It’s no secret that the cost of living is increasingly on the rise; this is not only affecting basics like food and utilities but is now bleeding into property. As the cost of rent continues to rise with a 13% increase in 2023, many are beginning to wonder how this affects their business and what can be done to minimise any potential risks.
With business overheads up, it means that profit margins are reduced which makes it more difficult to sustain current operations. So, what is the long-term impact of the rising rent costs to business in the UK?
Long-Term Consequences of Rent Increases
As rents rise, businesses are now putting their costs up to offset this cost which will potentially make them less competitive, therefore limiting growth. This is causing some concern that SME’s are effectively being pushed out of local business and towns as they budget to compete with big corporations and franchises. In addition to this, there are further fears that this is ultimately leading to certain areas having a high concentration of certain types of businesses such as retail chains and restaurants – again, this will be at the expense of smaller independent businesses.
However, the main concern is that the rising rent costs will ultimately lead to business redundancy and job loss. If a business can no longer afford to rent the property, they may choose to downsize and will have to cut the work force by a percentage or equally close completely.
What Can Businesses Do to Offset the Rising Costs of Rent?
In recent years, some businesses have embraced remote working. Not only does this make your workforce happier with the work/life balance but it also reduces their overhead costs as they don’t necessarily need a larger space as not everyone will come into work at the same time. Or, in some cases, they have given up office spaces completely and opted for entirely remote work; with software like Microsoft Teams and Zoom, it makes it both achievable and affordable.
Depending on your type of business, some councils and communities are offering incentives as they try to encourage people to invest in local businesses and communities whilst others are looking for alternatives locations to find hidden hotspots which will cost less but still be an effective business base.
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