Small Businesses: Are you local?

It is a chilly morning towards the end of November, and on a narrow street in WC1 a quiet revolution is happening. On this quiet Bloomsbury back street Londoners are talking to each other.

It is happening in the gift shop, where Toni is planning drinks with a couple of her customers. Up the street, the barber turns down the jazz to hear the love-life traumas of his latest customer. Julia at the bookshop is picking out reading for some local children and, at the deli, a parcel has been delivered for a veg-box subscriber. Meanwhile, the men from the pub greet the lady from the dairy, as a girl pops in to leave a set of keys for her mum. The café owner, Fred, has been up since five. "Do you know what London looks like at 5am?" he demands, expansively. "Miserable. I love it!"

Over a complicated coffee at Marc Kennard's delicatessen, John Bird is trying to explain why these unassuming shopkeepers are heralds of a brave new dawn. As Kennard skilfully prepares him a double decaff Americano with cold milk on the side and two plain croissants, they patiently explain why the way forward for Britain's independent shops is something called Wedge.

Together with his daughter, Diana, Bird, the Big Issue founder, believes that the smallholders in Lambs Conduit Street have hit on something special. None is part of a chain. They do not have expensive marketing men. They don't provide a free multistorey car park or ask customers to drive miles out of town to shop there. They have never conducted a scientific survey of how to make people spend more money and their business plans barely stretch beyond the end of the road. John and Diana Bird believe that this is worth saving. And they think a supermarket-style loyalty card is the way to do it.

Wedge is a loyalty card with a difference. For a start, supermarkets need not apply. As the scheme is slowly rolled out across the country, Wedge's founders will not accept any shop that comprises more than 10 branches, but so far its biggest member has two. That member is Foyles bookshop, the family concern in central London that still holds its own alongside giants such as Waterstone's.

The Wedge Card is a simple proposition. It will be sold to customers for £20. From tomorrow, it can be bought in participating shops, from local charities or from the website, www.wedgecard.co. uk. The seller keeps £5 and £5 goes to charity. The remaining £10 goes into the Wedge company, a for-profit business that seeks to build "social enterprise". For Wedge cards bought online, 50 per cent will go to charity. For traders, it is hoped there will be new customers looking for the kind of discounts they can get on Nectar cards. Only, with Wedge, the discounts and offers will be far, far more creative. And sometimes, burlesque dancers will be involved. For now, you will get 5 per cent at Albion Wine, 10 per cent at Green Baby and up to 15 per cent at The Lamb Bookshop - plus a range of reductions at other businesses, including both Tate galleries.

The National Council for Voluntary Organisations (NCVO) is a Wedge Card partner. It represents charities from giants to local minnows. Its job is to make it easy for any charity to sign up. "The Wedge Card hits all the right buttons," says NCVO director of enterprise, Richard Williams. "It combines social justice, sustainability, diversity and economics. It encourages sustainable development and localism and it will entice more, new people into charitable giving. I come from the environmental sector, and I think this is a great way of being more environmentally aware. Plus it's a poke in the eye for some of the big stores that are making everything the same."

In theory, the businesses in any given street will choose a local charity to receive 5 per cent of the card's revenue. But as more and more customers sign up, cardholders will be able to use the website to send the money to any charity they choose.

But it's not only about money - or charity. "It's about having loyalty to your community and therefore to yourself," says Bird. "Without a community you are isolated and vulnerable."

Isn't it going to be tricky to start the scheme in London, where people are wary of connecting with their neighbours and talking to strangers? Far from it, thinks Diana. "A lot of Londoners are quite desperate for a sense of community. It might be easier to start in London."

Kennard's experience seems to bear this out. "When I walk down this street with friends and family, they always ask me if I've set it up," he chuckles. "I can't walk down the street without saying 'hi' to someone. I've never had that in London before. I couldn't live somewhere now that didn't have a collection of local businesses. It's what brings people together - they pop in here for a pint of milk and go over the road for something else. There are two populations around here: the people who work nearby and the people who live here. The resident population isn't wealthy. There are no estate agents on this street. It's a funny mix. It's not Notting Hill."

"But we are going to launch in Notting Hill," adds Bird, quickly. "And Stratford [in east London]," chips in Diana. "And Brixton. There are no chain cafés there."

"And we'd like to keep it that way!" says John.

As well as Stratford, Wedge is due to go to Marylebone, in central London, along with a small area of Covent Garden and into Southwark.

The chain café is a sensitive subject in the area surrounding Lambs Conduit Street. In fact, if you want to talk about Starbucks, you must whisper it. That is because the American conglomerate opened a store there in the summer, despite a local petition against it gathering more than 1,000 names, and the support of such local luminaries as Rupert Everett. "Starbucks is spreading like a cancer," said Everett, now a local hero. "Nobody in the area wants it, including me. There are plenty of diners and coffee shops there already."

Local residents may have been right to be concerned. More than 1,000 shops in the capital have closed in the past four years - and Fred Sata, the owner of Tutti's café, must be worried he will be next. When the builders who were working mysteriously on a new façade over the road from his business revealed that they were building a Starbucks, he didn't believe them. "We thought he was joking," he says, looking out at his shiny new rival. "I didn't worry myself too much. Then there was this big petition. But they couldn't do anything. We were sad. I thought, 'How many streets are there like this in London?' The builders said there will be 150 to 200 more Starbucks in the next two years, inside the M25."

For the time being, Tutti's café is safe. Over the course of a morning, a dizzying crush of people piles into the steamy, espresso-scented upper room, taking away coffee, tucking into freshly made pasta or thundering down the stairs yelling for Fred. "They only get the tourists," he says, tilting his head at That Which Must Not Be Named. "You should see lunchtime. We are full and there are three people in there. Every day their staff are changing." He lowers his voice. "And they come in here to eat food, you know that?"

At the other Wedge shops and restaurants in the street, they are looking forward to meeting the new Wedge Card owners, competitively dreaming up special offers and probably making friends. "You strike up friendships with all kinds of different people," says Toni, at the gift shop. "Lots of people say they come in here to feel calm. They tell me about their problems with their jobs and their arguments with their bosses. They open up."

At Badlambs hairdresser, a woman is lured in from the cold by the bergamot-scented chamber, the make-yourself-at-home music policy and the promise of a burlesque dancer in the window in time for the street's annual Winter Festival tomorrow, at which Wedge Card will be launched. As Tony, the owner, soaps her hair, the woman leans back and stretches. "It's the first time I've been here," she tells him, conspiratorially. "It's really lovely, isn't it?"

How chains are killing small shops

Tesco takes one in every three pounds spent in the UK.

In the five years to 2002, 50 specialised stores including butchers, bakers, fishmongers and newsagents closed every week. In May 2005 the Institute of Grocery Distribution revealed the loss of 2,157 unaffiliated independent convenience retailers, against only 1,079 the year before.

A recent Mintel survey of shopping patterns commented that "arguably the biggest threat to smaller towns and the high street is increased provision of convenience items by major grocery superstores".

A study in Fakenham, Norfolk, found that town-centre food retailers experienced a 64 per cent decline in market share following the opening of an out-of-town supermarket. The number of convenience food stores fell from 18 to 13, and the number of vacant shops rose by 33 per cent.

Friends of the Earth estimates that only 1 to 2 per cent of supermarket turnover comes from food obtained from local providers (within 30 miles).

A report by the All Party Parliamentary Group for Small Shops stated: "Many small shops [in the UK] will have ceased trading by 2015 with few independent businesses taking their place. Their loss, largely the result of a heavily unbalanced trading environment, will damage the UK socially, economically and environmentally."