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Three Reasons Small Businesses Needn't Worry about Extended Sunday Trading

02/17/2016 01:01 pm 13:01:29 | Updated 17 February 2016

Last week I joined heads with Adam Smith Institute research associate Holly Mackay to try and establish whether small business outcry over changes to Sunday Trading hours (which, it was announced this month, could be extended from Autumn 2016) is warranted.

As with many new government proposals, status quo bias is to be expected. Under the Sunday Trading Act 1994, shops with a floor space of more than 3,000 sq ft are currently subject to the six-hour restriction. It has meant smaller shops - like convenience stores - can set their own hours and, should they choose, open for longer than their competitors.

The government's plans would see prohibitions limiting large stores from opening on Sundays for more than six hours lifted in certain circumstances. The decision would be devolved to local leaders across England and Wales (Scotland and Ireland already have powers over Sunday trading devolved to their regional parliaments).

Here's what Mackay and I concluded.

1. Increased competition benefits us all. James Lowman, CEO of the Association of Convenience Stores, may bemoan the loss of a "small but important advantage," but most small business owners are used to finding new and innovative ways to outsmart their larger rivals. Competition has been proven to drive innovation: if you're the only player in your field, it can be difficult to improve.

Westfield London provides an interesting comparison. Prior to its opening in October 2008, a number of local retailers voiced concerns that the development would negatively affect their business in terms of lost customers and sales. Such concerns have proved unfounded - in fact, we saw increased footfall and a positive sales impact. Not to mention the benefit to small, independent retailers (such as bakeries) which opened inside the mall. The vacancy rate in Shepherds Bush, for example, is around 5 per cent - far lower than Britain's average rate of 12.5 per cent.

As for the public, there's a reason they gave resounding support to longer Sunday hours in a recent YouGov poll. Our shopping habits have changed; flexible hours mean large chunks of the public are suited to shopping outside the traditional hours. Retailers, therefore, must adapt in order to better compete for our trade.

2. Our ailing high streets, and even small retailers, will be better off. When Sunday trading laws were suspended during the Olympics, sales outside London increased by 6.2 per cent. In the capital, the increase was smaller (2.8 per cent) which, while still an increase, can be attributed to government warning us off the crowds. Increased sales suggests more customers to go round for everyone. A fifth of respondents to the YouGov poll said they would do more shopping on a Sunday were the changes implemented, and there is evidence that transactions for Sunday shopping are actually growing faster than those for Saturday. The more stores that are open on Sunday, the more consumers will choose to redirect expenditure from other segments (theatres, cinemas, bowling alleys etc).

Despite what the TUC would have you believe, this move will not mean the death of independent retailers. As detailed by Genakos and Danchev (2015), opening hours are only one of many strategic variables (in addition to price, location, advertising, personal advice or services) available to competitors who wish to protect and expand their market share. Indeed, in Australia, there appears to be no relationship between the proportion of small retail businesses and the stringency of trading hours regulation in each state. Further, regulation does not appear to have had any deleterious effect on the viability of small businesses.

3. Devolution, more broadly, is good for Britain. Surely local councils have a greater understanding of the problems facing their local areas than Whitehall? As one of the most centralised states in the world, the UK is ripe for devolution in a range of policy areas - from taxation to healthcare and infrastructure. The Chancellor was right to devolve business rates in the Autumn Statement; and the government is again right to put its faith in local councils, who are best positioned to tackle the decay of their local high streets. Devolving Sunday trading hours will also allow councils to "zone" any relaxation, so they will be able to prioritise city centres.

We may be a nation of shopkeepers, but we're stifling our instincts with antiquated rules. Why not let them open their doors?

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