Cost of living crisis could force hundreds of Glasgow firms out of business

In a new Spotlight investigation series, the Glasgow Times is speaking to businesses and business leaders to hear how they are affected by the crisis and what they need to cope to stay open and protect jobs.

A double whammy of rising costs of energy, materials and staff shortages together with customers having less money to spend as they struggle with their own rising bills is putting businesses and jobs at risk in the city.

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We will be speaking to firms in the hospitality and food and drink trade, beauty sector, local shops and big shopping malls to understand the issues facing the businesses communities rely on.

Energy bills, ingredients, materials, business and interest rates, wage inflation and rents are all increasing in cost.

Today, business leaders in Glasgow warn that the pressures are so great that without more help from the government, more closures will be inevitable.

Stuart Patrick, chief executive of Glasgow Chamber of Commerce, said businesses are being hit “from every angle”.

Many took on more debt to see them through covid in the hope that there would be normal times ahead but now face potentially a bigger crisis.

Mr Partick said there have been signs for optimism of recovery for some sectors post covid but rocketing costs are having a greater impact.

The economy of Glasgow city centre and other high street areas like the West End and Shawlands are dependent on retail, pubs, cafes and restaurants.

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Mr Partick said it is being closely monitored and he shared the most recent analysis.

He said: “We are still keeping an eye on the city centre, hotels, retail, and food and drink.

“It had only got to about 80% of the footfall of where we were before covid.  Spend on credit card was ahead. The most recent credit card data put it at 16% ahead.

“It’s food and drink and grocery spending that was ahead of pre covid. Demand for bars and restaurants was up but businesses were still struggling because of the cost of energy and staffing.

“Staff was a big cost. Through the British Chambers of Commerce, we have been arguing with UK Government about the definition of ‘shortage’."

The Chambers want reform of the Shortage Occupation List (SOL) to allow sectors facing urgent demand for skills in the short-term to get what they need.

Hospitality firms have reported limiting their opening hours, at first as a result of staff shortages but now due to rising energy costs.

Mr Partick said something similar is happening with some hotels.

He said: “Hotels could be struggling. Occupancy rates were getting back to where they were pre-covid but costs are increasing.

“Some are not putting all their rooms on the market because they can’t staff them.”

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Servicing high levels of debt is a problem and prevents further investment.

He added: “We can’t get clear figures on how much debt was taken on during the covid pandemic.  Businesses are being pushed from every angle. Even with high demand.”

One action from the government, he said could help, is with rates.

Mr Patrick said: “There are aspects of policy we need to look at. Business rates are no longer reflective of the challenges businesses face.

“Not all the online shopping is going back in store but the rates are the same. It doesn’t reflect the fuel or other increasing costs.

“They could start to discount rates to reflect that. There should be some debate about it.”

Larger venues with higher heating and lighting costs are a worry.

He said: “There are particular concerns about entertainment venues. They are big spaces that need to be heated.

“The Film Festival in Edinburgh (which went into administration last month) gave me a big chill.”

The change of government at Westminster has a huge impact as energy policy is controlled by the UK Government and the support packages are determined by the Chancellor.

Jeremy Hunt, who is the current Chancellor, said the energy support can’t continue after April.

Mr Patrick said this leaves businesses with a problem.

He said: “There is no energy support after April. This isn’t going away for at least two years.

“It was great to get the energy support.

“It matters that we are targeting vulnerable sectors, hospitality is one of them.”

The Federation of Small Business Scotland estimates almost half of all businesses expect to see a fall in income.

As a result, it found that one in six (17%) of small firms have said they could either reduce in size, look to sell or ultimately close down as a result of the rising costs.

The organisation has called on the Scottish Government to take action in the forthcoming Scottish Budget to help businesses through the crisis.

It is asking for any unspent covid support cash to be repurposed and given to firms most in need.

It also asks for the Small Business Bonus scheme to be continued and targeted at sectors hit hardest.

And it wants binding targets for the government to spend cash with micro businesses.

Hisashi Kuboyama, FSB development manager (West of Scotland), said: “Glasgow’s small business community has endured two and a half very difficult years and is now battling against the added threats of rising inflation, increasing energy prices and staff shortages, to name a few. 

“Our quarterly temperature-taking survey reveals the greatest level of pessimism among small business owners outside of lockdowns. And, we see that at least one in six business owners are thinking of shrinking, selling or shutting their operations – a figure unchanged from last quarter.

“The recent political and economic turmoil is clearly having a real-world impact. That’s why it’s vital the UK Government focuses on stability, including delivering on its promises to help with energy bills for small firms and reverse the hike in National Insurance. Those saving must be in the pockets of small firms by next month, followed by clarity on what will happen to energy deals after the initial six-month period.

“At the same time, there will be opportunities in the Scottish Government’s budget, due by the end of the year, to protect small firms and free them up to drive growth, which we’ll be exploring in the days and weeks ahead.”