A retail park area in the UK Image by Tim Sandle
Throughout 2022 more high street shops have closed and 2023 promises to bring more problems for retailers, especially those relying upon brick and mortar stores.
The cost of living crisis has had detrimental effects on many businesses across the UK, particularly small businesses in the high street who have been hit by rising energy prices along with a fall in sales. Business finance expert, Connor Campbell from NerdWallet explains to Digital Journal the full impacts felt by businesses.
For several months now, the cost of living crisis has placed unprecedented financial pressures on both businesses and individuals across the UK
According to Campbell: “The additional energy crisis has further exacerbated the struggle to remain afloat, particularly for businesses that need to keep their premises heated despite energy costs rising over 54 percent since 2021.”
Campbell explains that whilst the government has introduced the Energy Bill Relief Scheme – fixing the wholesale unit price of gas and electricity suppliers can charge businesses – many have continued to feel strained by the combination of crises affecting the UK, with some taking more drastic measures to keep their costs lower.
He notes: “Many smaller, family-run businesses – including pubs, restaurants, and cafes – have opted to start closing earlier if customers show no signs of coming in. Others, according to a survey by financial experts at NerdWallet, had increased their prices to offset costs onto their customers (43 percent)”.
These issues bring Campbell to find: “It has been a tough year for small businesses in the UK, and with winter in full swing, the pressure to keep buildings heated despite high energy prices has resulted in many business owners having to make difficult decisions to keep their businesses afloat.”
He adds that the unusual holiday consumer spending rush has not been sufficient to prevent retail problems from slowing: “The period leading up to Christmas is often one of the busiest times of the year for high street vendors, but the cost of living crisis has meant that many consumers simply cannot afford to spend as much money this year.”
Smaller shops have been hit hardest, Campbell notes: “This has had a knock-on effect that has seen many smaller businesses on the high street suffering financial losses, with even major shopping events such as Black Friday failing to increase high street spending.”
And some specific classes of retail have been the heaviest affected: “It’s disappointing but unsurprising to see that some businesses, particularly those in hospitality, are closing earlier if they seem unlikely to get much patronage. Heating their premises will only be worthwhile if they bring in enough business to offset the costs of their energy bills.”
Campbell predicts more trouble ahead unless help is provided by central and local government: “Going into the new year, the high street may look a lot different to previous years with only big names remaining open if more targeted support isn’t put in place to help small businesses and sole traders withstand the strain of both the cost of living and energy crisis.”