U.K. Retailers Must Pay to Ease Town Center Plight, Grimsey Says

The U.K.’s biggest retailers should help pay for the regeneration of Britain’s shopping streets as small stores struggle for survival amid government inaction, according to one of the industry’s most seasoned executives.

National chains such as Tesco Plc (TSCO) should contribute 0.25 percent of their 2014 sales to a fund that will sponsor new businesses, Bill Grimsey, the former head of Iceland Foods Ltd. and do-it-yourself retailer Wickes, said in a 58-page report compiled to challenge a state-commissioned review of the industry.

Grimsey’s report seeks to address rising numbers of business failures and store vacancies as consumers shun their local town centers in favor of online shopping and retail parks. A December 2011 review by government consultant Mary Portas “promised the earth, but delivered little,” according to the 45-year industry veteran, who said more than 20,000 retailers remain at serious risk of failure.

“The high street landscape has now irrevocably changed and there is no point clinging on to a sentimental vision of the past,” Grimsey said in the report, that took months to compile. “We have to start planning for a bold new world.”

The one-off levy being proposed by Grimsey could raise about 550 million pounds ($858 million), he said in a separate blog on the Guardian website.

For Tesco, the U.K.’s biggest retailer, such a levy would cost about 121 million pounds based on the supermarket chain’s domestic sales of 48.2 billion pounds in fiscal 2013. A spokesman for Tesco declined to comment on Grimsey’s proposals.

‘Money Grab’

Money raised from such a move “could sponsor a wave of social enterprises and new ventures to help dramatically transform the high street,” Grimsey said in the blog.

Still, the idea failed to win universal backing, with the Confederation of British Industry describing it as a “one-off money grab” that would undermine investment and job creation.

The British Retail Consortium, which represents about 80 percent of U.K. retailers by sales, said it firmly opposes a levy as “any new approach must be fair for all, not a selective attempt to penalize one particular part of the retail sector.”

The proposal was one of 31 recommendations made by Grimsey to revive suburban centers, others including freezing car park charges and creating a full-time “high streets minister” to replace the current part-time position.

The U.K. town center of the future will a community hub that includes health facilities, housing, education, arts, entertainment and leisure space, Grimsey said.

‘Horribly Stressed’

“Shops are just part of the total plan,” and policymakers have to “accept there is already too much retail space in the U.K. and that bricks and mortar retailing can no longer be the anchor to create thriving high streets and town centers.”

Eight major national household retailers have gone into administration since the publication of the Portas review, which “failed to highlight to government the dramatic structural changes impacting the retail industry,” Grimsey said.

While the health of bigger retailers is slowly improving, smaller retailers continue to struggle and many “remain horribly stressed financially,” according to today’s report.

The number of so-called zombie retailers, defined as companies whose total liabilities are 5,000 pounds or more than their total assets, has more than doubled in the past five years, Grimsey said. The U.K.’s 20,152 zombie retailers had a combined negative net worth of 2.3 billion pounds in July 2013, his report shows.

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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