Publication - Consultation paper

New Year's Day trading consultation - economic impact and impact on family life: report

Report on economic impact and impact on family life relating to the New Year's Day trading consultation.

New Year's Day trading consultation - economic impact and impact on family life: report
5. Economic Impact of New Year's Day Closure of Large Retail Stores

5. Economic Impact of New Year's Day Closure of Large Retail Stores

Due to lack of statistical evidence, it is difficult to estimate the direct economic impact of large retail stores (> 280 square metres) closing annually on New Year's Day in Scotland. Thirteen leading business representative groups and industry bodies including CBI Scotland, Scottish Retail Consortium and Scottish Chambers of Commerce have jointly written to Scottish Ministers urging them to reject the legislation as they believe it will add to the economic pressures already facing retailers due to the pandemic: "Curtailing [trading] through legislation would diminish consumer choice and add to the economic pressures facing retailers, their supply chain, and our town and city centre economies"[24]. There are possible outcomes, in relation to sales, of the potential closure of these stores:

  • Displacement: if large retail stores are closed then spend from that day could simply be displaced in time to the same shop/company. Consumers will either plan ahead and shop before the required closure, or delay spend until the following day(s). As a result, larger retail businesses will not face an overall financial loss as consumers spread their spending - which is easier to do for retail goods than, for example, hospitality as the public celebrate events on certain days. If employees that will now have the day off are planning to celebrate on New Year's Day by hosting a family gathering, this may even increase spending on groceries preceding the closure.
  • Displacement to smaller shops (< 280 metres squared) which can open on New Year's Day according to the legislation. These smaller retail stores are more likely to be local to consumers and employ fewer staff than larger stores. As a result, smaller businesses may see a financial gain at the loss of the larger stores. This, however, is not expected to be significant from one day's trading activity. Note: large companies may have smaller premises that may remain open if they meet the terms of the legislation (trading floor < 280 metres squared).
  • Retail spending could be diverted to online sales. Non-food retail businesses are more likely to be financially impacted by this outcome given the large share of other retail online businesses (e.g. clothing and homeware). It is likely that if a consumer shops for food online it will be with a large retailer that has both a large bricks & mortar and online presence.
  • Consumers can save their money that they may have spent in retail stores on New Year's Day which can be displaced into other sectors such as hospitality which can remain open, or there may be a very small increase in saving.
  • Staff who would have worked in large stores may lose out on overtime pay, so have less to spend/save on retail or other sectors. On the other hand, the overall cost for retail businesses with large stores may be levelled out by lower labour costs.

Given these potential outcomes, it is unlikely that the closure of large retail stores will have a significant negative impact on Scotland's overall economy. It can, however, have an impact on affected retailers' profits but again this may not be significant if consumers simply delay their spending. While official data does not allow us to analyse retailers' turnover by day, New Year's Day does not tend to experience the same high levels of activity seen on the weeks leading up to Christmas Day and other sales days like Black Friday and Boxing Day. Some large retailers have already made the decision to close their stores on Boxing Day 2021 such as Morrison's[25]. Many large retailers also made this decision in 2020 to close on Boxing Day for their staff as a thank you for their response to the Covid-19 pandemic.

There are expected to be sectoral differences with regard to impact when comparing food and non-food/other retail. In regards to food retail, consumers can pre-plan and delay spending before or after the closure of the large stores. If they decide to shop online it is likely that one of the large food retailers will be used given this saturated market. Smaller grocery stores may also benefit from shoppers that require groceries on New Year's Day as they are not required to close under the legislation. On the other hand, non-food/other retail has a more competitive online market e.g. clothing retail. As a result larger non-food/other retail stores that rely on bricks and mortar shops may not stand to benefit. While non-food/retail businesses tend to have sales in January, potential spending on New Year's Day can also be displaced to other trading days.

CEBR Bank Holiday research

There is limited analysis on the economic impact of this type of sectoral closure on a specific day such as New Year's Day, which is traditionally seen as more of a national holiday in Scotland than the rest of the UK, given the importance of Hogmanay, first footing and other specifically Scottish traditions. Studies have been undertaken on the impact of bank holidays such as a recent update (May 2020[26]) to a renowned study by the Centre for Economic and Business Research (CEBR) in 2012, which estimated a cost of £2.3 billion per bank holiday to the UK economy. The updated analysis by CEBR in 2020, however, found that that there may not be an overall negative economic impact through lost productivity on a bank holiday, due to increased flexibility in working practices since the original research and the balancing effect of increased trading to retail, hospitality and catering sectors.

Lost output on bank holidays is from sectors such as business services and manufacturing that are likely to close on a bank holiday, however retailers and service industries benefit from increased footfall on bank holidays as they are generally open. This research found that retail sales are boosted by 15% per day for a UK bank holiday with a bias towards furniture, gardening and DIY. The New Year's Day legislation, however, will see a different impact than the standard bank holiday given that only large retail stores will be required to close. Other service sectors such as hospitality and visitor attractions may therefore still see an additional boost. The CEBR did note that the only reason why an additional UK bank holiday might cause problems is if the additional costs to employers damaged financial positions that have in many cases already experienced hardship due to the Covid-19 pandemic, however these effects could be minimised as long as employees negotiate flexibly over pay and shift premiums.

Daily Turnover

While we to do not have data for specific trading days for the retail sector in Scotland, estimations have been made on the average daily turnover per business and per shop (retail unit) for 2018. The average daily turnover for the retail sector as a whole in Scotland is £64.6 million and £2,905 per site (shop), however this is not constant and will vary by day as well as by type of retail.

Retail food stores' (SIC 47.11) average total daily turnover is £30.5 million and £6,663 per site (shop), which is higher than retail as a whole. Daily turnover per site (shop) increased by size as defined by number of employees. Daily turnover is also higher for food retail stores that are part of an enterprise group (e.g. supermarket chain).

Estimated Average Daily Turnover of Retail ( SIC 47) Stores
Type of Business Number of Sites (Shops) Annual Turnover (£m) Daily Turnover Average (£m) Daily Turnover Average per site (shop) (£)
Retail (SIC 47) 22,240 23,584.6 64.6 2,905.4
Scotland total (exc. Financial sector and parts of public sector) 191,065 240,294.5 658.3 3,445.6

Source: Scottish Annual Business Statistics 2018

Estimated Average Daily Turnover of Food Retail Stores by Employee Size
Size of Site (Shop) Number of Sites (Shops) Annual Turnover (£m) Daily Turnover Average (£m) Daily Turnover Average per Site (Shop) (£)
0-4 employees 2,799 694 1.9 679
5-9 employees 342 317 0.9 2,542
10-14 employees 464 508 1.4 2,998
15-49 employees 670 1,823 5.0 7,453
50+ employees 308 7,805 21.4 69,425
Total 4,583 11,147 30.5 6,663

Sector definition: SIC07 47.11 Retail sale in non-specialised stores with food, beverage or tobacco predominating - in Scotland in 2018

Source: Scottish Annual Business Statistics 2018

Estimated Daily Turnover of Food Retail Stores by Type of Business
Type of Business Number of enterprise groups (e.g. Companies) Annual Turnover (£m) Daily Turnover (£m) Daily Turnover Average by Enterprise Group (£)
Not part of an Enterprise Group - e.g. Independent Corner Shop 2,853 873 2.4 838
Part of an Enterprise Group (e.g. Supermarket or Shop Chain) 49 10,273 28.1 574,414
Total 2,902 11,147 30.5 10,523

Sector definition: SIC07 47.11 Retail sale in non-specialised stores with food, beverage or tobacco predominating - in Scotland in 2018

Source: Scottish Annual Business Statistics 2018

New Year's Day Footfall

Given the restrictions placed on retail businesses since March 2020 due to the Covid-19 pandemic, footfall data on 1 January 2021 will not be an accurate representation of usual trade for New Year's Day as non-essential retail was required to close. Some essential retail businesses may have voluntarily closed on New Year's Day as well.

Footfall data is not available pre-March 2020 as data was made available to monitor the pandemic. The chart on the following page shows a significant decline in activity compared to the equivalent day in 2019 for the beginning of January 2021 mostly due to Covid-19 restrictions.

Volume of overall daily UK retail footfall, percentage compared with the equivalent day of the equivalent week of 2019, 1 March 2020 to 21 August 2021

Two line charts are shown here setting out the volume of overall daily UK retail footfall percentage compared with the equivalent week in 2019 over the period 1 March 2020 to 21 August 2021. Two lines are shown in the first chart comparing overall footfall index with the rolling 7 day average. The lines see a significant decline in March 2020 to then steadily increase until further falls in November and early 2021, but have since recovered near to pre-pandemic levels. The second chart compares the high street index, retail park index and shopping centre index. All three follow a similar trajectory to the overall footfall index, however retail parks have seen less of a decline compared to high streets and shopping centres.

Source: ONS: Economic activity and social change in the UK, real-time indicators.

Number of Stores impacted – estimation (approx. 1,353 outlets)

The lack of data on floor size for all retailers in Scotland means that an estimate is required for the number of stores whose floor-space is in excess of 3,000 square feet (280 square metres). Analysis was undertaken in 2006 by the British Retail Consortium for the Christmas Day and New Year's Day Trading Bill using an estimation of retail outlets in excess of 3,000 square feet. This was estimated to be approximately 6%.

2005 2020
Total 6% of Total Total 6% of Total
Total Retail Outlets in Scotland 23,760 1,426 22,550 1,353
Total Retail Enterprises in Scotland 14,435 866 13,790 827

Source: Inter-departmental Business Register 2020

This translated to an estimation of 1,426 outlets in 2005. If we apply this same assumption to more up-to-date data for 2020 – assuming the general size of retail properties has remained stable – approximately 1,353 outlets would be required to close on New Year's Day in Scotland.

While only 6% of units are estimated to close according to this estimation, these larger retail premises are expected to have a greater share of total retail employment and turnover in Scotland. When defining business size by number of employees, large retail enterprises (250+ employees) in Scotland comprised around 2.2% of enterprises, yet accounted for 69.6% of employment and 76.8% of turnover.

Number of employees impacted – estimation (approx. 141,000 employees)

Due to data limitations it is not possible to estimate the share of employees that would be able to take the holiday if large stores, as defined by trading space over 280 square metres, were required to close on New Year's Day. It may also be the case that some staff may be required to work even if the store is not allowed to trade e.g. warehousing, restocking shelves, cleaning. What is required to estimate employment of large retailers is information on average staffing per square foot of retail space: in conjunction with data on square footage of all retail outlets, this could then be used to estimate the total number of employees in stores with floor-space above 280 metres squared. Such data is not available for Scotland.

However, at a very crude level, given the likely relationship between floor-space and staffing requirements, one approach would be to take this estimate of 6% and assume that this holds roughly for staffing levels as well: the top 6% of retailers by floor-space are also the top 6% of retailers by staffing levels. Looking to the table below on numbers of outlets by staffing levels, the estimated top 9% of outlets by numbers of staff are those that have 20 or more employees (note: due to data limitations 6% cannot be established exactly). This leaves the remaining 91% of stores with between 0-19 employees.

Number of retail outlets by business size (no. employees), Scotland, 2020
Number of employees Number of retail outlets in Scotland 2020
0 to 4 11,430
5 to 9 5,785
10 to 19 3,310
20 to 49 1,405
50 to 99 305
100 to 249 240
250 to 499 75
500 to 999 0
1000+ 0
Total 22,550

Source: IDBR 2020

To estimate the number of employees affected by the legislation, we take a midpoint from each category of staff numbers 20-49, 50-99, 100-249, 250-499, 500-999 and 1000+ and then multiply it by the number of firms in that grouping. This is a simple way to approximate the numbers of affected staff. This method obtains a figure in the region of 141,000 employees, roughly 61% of retail employment in Scotland. It should be noted that a share of these employees will work in outlets exempted from the legislation or will still be required to work on New Year's Day even if the store cannot trade (note: this figure will also be inflated as it covers the top 9% of outlets rather than 6%).

As previously mentioned, it may also be the case that some staff will be required to work even if their large retail store is closed to trade e.g. to work on warehousing, restocking shelves, cleaning. The table below sets out the types of occupations in the wholesale, retail, repair of vehicles and accommodation and food sectors (SIC Section G & I)[27]. In this sector grouping, the greatest share of employees are in sales and customer service occupations (32%), which would likely be given the day off if the store was unable to trade. 23% of employees, however, are in elementary occupations that includes general labouring and cleaning, security, storage, transportation duties.

Share of employment by occupation and industry, Scotland, April 2020 – March 2021
  Sector (SIC 2007)
Occupation (SOC 2010) G, I – 'Wholesale and Retail Trade, Repair of Vehicles' and 'Accommodation and Food Service Activities' Total Services
Managers, Directors and Senior Officials 14% 9%
Professional Occupations 3% 25%
Associate Prof & Tech Occupations 5% 16%
Administrative and Secretarial Occupations 6% 10%
Skilled Trades Occupations 10% 5%
Caring, Leisure and Other Service Occupations 1% 11%
Sales and Customer Service Occupations 32% 10%
Process, Plant and Machine Operatives 5% 4%
Elementary occupations 23% 10%

Source: Annual Population Survey, April 2020 – March 2021

Geographical Impact – retail employment (2019)

The following figures by geography cannot be disaggregated by size of premises as defined by the legislation (280 metres squared or more of floor-space).

The Local Authorities with the greatest share of total retail sector employment in Scotland were Glasgow City (15.0%), City of Edinburgh (11.6%) and Fife (5.6%).

The Local Authority with the highest share of retail employment in 2019 was East Dunbartonshire where 13.5% of the population worked in the retail sector. This was followed by Clackmannanshire (13.3%), Midlothian (12.5%) and West Lothian (11.5%).

Local Authority Total Employment Retail Employment (SIC 47) Retail as % of Total Employment in Local Authority % of Total Retail Employment in Scotland
Aberdeen City 174,000 11,000 6.3% 4.7%
Aberdeenshire 112,000 9,000 8.0% 3.9%
Angus 39,000 4,000 10.3% 1.7%
Argyll and Bute 41,000 3,500 8.5% 1.5%
City of Edinburgh 349,000 27,000 7.7% 11.6%
Clackmannanshire 15,000 2,000 13.3% 0.9%
Dumfries and Galloway 67,000 6,000 9.0% 2.6%
Dundee City 75,000 8,000 10.7% 3.4%
East Ayrshire 42,000 4,000 9.5% 1.7%
East Dunbartonshire 26,000 3,500 13.5% 1.5%
East Lothian 33,000 3,000 9.1% 1.3%
East Renfrewshire 22,000 2,500 11.4% 1.1%
Falkirk 67,000 5,000 7.5% 2.1%
Fife 137,000 13,000 9.5% 5.6%
Glasgow City 420,000 35,000 8.3% 15.0%
Highland 128,000 12,000 9.4% 5.2%
Inverclyde 27,000 3,000 11.1% 1.3%
Midlothian 32,000 4,000 12.5% 1.7%
Moray 39,000 4,000 10.3% 1.7%
Na h-Eileanan Siar 16,000 1,000 6.3% 0.4%
North Ayrshire 42,000 5,000 11.9% 2.1%
North Lanarkshire 137,000 11,000 8.0% 4.7%
Orkney Islands 13,000 1,000 7.7% 0.4%
Perth and Kinross 69,000 6,000 8.7% 2.6%
Renfrewshire 87,000 9,000 10.3% 3.9%
Scottish Borders 47,000 4,500 9.6% 1.9%
Shetland Islands 16,000 1,250 7.8% 0.5%
South Ayrshire 48,000 5,000 10.4% 2.1%
South Lanarkshire 121,000 12,000 9.9% 5.2%
Stirling 51,000 4,500 8.8% 1.9%
West Dunbartonshire 31,000 3,000 9.7% 1.3%
West Lothian 78,000 9,000 11.5% 3.9%
Scotland Total 2,602,000 233,000 9.0% 100.0%

Source: Business Register Employment Survey (2019)

Note: Data by business size not available.

Geographical Impact – retail businesses (2020)

The Local Authorities with the greatest share of total registered retail sector enterprises in Scotland were Glasgow City (11.7%), City of Edinburgh (11.5%) and Aberdeenshire (7.9%).

The Local Authority with the highest share of retail enterprises in 2019 was Glasgow City where 10.9% of registered enterprises were in the retail sector. This was followed by Inverclyde (9.7%), Argyll and Bute (9.0%), and Dundee City (8.5%).

Local Authority Total Business Count Retail Business Count (SIC 47) Retail as % of Total Businesses in Local Authority % of Total Retail Businesses in Scotland
Aberdeen City 9,555 390 4.1% 5.3%
Aberdeenshire 14,200 560 3.9% 7.9%
Angus 4,155 280 6.7% 2.3%
Argyll and Bute 4,040 365 9.0% 2.3%
City of Edinburgh 20,715 1,320 6.4% 11.5%
Clackmannanshire 1,250 90 7.2% 0.7%
Dumfries and Galloway 6,685 420 6.3% 3.7%
Dundee City 3,925 335 8.5% 2.2%
East Ayrshire 3,550 265 7.5% 2.0%
East Dunbartonshire 3,145 210 6.7% 1.8%
East Lothian 3,410 235 6.9% 1.9%
East Renfrewshire 2,790 185 6.6% 1.6%
Falkirk 4,215 305 7.2% 2.3%
Fife 10,460 765 7.3% 5.8%
Glasgow City 20,965 2,290 10.9% 11.7%
Highland 11,480 685 6.0% 6.4%
Inverclyde 1,805 175 9.7% 1.0%
Midlothian 2,720 140 5.1% 1.5%
Moray 3,565 230 6.5% 2.0%
Na h-Eileanan Siar 1,250 85 6.8% 0.7%
North Ayrshire 3,570 275 7.7% 2.0%
North Lanarkshire 8,390 645 7.7% 4.7%
Orkney Islands 1,535 80 5.2% 0.9%
Perth and Kinross 6,585 410 6.2% 3.7%
Renfrewshire 5,255 405 7.7% 2.9%
Scottish Borders 5,275 355 6.7% 2.9%
Shetland Islands 1,580 85 5.4% 0.9%
South Ayrshire 3,840 290 7.6% 2.1%
South Lanarkshire 9,645 710 7.4% 5.4%
Stirling 4,305 275 6.4% 2.4%
West Dunbartonshire 2,185 175 8.0% 1.2%
West Lothian 5,300 345 6.5% 3.0%
Scotland Total 179,460 13,380 7.5% 100.0%

Source: Inter Departmental Business Register (2020)

Geographical Impact – retail business units (2020)

The Local Authorities with the greatest share of total local units registered under the retail sector in Scotland were Glasgow City (15.9%), City of Edinburgh (10.9%) and Fife (6.1%).

The Local Authorities with the highest share of large units as defined by employee size (250+ employees) in 2020 were Glasgow City where nearly 1 in 5 (18.8%) large units were located, followed by Edinburgh at 12.5%. This was also the case for medium sized businesses (50 to 49 employees) where Glasgow City (16.5%) and City of Edinburgh 11.0%) had the greatest share of units.

Local Authority Total Retail (SIC 47) Units % of total retail units in Scotland Micro (0-9 employees) Small (10-49 employees) Medium (50 - 49 employees) Large (250+ employees)
Aberdeen City 870 3.9% 600 240 25 5
Aberdeenshire 830 3.7% 600 200 30 0
Angus 430 1.9% 340 80 10 0
Argyll and Bute 495 2.2% 435 60 5 0
City of Edinburgh 2,460 10.9% 1,865 525 60 10
Clackmannanshire 170 0.8% 125 35 5 0
Dumfries and Galloway 690 3.1% 520 160 15 0
Dundee City 680 3.0% 525 130 20 5
East Ayrshire 415 1.8% 320 85 10 0
East Dunbartonshire 330 1.5% 260 55 15 0
East Lothian 340 1.5% 265 65 5 0
East Renfrewshire 285 1.3% 220 60 5 0
Falkirk 515 2.3% 385 115 15 0
Fife 1,380 6.1% 1,065 285 30 5
Glasgow City 3,575 15.9% 2,795 675 90 15
Highland 1,205 5.3% 930 245 25 0
Inverclyde 285 1.3% 220 60 5 0
Midlothian 250 1.1% 190 45 10 5
Moray 395 1.8% 300 80 10 0
Na h-Eileanan Siar 110 0.5% 80 25 0 0
North Ayrshire 480 2.1% 355 110 10 0
North Lanarkshire 1,035 4.6% 785 220 25 5
Orkney Islands 105 0.5% 70 35 0 0
Perth and Kinross 680 3.0% 550 115 15 0
Renfrewshire 695 3.1% 495 170 30 5
Scottish Borders 560 2.5% 450 100 10 0
Shetland Islands 110 0.5% 70 40 0 0
South Ayrshire 540 2.4% 410 115 10 0
South Lanarkshire 1,140 5.1% 865 240 30 5
Stirling 490 2.2% 380 100 10 0
West Dunbartonshire 335 1.5% 255 75 5 0
West Lothian 670 3.0% 485 170 10 5
Scotland Total 22,550 100.0% 17,215 4,715 545 80

Source: Inter Departmental Business Register (2020)


Contact

Email: paula.cassells@gov.scot