working hours they can undertake[7].   

 

Is the Industrial Strategy still a relevant and appropriate vehicle through which to deliver post pandemic growth?

 

  1. The industrial strategy’s overall ambition to improve living standards and economic growth by increasing productivity and driving growth across the whole country is relevant and are actively contributing via the Retail Sector Council. We also support the industrial strategy’s approach to policy making, focussed on mutual understanding and close communications between stakeholders and government about ‘on the ground’ needs and experiences and policy objectives.

 

What lessons should the Government learn from the pandemic about actions required to improve the UK’s resilience to future external shocks (including – but not limited to – health, financial, domestic and global supply chains and climate crises)?

 

  1. The involvement of industry in critical scenario planning across government departments would improve the responsiveness of government. We have welcomed close collaboration with the Department for Environment, Food and Rural Affairs during the outbreak through numerous working groups. This engagement has been valuable during the pandemic to identify the regulatory needs of the sector, particularly during March and early April when panic buying activity was widespread, leading to temporary relaxations of delivery hour regulations and competition laws to help feed the nation. Consulting in advance on emergency plans related to all key infrastructure and utilities is also critical.

 

  1. One issue has been limited understanding within government of the food supply chain. Local shops have experienced supply issues, particularly on lines where there has been exceptional demand. Availability across product categories is improving but there are still challenging gaps in supply for retailers and their customers. Retailers have sought new supply routes by working with suppliers to hospitality and other industries where more business closures have taken place and increased their business with local producers. The Government should closely monitor the working of supply chains and be prepared to step in if necessary during future crises or a potential second wave of Covid-19. Adequate supply must be maintained to the convenience sector, especially to ensure access to groceries in more rural and isolated areas where stores are often the only available provision. 

July 2020

 

 

 

 

 

 

 

 


Annex A – About ACS

 


Annex B – Economic Modelling of NICs and Employment Allowance Policies.

 

Annex C  - ACS Business Performance Index

July 2020


[1] ACS Local Shop Report 2019

[2] ACS Local Shop Report 2019

[3] https://www.gov.uk/guidance/how-non-domestic-property-including-plant-and-machinery-is-valued#what-counts-as-plant-and-machinery

[4] ACS Local Shop Report 2019

[5] ACS Local Shop Report 2019

[6] ACS Local Shop Report 2019

[7] ACS Colleague Survey 2020