Empty units are becoming an increasingly common sight on Britain’s high streets, as independent retailers warn that running a small business in the UK is now tougher than operating in mainland Europe.
Research involving 526 small businesses across the UK found that 22 per cent of shop owners believe more than a quarter of the retail units around them are vacant. Almost two-thirds, or 64 per cent, also said Britain has become a more difficult place to do business than comparable European countries.
The findings come from the Growth on Hold report, produced by start-up and small business network Enterprise Nation. It highlights the combined impact of higher wages, business rates, energy prices, VAT and National Insurance on the future of town and city centres.
The pressure is already affecting expansion plans. Some 77 per cent of high street businesses said they had postponed growth plans, while 42 per cent had reduced the number of employees working directly with customers.
High street companies are particularly vulnerable to business rates. According to the study, 67 per cent of shops pay the charge, compared with just 21 per cent of businesses operating in other locations.
Among all the small businesses surveyed, 69 per cent said they had delayed or abandoned a growth initiative over the past year. Half had also reduced investment in potential opportunities.
Employer National Insurance, business rates, supplier costs and energy bills were all identified as major contributors to the financial strain. VAT was also ranked among the three biggest pressures by six in ten businesses.
Victoria Cozens knows first-hand how quickly the outlook can change. She grew Perky Blenders from a one-kilogram coffee roaster in her North London garden into an independent chain with six shops and 40 employees.
Victoria Cozens (pictured), owner of Perky Blenders in London, said rising wages and business rates are creating fresh challenges for her company
Just two years ago, the business appeared to be on course to franchise the brand and open additional locations. Today, Ms Cozens said, those ambitions appear far less certain.
“We started that process and then the changes came in,” she said. “Employers National Insurance, related wage increases, and more recently the extraordinary increase in business rate costs, especially for hospitality.”
Perky Blenders’ annual employer National Insurance bill has increased by more than £20,000 since 2024 alone.
Ms Cozens said: ‘We’ve always tried to pay above the minimum wage for our barista roles. With the increases in costs across the business, especially ENI, it has been hard to support the people we care about the most.’
The company previously employed specialists across marketing, customer service, website management and fulfilment but those jobs are now covered by Victoria and the wider team.
She added: ‘You can be an owner-operator and find ways to make it work.
‘But if you want to operate multiple sites, grow your business and employ more people, that has become so much more challenging.’
A similar squeeze is being felt at Broken Eggs, a 30-seat Spanish restaurant in Fitzrovia founded by former City banker Gabriel Larraz, 29.
Gabriel Larraz, owner of Spanish restuarant Broken Eggs, said growth does not necessarily mean increased profit
The restaurant employs 14 people and has full tables, strong reviews and steady growth, but that growth has failed to translate into increased profit.
Mr Larraz said: ‘When I look at our profit versus last year, the amount of volume that we’ve grown this year has basically all gone to paying extra costs.
‘It’s not one thing that’s changed. It’s the national minimum wage, employer contributions, business rates, energy costs.
‘It’s a double hit: your direct costs go up, but all of your inputs go up as well because your suppliers are facing the same pressures.
‘The most annoying thing is that it keeps changing all the time. Tell me these are the rules for the next five or ten years and I can plan my business.’
VAT was ranked first by approximately one in three (29 per cent) businesses cited in the report, compared with one quarter (24 per cent) who said wages.
Cutting the standard rate of VAT is now the number one policy demand among small businesses ahead of the Autumn Budget on October 28.
More than one third (37 per cent) called for a VAT reduction – far surpassing the 12 per cent that said lower business rates and a further 12 per cent that said reducing employer National Insurance.
Enterprise Nation CEO, Aaron Asadi, said businesses ‘simply want the opportunity to grow’
And demand is even stronger among businesses on the high street, where more than half (54 per cent) named a VAT cut as their top ask.
But the research also suggests most firms would use the saving to protect their businesses rather than immediately cut prices.
Nearly half (46 per cent) said they would use a VAT saving to absorb other rising costs, while two in five (44 per cent) would reinvest it in their business.
This compares with three in 10 (29 per cent) who would use it to hire and nearly a quarter (23 per cent) who would cut prices.
Enterprise Nation CEO, Aaron Asadi, said businesses ‘simply want the opportunity to grow’ – and are not asking for bailouts from Westminster.
He said: ‘For a government that prioritises growth, a quick look at the High Street should tell them it’s been anything but for the last few years.
‘And, this new data presents the indisputable truth. Empty shops, fewer staff, traders fighting to stay afloat. Far from growing, our High Streets are shrinking.’
Mr Asadi added the data highlights a small business community that has ‘done everything’ asked of it but is still ‘being ground down’ by mounting costs.
He said: ‘Businesses aren’t asking for a bailout. They’re asking for decisions: say at the Budget whether hospitality VAT will be cut, aim the promised rates relief at the smallest premises, and make the support that already exists actually reach businesses.
‘Without that, we will keep seeing owners forced to shrink businesses they’ve spent a decade building.’
The report also cited energy as another major pressure on small business – with those able to estimate the impact saying rising bills have cut their margins by around 18 per cent on average.
Yet the research found three-quarters (75 per cent) are unaware of efficiency grants or reliefs available to them, while more than two-thirds (69 per cent) did not know the rule of thumb that cutting energy costs by 20 per cent can boost their bottom line by as much as a five per cent increase in sales.
Cash flow is also emerging as a major dividing line between businesses coping with the squeeze and those in distress.
Among businesses that are not confident about their cash flow, the majority (86 per cent) have delayed growth compared with half (50 per cent) of those that are confident.
Six in 10 (62 per cent) were found to have cut investment, while almost half (48 per cent) have considered closing altogether, compared with just one in 10 (12 per cent) of businesses confident about their cash flow.
Card and digital payments were found to be dominant, with just two per cent of businesses saying they are paid mostly in cash.
The Growth on Hold report has made six recommendations to the Government in light of the findings, including deciding on hospitality VAT at the October Budget and raising Small Business Rate Relief thresholds.
It also calls for payments to landlords who re-let empty shops, the next round of cost support to be paid as flat grants through councils, tougher enforcement of late payment laws, greater backing for small business lending through non-bank and community lenders and the rollout of the West Midlands Business Energy Advice Service across England.
Robert White, Executive Director and Head of Payment Partnerships at Square UK, said many of Britain’s small businesses are not ‘standing still by choice’.
He said: ‘Rising costs on all fronts have stifled the opportunity to grow. The heaviest of those pressures – VAT, National Insurance contributions, business rates – are ones only Government can address.
‘The small businesses on the front foot are those with the clearest sight of their money and quickest access to capital.
‘Alongside the policy changes this report recommends, that is how growth on hold starts moving again.’
