Alarm bells are ringing with high street business owners as Chancellor Rishi Sunak prepares to release his Spring Statement today, Wednesday March 23. New ONS figures show that the consumer price index hit 6.2pc in February, up from 5.5pc the previous month and higher than the 6 per cent forecast in the highest annual increase since March 1992. The retail price interest is its highest in 31 years at 8.2 per cent.
The figure of 6.2 per is more than three times the Bank of England’s target but there are concerns it could rise even higher and even into double digits. The Chancellor is widely expected to reduce fuel duty to ease the pressure on households and businesses, but for high street retailers and other businesses there are cost pressures from every conceivable angle, not just at the petrol pumps.
Dr Jackie Mulligan, expert on the Government’s High Streets Task Force and founder of ShopAppy said: “This is no cost of living squeeze, it’s outright strangulation. The current trajectory of inflation poses an existential threat to independent retailers around the UK. If things carry on like this, the term profit margin will disappear from the English dictionary altogether.
“The thousands of bricks and mortar retail businesses we work with are having to cope with rising costs across the board at the same time as customers, understandably, are having to rein in their spending as their disposable income is being hit with a sledgehammer. Independent retailers already have five and a half times more debt than they had pre-pandemic, and the rate at which inflation is rising will push many off the high street altogether, impacting communities and people’s access to local services. In the absence of Government support, customers need to do whatever they can to support their local businesses. Use them or lose them.”
Jenny Blyth, owner of Storm In A Teacup Gifts: “The current level of inflation means people just don’t have spare cash to spend on things like gifts. Our sales have bottomed out, leaving a wake of stress and anxiety. This inflation is not just draining our pockets, it’s putting a high price on our mental health and that is something which is meant to be priceless. The Government needs to sit up and listen to our cries for help.”
Shirley Leader, director of Petersfield-based woman’s clothing boutique, Velvet & Rose: “The increase in inflation is deeply worrying. Already as a small boutique owner, my energy bill is at a record high. On top of that, it is buying season and we are getting less for our money as fabric prices and duty have increased. We absorb what we can, but at some point something will have to give.”
Office for National Statistics Chief Economist Grant Fitzner said: ‘Inflation rose steeply in February as prices increased for a wide range of goods and services, for products as diverse as food to toys and games. ‘Clothing and footwear saw a return to traditional February price rises after last year’s falls when many shops were closed. Furniture and flooring also contributed to the rise in inflation as prices started to recover following new year sales. The price of goods leaving UK factories has also been rising substantially and is now at its highest rate for 14 years.
Olga Sipcenoka, founder of Hertfordshire-based restaurant Per Tutti: “As a family-run business, the worry about inflation is crippling and with each day that passes we can feel its impact on our bottom line. Suppliers call every week with new price increases, which is really stressful. For now, we haven’t increased our prices as we have to be in line with our local competitors including some very big chains, and our current dilemma is how long we will be able to swallow the extra costs without passing them onto the customer. And if we do put prices up, how well will it be taken by our guests? Will they be able to afford to dine out as much as they do now? We are a family of five and these are really worrying times. We are preparing ourselves for a recession.”
Nicola Bulbeck, chair of the trustees at Shepton Mallet-based Happy Landings Animal Rescue: “With bills rising across the board, we are starting to have to rescue a lot more animals as a result of people struggling to cover the costs of home and pet ownership, and we expect this to only increase over the coming year. We are a small local charity but with inflation continuing to rise, and with costs going up across the board, like many others in our sector we will be considering whether it remains viable to keep going. Despite the Government attempting to step in, of the £750m it pledged, over three quarters of it went into supporting people-based charities, which while not wrong, leaves the under-represented animal rescue charities seriously underfunded.”
Gillian Ferguson of Scotland-based Twisted Empire Bakes: “My profit margins are being obliterated. We’re now effectively making another mortgage payment for gas and electricity, while the energy companies are reporting record profits. You couldn’t print how I feel about this.”
Marianne Clarke, owner of pet portrait and grooming company, Selston Groom and Train: “Rising energy bills and the cost of living crisis mean we have stopped putting our heating on when we are cold. I now only use the heating to dry clothes. I wear my dressing gown on top of my normal clothes all the time unless I am working. The cost of everything just seems to be going up and up.”
Ruth Bradford of Bristol-based The Little Black and White Book Project: “With each day that passes, my concern about inflation is growing as people simply aren’t spending. As a consumer I totally get it, it’s not pretty out there, but as a business owner it feels like I’m on borrowed time. All I can do is hope that the website traffic I am seeing does come back and convert at some point as people still seem to be largely browsing. It’s just so hard to predict anything right now and I can’t help feeling it’s just going to get worse.”
Adam Bamford, CEO of Derby-based Colleague Box: “It’s a strange and complex time balancing the books of business and the frightening increase in household expenses. Having a business where both of the income earners rely on profits it’s an endless battle of increasing our product costs to ensure we take enough home each month just to cover the basics of living. When we created the business, we had the ambition of wealth building but we are now resigned to the lofty ambition of covering costs and ensuring our employees are paid each month. While business is currently very good, the costs going out the door are relentless and the increase in energy and National Insurance around the corner are another massive hurdle.”
Craig Bunting, owner of Derby-based coffee shop, Bear: “It’s hard to identify a cost that isn’t going up at the moment and, as a business owner, it’s a nightmare knowing when and how to act. It’s important to acknowledge the cost of living increases our customers are experiencing. This has to be taken into account when making business decisions. As a hospitality business owner, I believe the Government needs to do more for our sector, to support the jobs our industry creates and to protect against some of the incredible cost increases our businesses are seeing. VAT should remain at 12.5% and the business rates burden should be an immediate priority for hospitality, leisure and tourism going into the spring and summer.”
Michelle Cunningham owner of online boutique Tarelle Accessories: “As an online business selling women’s fashion accessories, our suppliers have increased their prices due to rising raw material costs. On top of that, we import some of our stock from Europe and the shipping costs have also increased. Regrettably, we recently had to pass these costs onto our customers in the form of higher prices in order to keep the business viable. It’s an incredibly challenging time out there right now.”
Lucinda O’Reilly, director at London-based The International trade Consultancy: “As a sole trader who works from home, many of my business and personal expenses are intertwined. I’ve been making efficiencies and cost reductions in terms of who and where I buy things from and also thinking really hard about how I do things in the most efficient way regarding energy use and car journeys. It takes time and energy away from focusing on growing my business and can be quite soul destroying after a while. But I’m one of the lucky ones, at least I don’t have to make the choice between eating or heating my home as many people are doing these days.”
On the other hand, VAT revenues have hit an all-time high, as have takings for other taxes including stamp duty and inheritance tax, helping to cut government borrowing.
Responding to the latest CPI inflation figures, Helen Dickinson, Chief Executive of the British Retail Consortium, said:
“Rising inflation remains a significant concern for the economy, squeezing household incomes and increasing cost pressures on retailers. For the second month in a row, Transport saw the highest rate of inflation this month, while food inflation rose slower than the headline rate. The BRC’s Shop Price Index, which tracks the price of basic goods, showed an even smaller price rise in food, suggesting that retailers are successfully managing to limit cost increases for many essential groceries. Many supermarkets have expanded their value ranges to support individuals and households on lower incomes. Nonetheless, with retailers struggling to absorb these higher costs, shop prices look set to rise in the coming months.
“The situation in Ukraine is undoubtedly exacerbating existing cost pressures in the supply chain – from increased energy costs to higher global commodity prices. Many households will also face far higher energy bills and NI contributions from next Friday. As a result, all eyes will be on today’s Spring Statement, to see if the Chancellor will announce any relief for those families most affected by the cost of living squeeze.”