Rising costs and supply chain issues: the challenges facing the High Street
Martin McTague, national chair of the Federation of Small Businesses, on the pressures facing stores on the High Street
01 April 2022
Small businesses on the High Street definitely have a lot on their plates at the moment, following two years of uncertainty, restrictions, and change. The rises in National Insurance contributions (NICs) and business rates will increase small businesses’ costs before they have earned a penny of income, while spiralling inflation is causing input prices and utility bills to soar. It’s no surprise that retail businesses registered the lowest confidence level in the Federation of Small Businesses’ (FSB) Small Business Index research in the final quarter of last year, at -40 (against -8.5 for all businesses).
The restrictions on commercial evictions brought in as a response to the COVID-19 pandemic expired towards the end of March, although there are still protections in place for rent arrears which are due to the pandemic, with an arbitration process set up with the aim of getting landlords and tenants to reach agreements.
It is still too early to tell whether the lifting of the evictions ban will cause a flood of evictions. Landlords are very aware that the commercial property landscape has shifted, with premises in formerly red-hot locations such as central London now seeing lower levels of footfall. Meanwhile, previously less-favoured commuter town locations are enjoying higher numbers of shoppers as people who are still working from home, or making use of flexible working patterns, tend to stay local for shopping and after-work socialising.
Ebbing confidenceThe FSB’s Small Business Index found retail businesses registered the “lowest confidence level” for the final quarter of 2021
Many businesses have been affected by supply chain issues, and shipping costs remain higher than a year ago. Delayed delivery times are having an impact on retailers’ ability to keep on top of their stock levels, and are necessitating changes to stock management processes in many cases, including making larger, less frequent orders, or trying to predict future demand – an imperfect science at best. In a fashion-driven area such as eyewear, knowing what customers will be looking for in three months’ time is becoming more important than ever, while retailers cannot afford sales of items such as contact lenses and supplies to be interrupted due to a lack of stock, for fear that customers will turn elsewhere.
Challenges and cost pressures certainly abound, but many small businesses are bullish about the future, now that COVID-19 restrictions have been lifted, and the pent-up demand for products and services (such as eye examinations and new glasses purchases) begins to make itself known. We are still some way from the pre-pandemic norm in many ways, but – perhaps helped by the taste of spring in the air – people are starting to think about purchases and check-ups, which they put off during the height of previous waves of the pandemic.
We are still some way from the pre-pandemic norm in many ways, but – perhaps helped by the taste of spring in the air – people are starting to think about purchases and check-ups, which they put off during the height of previous waves of the pandemic
FSB is evangelical about the benefits of shopping local – to communities, local firms, and to consumers themselves – who can access expert and tailored advice and services on their doorstep. The Government’s levelling up agenda is yet to be fleshed out, but if it brings more life to local communities and High Streets, it is to be welcomed.
We will push the Government to consider the specific needs of small businesses as it looks to advance the agenda, as well as pointing out that the many areas which would not normally be thought of as needing to be ‘levelled up’ will still have small firms which have had a tough time, and which need a bit of extra support.
The arguments for staying local to shop are strong: being greener, healthier, and more beneficial to communities and regional economies, and are being heard by consumers who are more aware than ever of their ability to vote with their wallets. Now is the time for small firms to band together and work with local government, development agencies, and community groups to explore how to make their High Street a great destination for residents and visitors.
As our research shows, small firms have the appetite to grow – it is up to the Government to ensure they have the opportunity and the right environment to do so.
Martin’s checklist for High Street businesses
- Do you have an online presence? Is it easy for potential customers to find out key information about your business, such as opening times, product lines, services available, and online bookings? If not, it is well worth investing a little time and effort in your online shopfront, to make it as friendly and welcoming as possible
- Are you thinking about new products – even items outside your core offering – that you could stock? With customers still tending to make less frequent shopping trips than pre-pandemic, you may be able to tempt them to part with a little extra cash by stocking product lines outside your normal range by the till, or online
- Why not join a networking group, such as FSB? From getting to know other local businesses, to hearing about opportunities to learn and grow, the benefits will really build over time.