THE new Scottish National Investment Bank (SNIB) should allocate capital to fund the regeneration of towns and city centres left reeling by the fallout from the pandemic, it has been declared.

Scottish high streets are continuing to come under pressure from restrictions to halt the spread of coronavirus. Non-essential retail outlets, bars, restaurants, cafes, and cinemas having been closed since late December, with still no definitive prospect of reopening.

The sustained closures have had a devastating effect on the retail sector, with Debenhams and Arcadia Group among a host of big names which have fallen into administration, sparking hundreds of thousands of job losses.

As attention now switches to how to fill gaps left by retreating retailers, the Federation of Small Businesses (FSB) in Scotland argues the newly launched Scottish National Investment Bank should fund projects that would make new uses for long-term vacant buildings in towns and city centres.

The institution officially opened its doors in November with a £2 billion war chest to invest in projects that meet its mission-led criteria – innovation, tackling inequality and supporting the drive to net zero carbon emissions.

Andrew McRae, Scotland policy chair at the FSB said: “Scotland needs to address the chronic problem of long-term empty properties in our city and town centres. One way to do that is to ask the Scottish National Investment Bank to invest in these premises and bring them back to use.

The Herald: Andrew McRae of Museum Context.

Andrew McRae, FSB Scotland

“If the next Scottish Government chose to make this move, alongside property market reforms, we’d have at least some opportunity to create the diverse, successful local high streets we all want to see.”

The FSB suggestion echoes a similar call in a major report, A New Future for Scotland’s Town Centres, published last week. The report recommended the creation of a strategic acquisition fund to help local businesses and community groups take ownership of and develop vacant units.

Both the report and the FSB flag the need to reintroduce services, such as GP surgeries, dental practices, banks and care homes, to town and city centres, which could help to drive the footfall that is essential for shops to survive.

In its manifesto for the forthcoming Scottish Parliament election in May, the FSB also makes the case for the commercial property market to be reformed, in order to make taking on property “less daunting” for small businesses.

That could involve introducing a standard small business lease, and giving small businesses greater rights as tenants. The FSB argues it should be easier for small business owners to open “pop-up” shops to trial ideas, citing the success of farmers’ markets. It also flags the importance of repurposing existing buildings for housing.

Phil Prentice, chief officer of Scotland’s Towns Partnership and a member of the review group which contributed to the New Future report, said the value-added tax (VAT) system should be amended to encourage investment in regenerating buildings.

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He noted that, while a developer looking to restore an existing property would be charged the full rate of VAT, a developer building new homes in a greenfield site would not pay the tax.

Mr Prentice said: “We need to think about what are doing for the climate. We need to think of looking at our towns and cities as already existing infrastructure that we can plug into.

“To remove the tax disadvantage, what we just do is put the tax burden on to new-build, which is stretching the infrastructure and damaging to the environment, and zero-rate the regeneration stuff within the town centre.

“Straight away, with the stroke of a pen, the UK Government could make town centre regeneration 20 per cent cheaper just by removing the VAT disadvantage.”

The most recent figures from the Scottish Retail Consortium show the shop vacancy rate increased to 14.4 per cent in the fourth quarter 2020 from 14% in the previous three months, suggesting one in seven stores in Scotland is lying empty.

And there are fears even more closures and redundancies will come after the furlough scheme, which has protected incomes since the pandemic took hold last March, closes at the end of April.

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With the drift to online shopping unlikely to stop even after the pandemic eases, stakeholders are calling for radical steps to help struggling streets rebound.

Stuart Patrick, chief executive of Glasgow Chamber of Commerce and a member of the City Centre Recovery Group, which has been examining long-term solutions for Glasgow from the Covid crisis, said there are financial barriers to overcome to convert existing space into residential use. But he noted that investigations were being made into reintroducing the business premises renovation allowance, previously in place between 2007 and 2017, to encourage investment.

Mr Patrick said: “It tended to be used for hotels – residential wasn’t eligible. I am thinking that this is possibly one of the areas [where] we could have some sort of taxation incentive that would help us convert existing buildings.

“There is a very heavy proportion of upper buildings in the city centre that are vacant. We really want to try and grab that opportunity. When we have done that in the past it has been relatively successful, but it is just so difficult to do financially.”

Mr Patrick said there is “active collaboration” between the business community and Glasgow City Council on actions needed to revitalise the city post-Covid.

He made the case for “flexibility” for hospitality operators to ensure they can utilise public spaces to “offer a wider option of outside services”.

Mr Patrick added: “We also have really got to look at how businesses are financially supported. We are obviously concerned that it may take longer for footfall to recover for businesses in the city centre than it does in the suburbs and smaller towns, simply because folk are, by legislation, forced to shop more locally.”

Although coronavirus restrictions have heaped enormous pressure on town and city centres, Leigh Sparks, professor of retail studies at the University of Stirling and author of A New Future for Scotland’s Town Centres, refuses to believe further decline of the retail sector is inevitable.

While noting that many major retailers had over-expanded in terms of physical premises, and that operating on the high street had become “too expensive”, professor Sparks said: “We are seeing growth of independents”.

He added: “We are seeing more localism coming back… and if we can make it easier and cheaper to afford these sites [more will follow].”