Mind the gap:
If you want to draw an audience it never does any harm to choose your venue carefully. Harvey Nichols, the cutely named Forth Floor, posh nosh and prosecco. More than a hundred guests are there by six.
It’s pretty much a captive audience for Andrew Murphy who’s got a speech to deliver and he’s got his main target along as his guest speaker. Result.
Murphy has a lot to say about shop closures, the living wage, the apprenticeship levy, online retailers and – he apologises “if this is beginning to bore you” – business rates.
Despite a list as long as a child’s letter to Santa he remains calm and unflustered. In any case, he has said much of it before, only the Economy Secretary has not always been standing right in front of him as he reels off one demand after another.
Murphy is one of the leading executives at John Lewis, and used to run the store around the corner in the now part-demolished St James Centre. He is also chairman of the Scottish Retail Consortium which champions the sector.
Just now it is caught in a maelstrom of concerns over the inexorable rise of online shopping. Combined with governments north and south imposing taxes and levies on retailers it is fast finding itself in the perfect storm.
The combination of higher costs both for employing workers and operating from property have come at exactly the same time that technology has made people and property much more of a discretionary choice for retailers.
“That is not an opinion, it’s an indisputable fact,” says Murphy. “And the result is we’ve seen 1,600 shops close in Scotland in the last seven years, and there are 10,000 fewer Scottish retail jobs. It seems likely that closure rate will accelerate in the next few years unless action is taken.
“That’s a huge cause of concern.”
He says the changes in the industry are happening so quickly that government has to allow us to buy time to adapt. There are few high streets away from the main centres which do not have vacant premises, or “gap-toothed high streets, as he puts it.
“I’m from Penicuik and there are more gaps every time I go there,” he says. “There is barely a national chain in the town.
“It is not the council’s fault or even the government, but with the right action from government the changes could be slowed down.”
He has called for Scottish Ministers to consider bringing forward their existing plans to create a new zero-rate income tax band. It would effectively increase the tax free personal allowance over and above existing plans – giving the opportunity to increase the allowance more quickly than in the rest of the UK.
The SRC believes it could provide what he calls “a timely boost to consumers, the economy, and hopefully retail sales and employment”.
He wants a reform of business rates and is encouraged that former RBS executive Ken Barclay is due to deliver his government-commissioned report next month.
‘The Barclay report is a crucial opportunity’
“Please believe me. I would love to be able to change my tune on this,” Murphy tells his guests. “However bored you are of hearing it, I promise you I am more tired of saying it. But the reform agenda is at a critical juncture. There are only a few weeks until the Barclay Review reports. That report is a crucial opportunity to modernise the rates system; and as the furore caused by the revaluation showed, there is a desperate need for a better system.”
He says the government has to take the sector’s concerns on board and, more importantly, it has to take action.
“Change is happening whether we like it or not,” he says. “And the transformation of our industry is an emergent reality which applies irrespective of government policies & retail strategies across the western world.”
He points out that retail is the largest private sector employer in Scotland and a crucial source of Government revenue, paying a fifth of the total business rates bill.
It employs a quarter of a million Scots paying income tax. Furthermore, from 2019 the Scottish Government will also be assigned about £4 billion of VAT revenues – the vast majority of which flows from retail.
“This is an issue which affects the whole Scottish economy. That’s why we believe government needs to take urgent action,” he says.
One area of potential conflict is over the living wage. He has heard the government’s case, but he says there are two sides to paying it.
“As a policy I am against the living wage. As an ambition to pay people more then it obviously something we all want. But the living wage is ultimately destructive.”
He points out that just paying more makes companies uncompetitive and that the living wage itself fails to take into account the whole remuneration package that employees receive such as pensions, bonuses and so on.
‘A piecemeal approach will fail to meet demands’
He’s familiar with employee involvement which is championed by John Lewis but it too is facing some stark realities about the retail market, recently slowing its growth plans. As one local aside, he says the Edinburgh store has seen footfall down by a quarter as a result of the disruption caused by the St James works.
“The fall was expected,” he says. “We are investing in the store for the long term. We still have a good business there.”
His main concern is about the business rates chestnut.
“Barclay must deliver genuine and lasting reform and a far more competitive rates system,” he says.
“A piecemeal approach, or one that only tinkers around the edges, will simply fail to meet the demands of a rapidly changing economy.
“I won’t list all the reforms required now, but the two priorities must be creating a more flexible system through three-yearly revaluations, and a commitment to reduce the overall burden on businesses – in particular the current situation where over 5,000 Scottish shops pay higher rates than the equivalent store in England due to the decision to double the large business supplement.
“Scotland needs a business tax system for the 21st century, one that acknowledges how much has changed in the economy, and is ready for the new changes which are coming.”
Birthplace: Cyprus (grew up in Penicuik)
Education: Aberdeen University (Politics); Kellogg School of Management; London Business School
Career highlights: held a number of positions at John Lewis – and is currently group productivity and change director.
Former chairman of Essential Edinburgh and non-executive director of Edinburgh Leisure; chairman Aberdeen City Centre Association