Trouble on the High Street

The story on the High Street continues to worsen, and it's not going to get any better any time soon.

McColl's are the latest of the "big boys" to fall under the current trading climate, but I want us to focus on the independent high street business, where regardless of the sector, is going through a torrid time.

Of course it all started with Covid, the impact this had on all of our lives is well documented and experienced through our own lens, and for an independent high street business, the unknown put pressure on mental health and cash flow. But as we came out of lockdowns and restrictions began to reduce, we all found ourselves slowly moving back to our own "normal".

For the High Street businesses, this didn't have a uniformed impact, we are still seeing less people out on the High Street, the elderly in particular have been slower to start to venture out. On top of that, peoples shopping habits have changed. Many are going out and only visiting shops where they need to purchase items, people are eating more at home and the delivery businesses have never been busier.

The result of all of that is that pretty much all independent businesses on the High Street have been impacted by this, and the result of that is that Cash Flow is becoming, or has already become an issue. Any spare cash in the business has been eroded by ensuring wages have been paid, rent and rates (where applicable) paid despite lower turnover and forced closures through lockdown. It is true that some landlords, gave relief during the lockdown period, but they are bar far the minority, and most have demanded arrears be settled, despite the lack of income.

But the continued impact of Covid is not by any stretch the only challenge being experienced. The impact of reducing cash headroom continues to put immense pressure on the business, and the business owner, as they try and figure out how they can get themselves out of this situation.

Then we have the impact of rising energy prices. This phenomenon is being experienced by everybody and not just business, but your high street business is being hit with a double whammy. The costs for their own energy has in many cases more than doubled. I have been supporting one high street business owner whose energy bills increased from 24p per kWh to 40p per kWh and a notification that come the end of the 12 month fixed period, they would likely increase by a further 30% - 50%. The story of higher energy bills are constant across the UK within businesses, and its yet another challenge they are having to face.

But it's not just their own energy they are having to burden. The higher cost of energy is being experienced by us all, and that means we have less in our pockets to spend, and as a consequence, that treat of a bunch of dried flowers, or a nice lunch out, has taken a back seat and as such, further pressure is placed on the high street business.

Finally, we have the cost of goods increase, with the war in Ukraine and the ongoing increases in wages and inflation overall, the cost of goods has also seen significant increase with items such as cooking oils not only see shortages, but seeing an increase of almost 30% according to Glauber senior research fellow at the Institute of International Food Policy Research. Furthermore, fruit and veg prices have already seen an increase of 12% and have been forecasted by some to hit 30% in the coming months.

Again, these increases have hit us all, and again, this means we have less money in our pockets, and therefore less to spend on our high street. 

But that again is not the end of the dilemma for the High Street Business, these increase are being presented to their business as well, not only food prices, but clothing, giftware, cost of travel, etc. And the issue the High Street business has, is "How can I pass these costs onto the shopper"

How indeed, with less money in our pockets, the High Street business owner is faced with having to absorb those increases.

So now we have the situation where the High Street business is in a never ending cycle:-

• Less people are coming out onto the High Street
• This means less income for the High Street business
• Increases in costs across energy and inflation means rising costs for the business
• Increases in costs for everyone means people are spending less on the High Street
• The High Street business can't afford to pass on all the increases it has taken
• Pressure on cash and any hope of profit reduce
• There is an inability to buy stock or maintain the same service
• Less people come to the shop

And just as we thought it couldn't get any better ..... come the Autumn this year, energy prices are set to rise even further as the price cap is reviewed.

So what's the answer ?

The short answer is there is unlikely to be one that is a quick fix. What I think we can all do over the coming months is recognise that the High Street shop, whether you are in a City centre, or a district, or village, take a moment to reflect on what would happen if that shop were no longer there this time next year.

If we think that the outcome might be the loss of that local shop, we should think that when we look to spend what little money we have, how can I spend it smarter, not only smarter to buy more for less, but also buy to support the local community and the High Street shop that adds to the community we live in.

The debate about the big box businesses continuing to suck up local businesses and that's a good debate to have, I hope that this piece allows us to sit back and think about the chain of events and impact its having on those businesses we maybe take for granted.