Independents set for tough times as COVID support ends and costs rise
Many independent food retailers face their hardest battle yet over the next 6-12 months, with costs set to soar and revenues likely to remain subdued, writes Greg Pitcher
Firms across the sector have taken advantage of grants, rates holidays, tax deferrals and other government schemes to survive since ministers ordered the country into lockdown in March.
But now the sector is facing up to a winter of discontent as state aid is steadily withdrawn while the pandemic continues to bite and the UK cuts ties with the EU.
Sangita Tryner, founder of Nottingham’s Delilah Fine Foods, said the company had so far been able to reduce its costs in line with lower revenues during the COVID crisis.
“It’s not sustainable,” she warned. “There are too many cost pressures coming. It’s daunting at the moment, especially for city-centre stores. I can’t see us getting back to full-time trade for a long time.”
Tryner said that as the traditionally quieter summer period faded and employers were asked to pay more towards furloughed staff, companies would be forced to make “big decisions”.
“Some small food shops will struggle to keep going over the next 6-12 months,” she added.
“It will depend on whether they can diversify. Anyone who stays static in the city centre is heading for a car crash.”
Daniel Williams, project manager at Cheshire’s Godfrey C Williams & Son, agreed that the waves of cost pressures ahead of the sector were “a worry”.
“Costs are likely to go up more than revenue over the next 12 months,” he said. “We buy sacks of green coffee beans from a supplier who ships through Hamburg so we don’t know if that cost will increase with Brexit. It is a volatile 12 months ahead and I worry that there are businesses that won’t recover.
“The real challenge for many independent retailers is ahead.”
Andrew Goodacre, chief executive of the British Independent Retailers Association, said he feared independent traders could go out of business due to cost pressures – especially if there was a winter lockdown.
“Given the current trends, with £1 in every £3 of retail expenditure being online, the government needs to take action now to reduce the burden on the independent retailer,” he said.
“Costs are increasing, margins are reducing and sales are moving elsewhere.
“We have heard a lot about essential and non-essential retailers throughout lockdown. In our view, independent retailers are essential to their communities and need more support.”
Waves of pressure ahead for food retailers
The government has spent tens of billions propping up the economy during the pandemic but the money tap is now slowly being tightened.
From 1st August, employers have had to pay national insurance and pension contributions to furloughed staff.
As of 1st September, they have been paying 10% more of employees wages, rising to 20% on 1st October. The furlough scheme ends on Halloween.
A final grant available through the Self Employment Income Support Scheme must be claimed by 19th October.
Retailers, of course, then have to make tough decisions on stock and staff costs for the critical Christmas period. And as soon as Auld Lang Syne has been sung, the UK will complete its exit from the EU, potentially bringing in expensive new import tariffs.
Many people paying income tax through self assessment will be hit with a double bill at the end of January after the mid-year payment was deferred due to the outbreak.
VAT payments deferred between 20th March and 30th June this year then need to be paid in full by end of March 2021.
And for retailers who survive all the above, the business rates holiday runs out on 5th April 2021.
Retail consultant Richard Hyman, pictured, said: “Government support is going to disappear and a lot of businesses are going to find they are not viable.
“Unemployment will impact on demand for products, and if revenue falls, that puts more pressure on costs. You get into a bit of a cycle.
“Smart retailers need to do a bit of streamlining, a bit of range editing, and provide an experience and service that big retailers can’t. Don’t try to be more like the big firms, offer a personalised experience.”