Blog by Stokes Tea & Coffee
Great British Businesses breathed a sigh of relief as pandemic restrictions were finally lifted. Their adaptability, ingenuity, and determination to survive, and even thrive, has been nothing short of awe-inspiring.
But, as year-end tax submissions and payments wing their way to Her Majesty’s coffers, some SMEs could well be considering whether this might be their last roll of the proverbial dice.
Followers of news sources are subjected to incessant rhetoric about sky-rocketing costs, rising inflation and ultimately, a looming depression. Emails ping and letterboxes rattle regularly now with a flow of price increase notifications from all manner of suppliers, and of course, the Chancellor too.
So, what’s going on?
Record-breaking events in the main, tend to be associated with positive and aspirational themes, sadly this isn’t the case as an unprecedented economic storm continues to gather in menace.
We knew that shortages were here and that initial price increases were down to a simple case of supply and demand post pandemic restrictions but, the precedents and predictions for finances are seemingly obsolete as we enter frighteningly, uncharted territory.
2022 brings with it soaring costs and the biggest challenges for SMEs. It’s no secret that British independent businesses are the backbone of Britain.
According to research, total employment in SMEs was 16.3 million (61% of the UK total), whilst turnover was estimated at £2.3 trillion (52% of the total).
Hospitality makes up a fair chunk of these impressive stats. UKHospitality reports that the sector employs 2.9 million people, generates £130bn in economic activity and pays £38bn in taxation. It’s also the third largest private sector employer in the UK; double the size of financial services and bigger than automotive, pharmaceuticals and aerospace combined!
As taxation goes up along with costs, even the baby boomers will start to tighten their belts as they watch their disposable incomes evaporate and the jostling by businesses to win shrinking markets is no doubt, likely to become frenzied.
Stokes Tea & Coffee is a family of coffee roasters which has been operating for more than 120 years. The company has a long history of supplying wholesale coffee, tea, machines, servicing, and training as well as operating two of the busiest cafés in the city of Lincoln.
With most of its trading associated with the hospitality sector, Stokes is well placed to give an insight into to what the ‘coal-face’ looks like now for SMEs.
Nick Peel
Nick Peel is MD and the fourth generation in the family to lead Stokes Tea & Coffee, he said: “I think most businesses are feeling somewhat ‘punch-drunk’ from the breath-taking extent and speed of cost rises. Wise businesses know that customers are finding it tough, and it will be at their peril to unwittingly add to these woes.
“This means, we’re doing everything possible to manage costs, invest wisely, and reduce spend to avoid passing on like-for-like input rises wherever possible.
“A new, more efficient heating system, development of an online ordering portal for our wholesale customers and a new take away option are just some of the many things we’ve introduced to rapidly increase efficiency and meet our customers’ needs. Like everyone else, we are seeing huge rises in our wage bill, our VAT bill and of course, energy.
“It’s easy to feel helpless in the current economic storm, but, we are determined to do everything we can to limit the impact on our customers without ever compromising on quality. It’s what we’ve always focused on for the past 120 years. It’s not an easy balance to strike – but is front and centre for us.”
"It’s easy to feel helpless in the current economic storm, but, we are determined to do everything we can to limit the impact on our customers without ever compromising on quality."
British Garden Centres (BGC) is a longstanding wholesale customer of Stokes’ products and services. It’s an independent business with a national footprint. Since 2018, BGC has grown from its Woodthorpe base, with 10 centres, to a national company with 61 garden centres spreading from Folkestone to Carmarthen, Wimborne to East Durham.
Charles Stubbs, is the co-founder of this Lincolnshire based, family-led garden centre group. He said: “We believe that the key to surviving and even thriving in difficult times is to recognise the challenges quickly and react without delay. Within hours of lockdown 1, we were working on a click and collect model that enabled us to continue selling seasonal plants whilst the garden centres were closed.
“Introducing plants and additional gardening items to our website was key in enabling us to convert spring stock into sales and keep our thousands of customers happy. Looking ahead, any business will need to be efficient and proactive but more than ever before, engaging and customer-centric.”
Consumers will be cutting expenditures from their lists like disloyal friends before long. Increases in food and energy costs, the rise in National Insurance payments, VAT on goods and services for tourism and hospitality up from 12.5% to 20% are a potentially, toxic cocktail.
The Treasury declared its support for industries impacted by Covid restrictions, but help has more or less now evaporated. Many commentators are condemning the tax increases which could create the perfect conditions for business closures, subsequent unemployment and further reduce consumer spending power which can only compound an already startlingly bad outlook.
Quite simply, SMEs find themselves in the pinch-point, cost pressures mean business is between a rock and a hard-place – putting prices up for customers who are seeing decreasing spending power is a recipe for disaster.
Industry body UK Hospitality has warned the increase in VAT will “restrict the sector’s efforts to stifle rises for customers”.
“For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal,” chief executive Kate Nicholls said.
For hospitality, visitor numbers are still below pre-pandemic levels so there’s lost ground to make up. The taxation and overall dramatic increases in costs may sound the death knell for many businesses. But there will be those who, through innovation and sheer grit may still pull through – after all, Britain is counting on it.
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