Kirkby, a town on the outskirts of Liverpool, had been waiting 40 years for a supermarket until 2019 when the local authority stepped in. In one of a number of direct investments to kick start the local economy, Knowsley council bought up central Kirkby’s entire shopping district and brokered a deal with supermarket chain Morrisons.
With these interventions coming on-stream, the borough in north-west England has become one of the fastest growing local authorities in the country for retail. Research by the Financial Times shows that local spending in shops in February 2022 was up by 25 per cent on pre-pandemic levels, driven in large part by a huge increase in Kirkby.
In contrast, the FT’s neighbourhood spending data reveal that across all of Great Britain in-person spending in February was within 1 per cent of where it had been two years earlier, just before Covid-19 restrictions were imposed. But the data also confirm that the geography of the economy that is emerging from the pandemic is surprisingly different to the one that went into it.
The data show there are other fast-growing boroughs, but Knowsley is unusual in both the speed of its expansion and it being disadvantaged. Whereas other fast-growing areas for spending are largely prosperous places helped by more working from home during the pandemic, Knowsley is the second-poorest borough in England. Whitehall estimates that one in four residents live in “income deprivation”.
Knowsley council said locals had been desperate for a supermarket in Kirkby but for years had to go elsewhere. In November 2019, the town hall spent £42mn to buy the 94,000 sq ft site that now houses Morrisons, as well as the struggling shopping precinct behind it. More recently, it has bought a former college nearby that is now destined for housing, plus office space in the town of Huyton and a football club in Prescot.
Such council activism has fallen out of favour in recent years. The London borough of Croydon suffered a financial crisis in 2020, with some of its difficulties blamed on extensive real estate transactions.
Knowsley council said: “The successes we have achieved didn’t happen by accident — we kick-started our recovery . . . and this has put us in a very good position as the increased sales data clearly show.”
Retired civil servant David Higham, whose work has included supporting former Conservative deputy prime minister Lord Michael Heseltine on regeneration in the North West, said the borough of Knowsley was historically known “more for its problems than its opportunities” but was now adopting a “sensible and structured approach”.
Tourism has helped Knowsley’s rise. The Knowsley Safari Park has had strong visitor numbers post-lockdown. The council is also one of the bodies supporting a Shakespeare North project to attract visitors to a new local timber-framed theatre.
“Crudely, the strategy [to date] looks to be to capture the spending of people already in the borough,” said Higham. The next phase is to “increase the number of people visiting and develop a more positive image”.
In Kirkby, Prescot and Huyton, small retailers predicted that better food and drink offers would be the only way their district centres would survive commercially. Despite the overall bump in spending within the borough, they said longer term headwinds meant trade remained tough.
“I’ll last as a butcher in Kirkby,” said Neil Woolvine, 45, who runs his shop in the precinct behind Morrisons bought by the council. But he added that he may have to become an online-only service.
Describing the past few years on the high street as “agonising”, he said the council had tried very hard to help him and others survive. But added: “Retail’s finished. This will all end up with leisure, wine shops, bistros.”
Woolvine’s point is underlined by retailer Amazon’s expected imminent move into a giant “mega warehouse” just down the road on Knowsley Business Park, the company’s second facility on the industrial estate.
This is part of a national trend. Data published by the Office for National Statistics on Monday show that new orders for the building of warehouses were worth £5.6bn in 2021, double the value of the previous year and by far the highest in any year since records began in 1985.
The FT data show online spending has risen from around a quarter of consumer outlay in early 2020 to more than a third currently. This analysis is based on bank card data shared by the Social Investment Business, a regeneration charity. The data cover a sample of UK cardholders.
Hazel Blears, a former secretary of state for local government and the chair of SIB, said Knowsley showed how “well-judged actions by social investors, whether those investors are charities or local authorities, can make an enormous difference.
“We can actively de-risk propositions for conventional capital and make it possible to crowd in essential cash.”
The FT data reveal there was no national bounce in spending when coronavirus restrictions were dropped at the end of January, but there was a noticeable shift in where spending happened, as people moved back into city centres.
Areas that continue to suffer are in central London, or hubs that also rely on travelling workers. One area, however, lags the rest: sales in the City of London are still 37 per cent below pre-pandemic levels. But this is a marked improvement on January’s figures, when they were down 55 per cent.
Demand for City real estate, however, remains buoyant. Since the turn of the year, several major deals have been struck for offices, including the £1.2bn sale of Swiss bank UBS’s UK headquarters at 1 and 2 Broadgate to a Korean pension fund and the £800mn-plus sale of the Scalpel office tower to a Singaporean investor.
“We’ve now got a few data points telling us the new normal is not as close to the old normal as we thought it would be,” said Zachary Gauge, head of European real estate strategy and research at UBS. “There are clearly some structural challenges coming through and the investment market hasn’t been aligned to those challenges.”
Landmark office sales such as the one for Gauge’s own workplace have been driven by international investors with “huge amounts of capital needing to be deployed” who have decided that modern buildings on long leases to strong tenants were a safer bet than fixed-income assets or equities, he added.
But if the City continues to lag, that confidence could come to look misplaced, Gauge warned.
Additional reporting Valentina Romei