Small businesses on the brink as shoppers cut back and costs surge

Three million UK households are now skipping meals as the cost of food and everyday essentials continues to climb, according to new data from Which?. Confidence in the economy has plunged to levels not seen since the height of the cost-of-living crisis, with most people expecting things to get worse over the next year. Behind the stark figures lies a widening squeeze: families are buying less, trading down or going without, while small retailers and hospitality businesses face rising costs on every front. Many are absorbing losses to keep customers, others are raising prices and losing trade, and some are quietly shutting their doors. The risk is a slow hollowing-out of the high street, where fewer independent businesses survive, competition weakens, and prices ultimately rise even further.

Three million households in the UK (that’s slightly more than a 10th) are having to miss out meals because of rising food prices and other costs. The figures come for the consumer organisation Which? today (30th April).

The conflict in the Middle East has pilled the pressure on food producers given soaring oil and raw material prices. They have pushed up the price of production of all sorts of food and household goods in turn hitting the pockets and confidence of consumers.

The Which? consumer insight tracker for April shows that consumer confidence to down to -62, which is the lowest since the peak of the cost-of-living crisis in 2022. Most believe the UK economy will deteriorate in the next 12 months and 85% are now worried about food prices.

All of this feeds into the decisions businesses make on prices. Small and micro businesses in retail and hospitality are hit particularly hard when consumers have to tighten their belts. It’s a double whammy though. It’s not just households that are feeling the pressure of rising costs. Small businesses have to pay more for the supplies they put on the shelves and their menus. They then have to choose between keeping their prices the same and making less and less money, or putting up their prices so their customers are either paying more or not buying because they can no longer able to afford to buy.

Photo by Qeis Ismail on Unsplash

There’s an unfortunate perception that everyone who runs a business is making lots of money but the reality is very different. Many business owners and especially the bosses of smaller ones are taking home less and less, and sometimes nothing, and they have families to feed too. Others are quietly closing up because there’s no possibility of making enough money to pay their bills and suppliers. Everything has gone up.

Some of the rising costs are down to energy costs. Other cost increases are down to Government decision to raise wages, taxes and business rates. Small businesses are under siege and try as they might they are at the point where they can’t hold down prices any longer and households are compromising on their shopping and eating habits to deal with those rising costs. 4 in 10 are buying cheaper products, more than a third are buying more supermarket-branded budget items and 3 in 10 are buying items when they’re on sale. One in 10 UK households are now skipping meals and one in seven are going without some foods. On top of that there’s fuel and transport cost worries and increasing number missing bills.

We need the Government to take steps to help our smaller retailers and the hospitality sector or we will lose them. If we lose them, we’ll be left with the bigger businesses like the supermarkets and chains that can buy in bulk and keep their costs lower and prices down, for a while. That leads to the danger that when the smaller competition has gone to the wall, the bigger remaining businesses can raise prices because there’s nowhere else to buy from.