Copy article

Could rising rent prices force out SMEs?

Journalist: Helena Young, Startups.co.uk

ended 16. May 2022

With the news that shop owners will be forced to rent out empty premises to counteract rising rent costs, Startups is looking at what the spike in bills means for SMEs.

Are you a small business owner or property expert? How have SMEs been impacted by the increase in costs? How should they/do you plan to offset/manage rent rises? Let us know below.

8 responses from the Newspage community

Copy all

Star Quote
Copy

Marcus Wright
Managing Director at Bolton Business Finance
"I am a little sceptical about this announcement to "force" landlords to rent out empty shops, to revive the UK High Street. First of all I have never met an owner of a retail premises that did not want to rent it out. Secondly, most of the SMEs I speak to are more concerned with unfair business rates than the rent cost. The fact is the world is changing and small retailers are moving online. I expect to see many of these empty shops converted into residential/mixed use properties in the months and years ahead. The world of retail is changing irreversibly."
Copy

Editor
Imran Hussain
Director at Harmony Financial Services
"For small businesses with a physical presence, the rise in utility bills is a massive concern, especially if margins are already tight. Any profit is pretty much negated by the rise in the cost of rent and utilities and, amid the current cost of living crisis, it's hard to pass these costs onto clients or customers. If small businesses are to survive, they need support from their local communities now more than ever. If we don't use them, we will lose them."
Copy

Editor
Rob Peters
Principal at Simple Fast Mortgage
"It's no secret that property owners want to rent out their vacant units. Business rents tend to only go up and this makes for an attractive investment opportunity. The current inflation situation means everyone faces increased costs, but there is a large amount of strain on small business owners, particularly those in the retail sector. Increased business rates, increased tax, a social shift away from the high street to a more online presence, lower footfall, a pandemic, and now a spike in the cost of living. We will see a number of small business fold during in the months ahead."
Copy

Editor
Kate Underwood
Managing Director / HR Director at Kate Underwood HR and Training
Working with many retail clients they are having review all costs with the energy and payroll increases - with increased rent as well it is going to force a lot of them to close. During the pandemic I had some very innovative clients who moved part of their business online in order to continue to trade - this might be the way forward to survive. Our high streets will really be empty of local shops and it will be cookie-cutter corporate machines that will survive which let's face it - gets boring.
Copy

Legend
Dr Jackie Mulligan
Founder at ShopAppy
"We hear about businesses leaving the high street every week due to rising costs and shrinking profit margins as customers are increasingly squeezed. It isn't just rent, the rates system needs reform and I don't know how much louder organisations and businesses can shout about that before we hit breaking point. These factors are discouraging great businesses from becoming part of the social, environmental and economic fabric of communities but there are pockets of positive initiatives emerging to help address the issues."
Copy

Zoe Goodchild
Managing Director at Apostle Accounting Limited
"SMEs are unfortunately caught up in the exponentially rising costs of utility bills alongside the rent increases. Within their financial management, they should factor in these increases using scenario planning to mitigate shock as it happens to enable them to forecast potential profits on each possible rent rise. This way they can have a plan to work out in each interest rise instance where they may be able to mitigate this cost and have an appropriate course of action to offset this so as not to allow the rise to detrimentally affect their business. All too often, however, they only see landlords raising the rent as an effort to increase their own profits. However, it's easy to forget that landlords have their own financial commitments which have also seen increase in interest rates, which are considerably higher on commercial properties than the residential property market."
Copy

Natalie Fletcher
Director at Mancmade Ltd
I am no property expert, but for me working from home is a blessing, as well as a no brainer! Not many small Business can have the opportunity to work from premises , due to unreasonable and unrealistic costs of rent and rates, whilst not many small business can work from home, due to lack of space, which then means having to look for alternative solutions! As a small business owner, I was once expected by the local council to afford £35000 rent plus £19000 rates, which they expected from sole me. No small business can survive expected to pay these costs without any help or support from local governments, leading to big failures, through no fault of small business. Ultimately I lost my battle with sanity, at that time and had a melt down, whilst the council looked on in search of them rates!
Star Quote
Copy

Legend
Julia Usher
Managing Director at Ashes Memorial Jewellery
"As a small manufacturing and ecommerce jewellery business, rising costs for SMEs is of great concern. My business is very much in the luxury spend sector and it is already under pressure owing to rising energy, food and fuel prices, meaning consumer purse strings are tightened. Now, with the threat of rent increases, this will make a horrific economic trading climate even worse for SMEs. Like so many other small businesses, we have had to make changes within our company to try and offset the increase in costs. This has resulted in us being forced to put our prices up. Precious metals, like gold and silver, have yet again gone up and our silver chains that come from China have also increased in price dramatically. We have also seen a huge rise in our electricity bill to run the machines we use. This has forced us have to reconfigure our workshop so we can turn some off our less busy machines, lights and drills until they are absolutely needed. Further rent increases will force SME business owners to yet again try and streamline processes and consider increasing prices in order to survive. I think that this year is going to be very difficult for all SMEs and hard decisions will inevitably have to be made by business owners across the country to protect themselves."