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Good intentions

Published:  28 August, 2008

Mayor of London Boris Johnson has honoured a key election pledge to support London's small businesses by outlining measures to ensure that more affordable small shops are provided for in new retail developments.

In June the Mayor launched 'Planning for a Better London', which included a commitment to ensure a diverse and dynamic retail sector across the capital.

Under the new measures developers will enter into binding contracts to provide an agreed number of affordable small shop units when major retail schemes are proposed.

The Mayor, who was speaking at City Hall as he chaired his first business summit since he was elected, said: "During the election I promised to champion all sectors of London's business community and especially look out for the concerns of small businesses. Our small shops add real character and diversity to the capital's high streets but they're finding themselves squeezed out by competition from supermarkets and rising rents. My proposals aim to help reverse this trend."

Stephen Alambritis of the Federation of Small Business was pleased by the move. He said: "New retail developments will always be springing up in London. The key is to ensure that small businesses are part of those shopping sites. By emphasising the need for suitable premises and affordable rents Boris Johnson is definitely travelling in the right direction."

But Ian Anderson, head of retail planning at CB Richard Ellis, pointed out that the proposals come with their own set of problems.

"As a nation we clearly all want to support local shops and services, but there's huge amount of legislation and detail required to implement such a proposal," he said. "It poses many further questions, such as whether you target a local 'shop owner' or 'independent trader'. If so, then how is it policed? If a local shop owner develops a business and opens more than one shop (and becomes 'successful') are they then evicted as they're better able to afford 'commercial' premises? Is the rent subsidised, or capped? Is there a limited lease?"

Robin Denness, director of development at Churston Heard, part of Jones Lang La Salle, had questions of his own.

"Who is going to subsidise the idea? Is it the landowner, developer or council? It's a laudable aim but it's a question of how it's delivered. If you have five units and 20 independent retailers, how do you choose who takes the units? There are a lot of factors that need to be taken into account as to how it will work."

The British Retail Consortium (BRC) said it was not clear whether using Section 106 powers to require a proportion of lower cost premises on new retail sites - powers usually used to compel developers to pay for new infrastructure associated with their developments, such as schools, roads or street lighting - would help smaller retailers or might, in fact, undermine existing retailers of all sizes.

Stephen Robertson, BRC director general said: "We support small shops too, they are essential to the richness and diversity of London retailing, but the Mayor needs to think through all the implications of forcing any new obligation on developers.

"With businesses already facing some of the toughest conditions in decades, an obligation to provide units at below-market rents could further undermine retail investment by making some developments unviable.

"Where small shops are struggling it's down to a string of factors including restrictive leases, upward-only rent reviews, parking charges and availability, energy costs, rates, regulations and crime.

"The Mayor could help more retailers by turning his business summit words into action and tackling accessibility, transport and disorder while encouraging the government to offer more effective business rates reductions to smaller retailers, without imposing extra burdens on the rest."

Michael Green, chief executive of BCSC added: "BCSC has always realised the importance of a balanced tenant mix in any retail development. Our Future of Retail Property research published last year stresses the importance of reinvented town centres that must serve a variety of functions in an increasingly competitive market - combining leisure and offices alongside retail that will be at the heart of local communities. As part of the retail mix, chain and department stores often bring in customers which enable specialist shops to thrive alongside them, while independents provide the individuality which gives each shopping place its own unique identity."