Retail impact assessment: trade diversion and vitality
Failing the impact test is a mandatory refusal. The arithmetic is less contentious than the assumptions behind sales density, catchment and diversion.
A retail impact assessment tests whether a proposal outside a town centre would cause significant adverse impact on existing centres and on investment in them. The National Planning Policy Framework requires one for retail and leisure development outside centres that is not in accordance with an up-to-date development plan, where the floorspace exceeds a locally set threshold or, where no local threshold is set, 2,500 m² of gross floorspace. The test is separate from the sequential approach and a scheme can pass one and fail the other.
Failing the impact test is a mandatory refusal, so the assessment is not a supporting document. It is the application.
When an assessment is required
Three conditions have to line up before the requirement bites. The proposal is for retail or leisure development, it is outside a defined centre, and it is not in accordance with an up-to-date plan.
The threshold is the fourth element. Local plans frequently set a lower figure than the national default, sometimes considerably lower in areas with small and vulnerable centres, and the locally set figure governs. Read the adopted plan before assuming the national default applies.
Two points on scope. Gross floorspace, not net sales area, is the measure in the Framework, and applicants who assess against net figures produce an assessment that starts from the wrong number. And a proposal that falls below the threshold can still be refused on impact grounds if the evidence supports it; the threshold determines when an assessment is required, not when impact matters.
Where the scheme is also outside an up-to-date plan allocation, the Sequential Test applies alongside the impact test, and both have to be passed.
What the impact test actually examines
The Framework identifies two impacts. The impact on existing, committed and planned public and private investment in a centre or centres in the catchment. And the impact on town centre vitality and viability, including local consumer choice and trade in the centre and the wider retail catchment.
The first of those is easy to overlook and it decides cases. Where a council has a committed scheme in its town centre, whether that is a shopping centre refurbishment, a mixed-use redevelopment on a council-owned site or a funded and programmed public space scheme, a proposal that would undermine the deliverability of that investment faces a serious obstacle.
The second is broader than a trade diversion percentage. Vitality and viability describe how a centre functions, and a diversion figure is one input into that judgement rather than the answer.
Modelling trade draw and diversion
The quantitative work follows a settled structure, and the arithmetic is less contentious than the assumptions.
- Define the catchment, usually by drive time and by reference to the centres the proposal competes with, supported by the retail hierarchy in the development plan.
- Establish available expenditure in the catchment for the relevant goods categories, using published expenditure data and population projections, and state the base year and price base.
- Estimate the proposal's turnover, using published sales density evidence for the type of operator and floorspace proposed.
- Distribute that turnover as trade draw from the catchment zones.
- Convert the draw into diversion from named centres and from named committed schemes.
- Express the diversion as a percentage of each affected centre's turnover, before and after, and test the result against the centre's current health.
The assumptions that carry the argument are the sales density, the catchment definition and the diversion split. Show the workings for each, state where the input came from, and run a sensitivity test that assumes a higher turnover and a less favourable diversion pattern. An assessment presenting a single scenario invites the council's consultant to run the pessimistic one for you.
Cumulative impact matters as much as the scheme's own effect. Where other permissions are unimplemented in the same catchment, the assessment has to consider the position with those schemes trading, because a council will.
Base year choice is worth a sentence of its own. Expenditure data and population projections both age, and an assessment built on a base year three years before submission will be challenged on that ground alone. Where the data is older than the application, roll it forward explicitly and show the growth rates used rather than leaving the reader to work out what happened in between.
Vitality and viability indicators
Health check evidence is what turns a percentage into a judgement. The indicators councils and inspectors look at are consistent.
- Vacancy rate, and its trend over several years rather than at a single date
- The mix of uses and the diversity of retail, service, food and drink and leisure offer
- Presence of national multiple retailers and the level of representation
- Rental levels and yields where evidence is available
- Footfall counts, where the authority collects them
- Pedestrian environment, accessibility, parking and public transport
- Perception and customer views where a survey has been carried out
A survey of the centre carried out for the application should be dated, cover the whole defined centre rather than the prime pitch, and be repeatable. Photographs help. A vacancy count taken in the week between Christmas and the new year tells nobody anything.
The point of the health check is comparative. A five per cent diversion from a strong centre with low vacancy and rising footfall is a different proposition from the same diversion from a centre already losing its anchor tenants, and the assessment should say so plainly rather than relying on the number alone.
Presenting the conclusion
The policy test is a matter of planning judgement rather than a numerical threshold. There is no percentage above which the test is automatically failed, and inspectors have repeatedly declined to set one.
What persuades is an assessment that reaches its conclusion transparently. State the diversion figures, describe the health of each affected centre, explain why the combination does or does not meet the policy test, and address the investment limb separately rather than folding it into the vitality discussion.
Where the honest answer is that impact on one small centre is material, say so and address it, whether through mitigation, a reduction in floorspace or a restriction on the goods that may be sold. A conditioned restriction on comparison goods floorspace or on the subdivision of a unit is a common and effective response, provided it is precise enough to be enforceable.
An Economic Impact Assessment covering jobs and investment supports the wider planning balance, and it is a separate document from the impact test. Do not present employment benefits as an answer to a retail impact question, because they are not.
The Retail Impact Assessment is one of the report types where councils expect a suitably qualified author, and professional review before submission is strongly advised. Councils routinely commission their own retail consultant to test the work, and an assessment with unstated assumptions will not survive that.
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This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it. Enter your postcode on PlanScope to see which reports a site is likely to need.
Frequently asked questions
When is a retail impact assessment required?
For retail and leisure development outside a defined centre that is not in accordance with an up-to-date development plan, where the gross floorspace exceeds a locally set threshold or, where none is set, 2,500 square metres. Local plans often set a lower figure, and the local threshold governs. Check the adopted plan before relying on the national default.
Is the threshold measured on gross or net floorspace?
Gross floorspace is the measure in the National Planning Policy Framework. Assessing against net sales area produces a document that starts from the wrong number. A proposal below the threshold can still be refused on impact grounds if the evidence supports it, because the threshold sets when an assessment is required rather than when impact matters.
What impacts does the test cover?
Two. The effect on existing, committed and planned public and private investment in centres within the catchment, and the effect on town centre vitality and viability including consumer choice and trade. The investment limb decides more cases than applicants expect, particularly where a council has a funded and programmed town centre scheme.
Is there a diversion percentage that counts as significant adverse impact?
No. Significant adverse impact is a matter of planning judgement and inspectors have declined to set a numerical threshold. The same diversion figure means something different for a strong centre with low vacancy than for one already losing anchor tenants, which is why health check evidence sits alongside the arithmetic.
Can conditions address a retail impact concern?
Often, yes. Restrictions on comparison goods floorspace, on the range of goods sold, or on subdivision of a unit are common responses, and they work where they are precise enough to be enforceable. Where impact on a particular centre is material, addressing it directly is more persuasive than arguing the figure down.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.