Town centre regeneration

Many of the topics discussed here - such as local government and planning – are devolved. The discussion of trends and challenges facing town centres applies generally across Great Britain, but the local government and planning provisions discussed here relate to England only. Section 2.2 of this briefing offers information on support for high streets in the devolved administrations.

High streets and town centres: trends and challenges

Trends in retail – and in particular changes in people’s shopping habits, with a shift towards out-of-town shopping and more recently to online shopping – have prompted concerns about the viability of town centres. At the end of 2020, just under 14% of high street retail and leisure properties were vacant in Great Britain, according to the Local Data Company. The pandemic has increased pressure on some high street businesses already struggling and store vacancy rates are expected to rise in 2021. However, opinions vary about the extent to which the pandemic will lead to long-term change to town centres. Some point to evidence of new trends towards localised shopping and resilient independent stores as a cause for optimism for future high streets. Supporting high streets following the pandemic, has been cited by the Government as a key part of its ‘levelling up’ agenda.

Retail is (obviously) not the only activity in town centres – it accounted for roughly a third of properties on British high streets in 2020. Nor is it the only activity where patterns of use are changing. Another driver for the Government’s changes to planning policy around use classes and permitted development for change of use (for example) has been the need to find new uses for surplus office space in some town centres. Initiatives to support high streets have therefore sought to recognise changing patterns of use and support resilience and diversification. Most policy reviews emphasise the importance of a locally led approach to regeneration programmes.

Government policy to support high streets and town centres

The Government’s Build Back Better High Streets Strategy sets out the government’s long-term plan to “support the evolution of high streets into thriving places to work, visit and live”.

A major part of this Strategy is several funding schemes designed to help high streets and town centres redevelop and to support local economic growth. These include the High Streets Fund, the Towns Fund in England (with similar schemes in Scotland and Wales), the Community Ownership Fund and Levelling Up fund UK-wide. The High Streets Task Force provides expertise and support to local areas in England on regeneration programmes.

A report by the Levelling Up, Housing and Communities Committee, Supporting our high streets after Covid-19 published in December 2021 looked at the effectiveness of these various funding schemes in supporting local authorities in town centre in high centre regeneration.

High streets and business rates

Business and retail representative groups have stated frequently that high business rate liabilities have been a major cause of high street retailers struggling during the late 2010s. They have called for reductions in business rate liabilities for retailers, or for businesses across the board. However, many commentators have suggested that blanket reductions would be offset by medium-term rises in rent, leaving many businesses no better off overall.

The debate has also featured suggestions for the introduction of an ‘online sales tax’. This reflects the idea that companies selling principally online tend to use more warehouse premises and less high street retail space, leading to lower business rate bills for ‘online’ companies. Discussion of online sales taxes has featured in recent Select Committee reports, and is mentioned in the 2020-21 fundamental review of business rates. However, the Government has no plans to introduce an online sales tax at the time of writing. This would require identifying the properties or businesses, and which of their transactions, would be covered.

Planning matters

The National Planning Policy Framework’s chapter on building a strong, competitive economy says that planning policies and decisions should help create conditions in which businesses can invest, expand and adapt and that planning policies should set out a clear strategy to support local and inward investment. Similarly, its chapter on ensuring the vitality of town centres says that planning policies and decisions should enable town centres to grow and diversify, promoting their “long-term vitality and viability”. The Planning Practice Guidance on town centres and retail suggests (amongst other things) that local planning authorities should consider structural changes in the economy and in particular changes in shopping and leisure patterns.

Empty shops

Broadly speaking, planning provisions relating to empty shops are concerned with tidying or cleaning them up, rather than bringing them back into use, although there are powers for compulsory purchase in certain circumstances, where this will secure the promotion or improvement of the economic, social or environmental well-being of the area.

New use classes from September 2020

The Town and Country Planning (Use Classes) Order 1987 (as amended) puts uses of land and buildings into various categories known as “use classes” but, over the years, use classes have not kept pace with changing patterns of use, particularly in town centres and high streets.

From 1 September 2020, through the Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020, certain new use classes were created and certain others were revoked or amended. Class A (shops, financial and professional services, restaurants and cafes, drinking establishments and hot food takeaways) and Class D (non-residential institutions and assembly and leisure uses) were revoked entirely, Class B (offices, workshops, factories and warehouses) was amended and three new classes were added: Class E (commercial, business and service), Class F.1 (learning and non-residential institutions) and Class F.2 (Local community).

The Government has said that the new use classes will create flexibility and thus support the revival of town centres, but some commentators have argued that there may be negative consequences. The Royal Town Planning Institute (RTPI) (for example) has observed that retail businesses would be able to operate from what would formerly have been business premises, without the need for consent, which was not (the RTPI argued) consistent with the town centre first approach.

Change of use from commercial, business and service to residential: consultation in December 2020

In December 2020, the Government launched a consultation on revised permitted development rights (PDRs) to reflect the new use classes.

The consultation document said that town centre retailers faced a “significant challenge” from changing consumer behaviour, magnified by the Covid-19 pandemic, and converting surplus retail space to housing would help to revive the high street. It noted that some substantial retail and office buildings might be converted, creating a significant number of new homes, with the impacts being managed through prior approvals.

Response to the consultation

The proposals – and especially the proposal to create a PDR for change of use from new Class E commercial, business and service to Class C3 residential – proved controversial and raised many concerns about their potential impact on high streets and town centres.

Although some commentators acknowledged a need for more homes and to support struggling high streets, they often cast doubt on the Government’s approach. Some suggested that the proposed changes might undermine the high street rather than support its revival by (for example) reducing footfall to local shops.

Change to go ahead: announcement in March 2021

The Government announced at the end of March 2021 that the proposed change, to enable change of use from Class E commercial, business and service to C3 residential, would go ahead. The Town and Country Planning (General Permitted Development etc.) (England) (Amendment) Order 2021 came into force in England on 21 April 2021.

The RTPI, Royal Institute of British Architects, Chartered Institute of Builders and Royal Institute of Chartered Surveyors wrote to the Government to protest at the change, saying that it may lead to poor quality housing and may “pull the rug out from under high street businesses just as they prepare to reopen”.