Survival strategies

It’s life or death for c-stores as changes in the Budget threaten to rip apart everything they have worked for. Retailers explain how they have been impacted and what measures they are taking to manage the extra costs.

By Sarah Britton

When Chancellor of the Exchequer Rachel Reeves delivered the Autumn Budget on October 30, it sent shockwaves through the convenience industry. A rise in Minimum Wage was always on the cards, but when the government also announced that employer National Insurance Contributions were rising from 13.8% on employees’ earnings above a threshold of £9,100 a year, to a rate of 15% on earnings above £5,000, local retailers were left reeling.

“Taxing the costs of small privately owned businesses so aggressively and without any warning, whilst not seeking any productivity improvements from the inefficient public sector and the huge pay settlements these charges are funding is a new low, for a government of any hue,” rages Craig Duncan of Keystore Maddiston in Falkirk.

“Many of the businesses most impacted by these changes are the last men standing within their communities and the lifeline services they provide to a wide range of stakeholders will be severely impacted.”

The changes will mean a £16,000 increase for Craig’s business and he predicts that managing such steep cost rises will have a devastating impact on the whole sector. “At worst, it will lead to closures, or less scrupulous operators developing or expanding illegal employment practices,” he warns. He’s talking about incidents of hybrid contracts with official hours reduced and balance paid in cash ‘off books’, or paying cash in hand at below National Minimum Wage (NMW) levels to benefit claimants or workers with no right to work in the UK. He is also concerned about the potential for an increase in tax evasion strategies, such as smuggling, duty evasion and VAT evasion.

Even Craig’s best-case scenario paints a miserable state of affairs. “At best, it will force operators to significantly increase prices and cut employee jobs or hours and outlet operating hours to cover the costs associated with the changes,” he says. “Every operator I know is undertaking these exercises right now and expecting operators of any size to just absorb these costs is stunningly naive.”

Despite having only been trading for two and a half years, Fraserburgh-based Julie-Ann Whyte has already picked up several accolades for her contribution to convenience retailing, including the SLR Awards’ Unsung Hero in 2023 and Community Hero in 2024. But the cost hikes have left the owner of Whytes of Pitsligo questioning her career choices. “It’s pretty disappointing, to be honest,” she says. “You should be giving small businesses the opportunity to grow, and it just makes you reconsider whether you actually want to be in business.

“Where are you going to find another £16,000 in my business to accommodate all the changes that are happening?”

Although workers’ pay is going up, Saleem Sadiq, who owns five convenience stores, as well as nurseries, wonders how beneficial the changes will really be for employees. “Whether the employees get extra money in their pocket, I’m not 100% convinced because something needs to give at the end of the day for us to balance the books.

“We’re the ones creating jobs and I can actually seriously see us having to cut hours back to try and make some savings somewhere. We employ over 250 people and financially, it’s going to be very difficult for us to carry on as we are because it affects our bottom line.”

Saving on staff

Banff-based Billy Gatt, Scottish Local Retailer of the Year 2023, has had to take immediate action to protect his business by reducing Premier Whitehills’ opening hours.

“We reckoned it was going to cost us an extra £25,000,” he told SLR. “So we did not feel we had any option but to take action and I didn’t feel we could wait until April.” He had already recently changed the store’s closing time from 10pm to 9pm and has now pulled it back to 8pm. “We’ve also taken back our online delivery from a seven o’clock finish to six o’clock,” he says. “It will just generally mean a tightening of the belt.”

He claims that staff are disappointed about the reduction in hours, especially in the run up to Christmas. “I’m led to believe some of my café staff are maybe looking for alternative employment or additional shifts,” he claims. He is hoping to send a few extra shifts their way as other members of the team use up annual leave, but accepts that some people may go elsewhere.  “It might mean one or two folks here retiring or finishing and then if they do, then those hours will become available to the existing staff. I really don’t want to lose any of my staff. A lot of them are long standing – over 10 years.”

Julie-Ann is also reducing staff hours in order to save money. “I’ve already started saying to them that they’re going to get less hours next year, and I just think that’s shocking,” she says. “There’s already someone who says that they will be leaving because of their hours being reduced. She’s going to go back into caring because they’re in need of people and they’re willing to pay. It’s a shame as she’s been there since we opened.”

Saleem too is contemplating cutbacks. “Currently, say we employ five staff in a shift, we might have to think about employing only four,” he says.

He claims that single store retailers will end up increasing their own hours on the shopfloor to keep costs down. “They’ll have to work more themselves, take no holidays, have no family life because people can’t afford to employ people. I think the government has not thought this through properly.”

This is a harsh reality for Julie-Ann. “We’ve always had two people on a shift, but now it will be one person and me, which then distracts from the whole strategic thinking of a business,” she says. “It was after 11 o’clock last night when I came off the laptop, and then I’m back in here to do an opening because I’ve started reducing the hours already. Really, the work I was doing last night, I should be doing today, but I can’t do it today because I’m in the shop.”

Family members are also being roped in to help out. “My husband retired in April and this week he’s doing 22 hours,” says Julie-Ann. “He won’t get paid so that’s 22 hours we’re saving, but he should be enjoying his retirement.”

Pushing up prices

In another bid to save money, Julie-Ann is also making difficult choices over price. “I’ve looked at putting up prices but everyone’s struggling just now so if you put up your prices, then your sales go down. It’s a vicious circle.”

However, she has still upped the prices of certain items. “I didn’t want to, but I’ve had to,” she sighs. “We’ve done it on our coffee machine, ice cream, cakes, pies, and now I’m considering doing it on the day-to-day groceries.”

In-store deals may also suffer. “I am actually considering not doing any of the [Nisa three-weekly] promotions,” she says. “It’s really disappointing because we’ve always done the promotions and advertised it.”

Billy is considering upping his prices too. “There might be a small room for manoeuvre on general shop pricing,” he says, though he is keen to remain competitive.

Premier Whitehill’s popular Auntie Meg’s offering, which comprises an in-store café, as well as take-home ready meals, pies and pastries all prepared in the on-site kitchen, will also be impacted. “We’ll change the price of our Auntie Meg’s brand in April,” he says, but he is reluctant to change the café prices. “There was a long time my café didn’t get a lot of trade and then it got busy and I’m wary to knock up our prices and then knock the business.”

Cutting extra costs

Billy has also been reviewing his contracts to see where savings can be made. “Back in April this year, I was focusing on savings over the business by controlling the costs,” he says. “I did three-quarters of the book keeping myself and identified some stuff we could make savings on contracts.” He intends to ditch his Tango Ice Blast machine as part of the cutbacks. “The Tango Ice Blast machines spend half their time broken down, so where I’ve signed a lease contract with that, that’ll most definitely go in a year’s time because it’s a three-year deal.”

Julie-Ann had previously saved money by hiring younger staff, but the rise in the NMW means this is no longer worth her while. “At the weekends we bulk up to try and reduce the wage bill by having students in, but now the students are getting a huge increase so it’s just absolutely pointless,” says Julie-Ann. “The government has made such a mess of this, it really does make you wonder what they were thinking when they released this budget.”

Saleem is also hindered by the NMW changes. “Going forward, that’s going to seriously affect us because we employ a lot of young people,” he says. “This is probably an opportunity for young people to start off their first job. I think that’s going to be very difficult going forward in years to come because it gives me no incentive to employ somebody who’s 18 versus somebody who’s already mature and has the knowledge of the business.

“In [Spar] Renfrew I have three or four members of staff under the age of 20. Going forward, I wouldn’t be inclined to employ somebody who’s just come out of school because why would I?”

Craig agrees. “Any incentive to employ school leavers looking for experience in the world of work is removed,” he says.

What’s more, he believes that retailers will have to slow down their investment plans. “As prices increase, volumes will likely reduce and it will also lead to operators reducing capital expenditure, having a knock-on effect on jobs in other parts of the convenience supply chain,” he says.

Investment on ice

Billy had hoped to buy a new van as part of plans to expand distribution of his Auntie Meg’s products. “We supply it to other shops from Whitehills to Elgin,” he explains. “I was going to add another run from Whitehills to Aberdeen. I had a couple of customers [already] and I was looking for others, but I stopped that as a direct consequence [of the budget changes] because I’d need another van and another driver, and I was going to need more hours upstairs in the kitchen and the timing isn’t right for that.”

The budget announcements have also obliterated Julie-Ann’s plans. “It’s going to affect my great plan to do my expansion next year; I’m not going to do it,” she laments. “I really can’t afford it, and I need to find money to cover these changes. So it’s a shame, because there was going to be an opportunity of growing the team and now there’s not.

“I’ve had to tell the joiner, who was going to be doing the expansion, that he’s no longer required. So you’ve got the supply chain affected, you’ve got all these people hit by these mad decisions.”

Saleem has a similar view on the sacrifices that will likely be made for his business to remain viable. “It’s going to cost a lot of money – that money could have gone towards a refit in a year’s time, and I’ll need to maybe delay that plan going forward,” he says. “Bonuses for staff need to be cut to make savings somewhere.”

He believes that some businesses won’t survive the increases. “After Covid, vaping helped convenience stores [to bring in extra money],” he says. “With that diminishing in some way with the new legislation coming in from June next year and with the increase in wages, I think that will bring some businesses under 100%.

“I think there will be more shops closing down unless we come up with a local plan for the Scottish Government to help businesses.

“I’m on the Scottish Grocers’ Federations’ board [of directors]. We do try and speak to local ministers, but there’s only so much they can do – the Budget obviously comes out from central government.

“For now, it looks quite bleak to be honest.”