From Newport to Knightsbridge: the quiet collapse of UK prosperity

A recent report by Centre for Cities crowned the Welsh city, Newport as having the UK’s worst high street, with 19% of retail units sitting empty. The remainder are largely occupied by vape shops and betting outlets. While Newport may be an extreme case, it reflects a broader and troubling trend: the steady decline of high streets across the UK. Even affluent areas - Kensington, Chelsea and Fulham among them are not immune, with boarded-up shops becoming an increasingly common sight. It begs the question if businesses in some of London’s wealthiest districts are struggling, what hope is there for the rest of the country?

This decline didn’t begin yesterday, and its causes are multifaceted – high business rates, the protracted effects of Covid, the rise of e-commerce and food delivery services and, more recently, Labour’s tax policies, which have acted as a final blow for many small and medium-sized enterprises in retail and hospitality.
 
At the same time, another economically vital group is feeling increasingly unwelcome in the UK globally-mobile high-net-worth individuals and high earners. Changes to non-dom tax rules, inheritance tax and capital gains tax have prompted many to reconsider their ties to Britain. While the exact number of departures is hard to pin down, and some question the reliability of data from sources like Henley & Partners, anecdotal evidence is mounting. From declining demand for butler services and falling property prices in prime central London, to estate agents reporting European landlords selling up to reinvest in countries, like Portugal the signs are hard to ignore.

Some may argue that losing a non-dom billionaire, who only pays consumption taxes on rare visits, is no great loss. But the current tax environment is also driving away professionals who actively contribute hundreds of thousands of pounds to the Treasury each year – highly educated individuals working in banking, private equity, tech and consulting. These people are now exploring opportunities abroad, drawn by more favourable tax regimes and family-friendly policies, including affordable childcare that doesn’t discriminate by income.

So, what connects the decline of the high street with the exodus of high earners? Quite simply – fewer consumers mean fewer customers for local businesses. When high earners leave, they take with them the demand for services like cobblers, dry cleaners, independent cafés and neighbourhood restaurants. Labour’s tax policies are squeezing both the entrepreneurs who run these businesses and the professionals who support them with their hard-earned cash. 

If London were a client looking to reposition itself, the first recommendation would be a stakeholder mapping exercise, followed by a perception audit among key audiences, including SMEs and high earners. If I had to guess, very few ‘respondents’ would say they are currently getting a bang for their buck or feel supported and encouraged, which is problematic. 

With a £50 billion budget shortfall, the government must do everything within its power to support businesses and the biggest net contributors to the economy. The UK needs to return to basics and reconsider how it communicates its value to the very groups that drive economic growth. The current budget deficit is enormous, and it will likely grow even larger if these essential stakeholders continue to be overlooked.

Unless there is a tangible shift in how these economically active groups are engaged and retained, Newport will soon cease to be a shocking outlier.