Rising costs and supply chain issues: the challenges facing the High Street

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 recent Spring Statement did contain one big win for small employers; an increase in the Employment Allowance from £4000 to £5000. This will allow small businesses to offset some of the impact of the rise in NICs, and we’re proud that our efforts to advocate for our members – by getting the Employment Allowance created in the first place, and by getting it increased three times – will give them a measure of breathing space.

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.

Business rates relief schemes in the various nations of the UK across the pandemic have rightly focused on the most at-risk sectors, including High Street-based retail businesses. But the relief schemes won’t last forever; we want to see thousands of small firms in England lifted out of paying rates altogether, by increasing the ceiling for small business rates relief to a rateable value of £25,000. The 50% business rates relief for eligible retail, hospitality, and leisure properties from April, announced in the Spring Statement, is welcome, however.

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.