For the better part of a century, the fish and chip shop has been the most reliable barometer of British street health. When chippies thrive, the show comes alive. When combined, it is rarely a sector-specific problem. Currently, according to one of the most experienced operators in the trade, chippies are closing down at the very moment Westminster should be helping them grow.
This is the decision of Danny Hennesy, a thirteen-year veteran of the trade and owner of Mandens, the UK's leading fish and chip shop. His warning is meaningless: ministers are quietly wasting an opportunity to support one of Britain's strongest SME sectors at a time when consumer demand is at its highest in years.
“There has never been any excitement in this sector, but it is becoming difficult to run these businesses,” Hennessy told Business Matters.
That interest is reflected in the list. There are currently 338 fish and chip shops on the market across the UK with BusinessForSale.com, targeting both the mature generation of owner-occupiers preparing to move back and a large group of would-be entrepreneurs looking to trade as their escape from corporate life. Whether those deals translate into thriving, reinvested businesses depends almost entirely on the business conditions experienced by subsequent owners.
The arithmetic of the fish and chip trade has always been unforgiving, but the last 18 months have stretched even the best-run shops. The industry generates an estimated £1.2 billion a year and supplies hundreds of millions of portions a year through a network represented by the National Federation of Fish Friers. However the operators were hit in all areas at the same time.
April's increase in employer National Insurance Contributions, which rose from 13.8 per cent to 15 per cent and is down from a record low, has had positive effects in a sector where staffing is the second largest cost behind raw materials. Business Matters previously reported that NIC employers' debts exceeded Treasury forecasts by £28 billion, with hospitality among the hardest hit sectors.
Energy bills remain stubbornly high. And the price of the white fish that defines the menu, cod and haddock, is also increased because of the conflicts in the Middle East. Reuters and others have documented how the cost of diesel for fishing vessels has doubled on some routes, and the conflict has spilled over into the price of a Friday dinner.
“Fish and chips is one of the strongest food sectors in the UK,” said Hennessy. “It's part of our DNA, when times are tough, people still come back to it because it's familiar, affordable and reliable. But costs are rising from every angle, energy, raw materials, labor, and global events now come into the money to run the store. That stops the owners from investing and growing.”
The change in behavior that Hennessy describes is an issue that ministers should be very concerned about. Operators would often remodel, take second sites or upgrade power-hungry fryers rather than save money. That warning echoes data from a broader industry: Business Matters reported that the attack on the hospitality tax is now forcing some restaurants and bars to close one day a week just to protect borders.
“We should be seeing growth, instead, people are trying to hold on,” Hennesy said. “Without support, many shops will close, and that would be a real loss on the high street.”
The loss couldn't just be emotional. Fish and chip shops are co-tenants in thousands of second paradises that no national chain will ever colonize. When a chippie closes, the productive footfall at the newsagent two doors down goes with it, a variable that helps explain why high street closures are expected to accelerate as the business price relief regime tightens.
In all the stress, the underlying economy remains attractive, which is why consumer demand is not falling. Well-run stores can bring in margins of around 28 percent. Many turn over £8,000 to £10,000 a week. The best performing sites turn over £15,000, and a number of chippie tents clear more than £1 million a year.
Andrew Markou, CEO and founder of BusinessForSale.com, says that profile is exactly what keeps mid-career movers in the market.
“In uncertain times, people look to businesses that provide stability and ongoing demand, and fish and chip shops are a unique example,” he said. “The demand is there. The question is whether the wide area allows the sector to grow, or simply forces it to stand still.”
Hennessy's frustration is not that the industry lacks resilience. That persistence is mistaken for idleness. He wants ministers to recognize that targeted, energy-efficient, NIC border benefits for hospitality SMEs, at business rates for the private sector, will unlock investment that is currently being put off.
“This industry has been able to handle everything, the economic downturn, rising costs, changing habits, it will also survive this,” he said. “But with the right support, it can do more than just survive, it can lead to growth in the fast food sector.”
In the meantime, the chippies stay open, the lines stay tight and the national dish remains, as it always has been, an inexpensive tradition that comes out with almost everything thrown at it. The question for the Treasury is whether it is content to let one of Britain's bona fide SME success stories simply endure – or whether, with a few well-intended measures, it is willing to let it grow.
