Nice day for a high-street revival

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It has taken nearly 10 years from the publication of the Home Office report recommending the freeing of Sunday trading to the placing on the statute book of the more limited reforms approved by Parliament. During the interim period the laws were broken to an increasing extent, but it is only now that we can begin to see the full structural impact of the change.

We caught a glimpse yesterday. The bid by Tesco for William Low makes economic sense at several levels. It is a relatively cheap way for Tesco to extend its network in Scotland, where it is weak. Supermarkets are like armies: as they advance they must make sure their lines of support do not become too stretched. Conversely, it is inefficient to try to operate a thin network of stores, because the cost of distributing to them is too high relative to the margins available.

The takeover is also a response to the price-cutting war, which has put medium-sized chains like William Low at a comparative disadvantage as they have neither the buying clout of the giants nor the ability to develop the niche markets of the corner stores. But it should also be seen as an inevitable consequence of the extension of Sunday trading.

The key point here is that regular Sunday trading in the supermarkets will be equivalent to a 10 per cent increase in floor space. True, some of the supermarkets are open already - and Sunday trading has long been legal in Scotland. They will also only be open for six hours. But at present, Saturday is the heaviest trading day of the week, with anything up to 40 per cent of the trade. Hence it is the most crowded and unpleasant day for shoppers.

It would therefore be surprising were Sunday not to pick up a fair proportion of the Saturday business. Even on the shorter hours, 10 per cent of the week's total seems about right. Indications from the groups that have already opened suggest this is possible. The fact that opening is limited to six hours is, from a financial point of view, just about ideal for the stores, because it can be efficiently staffed with a single shift.

Now a 10 per cent increase in floor space is enormous. We have not yet seen the full impact of it, because companies such as Marks and Spencer have yet to open on Sundays - it only declared its intention yesterday. It may well be that having the local M&S open will have a positive impact on the trading levels of other stores, as people who would otherwise not have bothered to get their cars out will now do so.

So from the retail business point of view the question is: what will be the long-term effects of such an increase in shopping space? Here are some pointers.

First, the frantic building spree of the supermarket chains will go on hold for perhaps five years. In one sense the spree is already over, as several of the groups have been scaling back their expansion plans. But now the emphasis will be on rebalancing space against demand. Running what you have more efficiently is a different management task from expanding till you reach the sea.

Next, pressure on middleweight supermarket chains - even well run ones like William Low - will increase. The total volume of retail sales will not change to any material extent: it will simply be sliced differently. And capital-intensive businesses like the giant superstores will benefit because the investment is being used more intensively, while the more labour- intensive groups will suffer.

However, there may well be a countervailing force to the trend towards the giant superstore: Sunday opening may enable some space that was otherwise becoming uneconomic to have a longer useful life. Medium-sized high street stores are a good example. A combination of parking restrictions and competition from out-of-town superstores has clearly damaged high street trade. Now these stores can have a second shot at making the weekend work for them.

It may even be that Sunday opening will lead to a revival of the high street, particularly for leisure or speciality shopping. For this to happen will require high streets to recreate themselves as centres of entertainment as well as trade, which will require co-operation and imagination. But it is not difficult to see in principle how the high street could use Sunday to fight back.

This is the most interesting point. Increasing the available retail selling space by 10 per cent has the quite predictable effect of favouring the strong. But it may also have unpredictable effects. What might appear a threat could also become an opportunity. If, in their different ways, both the Saturdays and Sundays of the high street could be made more pleasant, old town centres could suddenly rediscover their traditional role as civic meeting place.