Clamp down on high street chains before it's too late

WHAT do you know - small retailers are being "squeezed out" of spruced-up town centres by councils and developers who prefer giving leases to established chains.

The report which revealed this last week can hardly have surprised anyone. After all, privately owned shops have been going out of business by the thousand thanks in part to competition from the chain stores. The chains represent a safer bet: they can pay more in rent and they are easier to find.

The danger is that we are at a "tipping point", where it gets harder and harder to run a small retail business in the face of expectations from funders and landlords that you will fail.

This is not meant as a criticism of developers and retail chains, who have to get the best return they can within the system. The problem is the system itself.

But there are alternatives. Kensington and Chelsea council in London is considering a clampdown on chain stores to prevent the formerly funky Portobello Road from becoming yet another dismal parade of usual suspects.

The Tory borough's proposals include forcing supermarkets and shopping centres to charge for parking, free 30-minute parking for high streets, abolishing "upward-only" rent reviews for shops, making developers provide affordable retail units in new or redeveloped shopping centres, and changing planning rules so that small shop units cannot be converted into larger ones. Some of these measures are backed by the Federation of Small Businesses.

Of course, a wealthy London borough like Kensington has different economic needs from a Scottish housing scheme or market town.

But it is hard to see how Scotland's economy benefits from the retail chain game. Very few UK-wide groups are based here. We lost perhaps the best known, Fopp, earlier this year.

Big store openings are still heralded as "creating hundreds of jobs", but they often destroy others in shops nearby.

A more robust approach has been taken by the Communist administration in the Indian state of Kerala. It recently banned chain shops to protect local stores from aggressive competition.

That is perhaps going a bit far. The high street chains and supermarkets help to set standards for choice, price and customer service. But their growth needs to be checked before they wipe out the competition. The Scottish Government should give the multiples two options - Kerala or Kensington.

Nothing ventured...

YOUNG American companies are tapping into a new, or rather renewed, form of investment. Corporate venturing firms, usually owned by big industrial groups, took part in 21.4% of funding deals in the first half of 2007 and contributed 9.2% of the money invested, the highest level since 2001.

These corporate investors have a lot to offer besides cash. They often have in-depth knowledge of the industries their portfolio companies are in. They can offer contacts and contracts, and perhaps even a lucrative trade sale exit if everything works out right.

I have no idea what proportion of investment in Scottish companies comes from corporate venturing firms, but I suspect it is less than 1%. So high growth Scots firms are missing out on a potentially useful pot of cash.

Ricky Muir-Simpson, the former boss of Adaptive Venture Managers, set up a company, Active Corporate Management, a few years back to push corporate venturing here.

But he acknowledges the market has moved slowly. He puts this down to a reluctance by big groups to accept ideas invented by smaller companies elsewhere, the novelty of the approach, and a failure to recognise its potential benefits.

Corporate venturing also requires patience, which according to Muir-Simpson is in short supply in the UK. Companies are under pressure to deliver results to analysts and investors every six months and long-term plays do not fit the bill. But for smaller companies, there is no harm in asking - even if it means making a transatlantic phone call.

Join Scotland on Sunday business news editor Douglas Friedli at 9.30am BST on Tuesday for an online chat about the issues of the day. Add your questions or comments below - now - and visit here on Tuesday morning for the live discussion.