We've survived two world wars. We've survived the pandemic
. We've survived a number of recessions and we cut
our cloth accordingly. I don't think the business has
been through such a tough time. Welcome to the
Devonshire Bakery. I'm the fourth generation member of the
family business. Um I have a daughter who's just
started as 1/5 generation baker and I've got a bill
here signed by my grandfather. Um from 1931 Devonshire
Bakery is one of the many businesses fighting for survival
in the current economic climate, retail sales plummeted in
2022 as the cost of living crisis and sky high
inflation took its toll. This forced many companies to
go into bankruptcy in the largest number of insolvencies since
the 2008 financial crisis in December, 2022, insolvencies
were 32% higher than a year earlier and 76% higher
than in 2019. And economists say this is just
the beginning of a wave of insolvencies about to hit
the UK when we speak to insolvency practitioners, they
are telling us they are having an increasing number of
calls from businesses which have reached the point where they're
going to have to close down. And that's an
issue because small and medium businesses are really the lifeblood
of the UK. Economy, small and medium sized
businesses account for 99.9% of the businesses in the UK
. They employ three in five workers and about half
of the turnover in the private sector wage costs,
um, ingredient costs the energy costs. They're the
three main areas. It's about um ensuring that we're
profitable or if not profitable. Certainly um breaking even
energy bills in the UK have reached unprecedented levels.
And for businesses like this one that are very high
energy use, that's a big problem. How much
do you spend on energy? Oh, it's gone
up to about 8000 a month. And how much
did you spend last year? That was, it
was between three and 4000 month. So that's,
it's doubled. Yeah, we are adapting to the
, to the energy costs. We've got a brand
new oven that we put in last year here.
We have uh units here that, that, that
are holding chocolate and, and icing. So again
, they're switched off at weekends now. Yeah.
So we've switched off a big part of our deep
freezing refrigeration. Now, the energy costs towards the
end of 2022 harmed the business contributing to the 25%
of the revenue they said they lost last year.
A lot of businesses have received help with their energy
bills over the last few months, that support will
start to fall away, leaving businesses responsible for more
of their own bills going forward. If there isn't
any other help, it will be a problem for
us. We've got a bit of reserves in the
bank, but that would only last a couple of
months. Milk is gone up by 44%. We
use for a lot of milk and cream. So
the chipped potatoes that come in that went up 36%
flour that's gone up by 23%. The bakery is
navigating a price increase on raw materials. And that's
leading to a bigger question around how much of these
costs can be passed on to consumers. We had
three price increases last year. Never never before we
have to do that and we'll be looking at another
one. Raising prices comes with a competitive disadvantage at
a time when people are increasingly policing what they spent
. So, baked goods like these ones are a
special commodity. But then it's how much can you
put the prices up by our loaves? LikeÂŁ3,
something for the big loaves? And when you go
to Tesco's, you can buy it forÂŁ1. So
we started, we started work at five o'clock this
morning. First bakers were in our biggest cost is
, is the wages. So they are 50% of
our turnover. We currently employ 45 people. Um
, pre pandemic. We were um not far off
, double that. So we, we're running a
far tighter ship. The number of days we open
are reduced, which has enabled us to employ fewer
people but give them a more secure job to meet
inflation. The UK living wage is going up by
9.7% and that adds to the increased costs. This
business will have to navigate this year on top of
increasing energy bills while it may not seem like much
for a business which employs a lot of people that's
going to be a real added extra cost. The
squeeze resulting in insolvencies is nationwide and it affects long
standing businesses like this one that are in many ways
, the fabric of the British High Street. Yeah
, there's a, there's a lot of um business
owner fatigue. I think the worst case scenario is
that over the next 12 months, we're going to
see a lot more business failures. It means gaps
in the High Street and it means fewer employers in
the UK. There is always room for um,
cutbacks. Although we think we've, we've hit as
many cutbacks as we possibly can. It grinds you
down eventually. Um And that's probably a lot of
the reason why um businesses are, are closing.
Um But, but I think if you, if
you embrace the challenge, then there will be light
at the end of the tunnel.