STORY: Rising costs could lead to insolvency risk for 2,500 bakeries
From ingredients prices to electricity rates, virtually every bakery's expenses have dramatically increased this year.
As a sector fundamentally dependent on energy usage, current crises have left thousands of UK bakeries on the brink of collapse.
Many UK bakeries have seen 300% price increases in 2022, meaning the energy cost of running some small bakeries has gone from £1,500-£4,500 per month.
As a result, most of the 2,500 independent UK bakeries might have to go into debt to survive the winter without putting their prices through the roof, according to data from Company Debt.
Bakers in a 'position of uncertainty'
For example, Bridport bakery Leakers closed this week after 20 years on the high street: "Sadly the current climate of escalating costs puts us in a position of uncertainty," the owners said. "In tandem with rising costs of raw ingredients, our energy costs particularly are unsustainable."
London baker Sophia Handschuh started her Sourdough-focussed artisan bakery at the end of lockdown. After a hugely popular Kickstarter campaign, she opened on Christmas Eve last year, and now sells up to 300 loaves and 400 pastries each day.
But this year’s energy price increases have forced her to take a £50,000 loan and raise prices twice for her loaves, baguettes and pretzels.
"If I told you that our energy bill when we started the business a couple of years ago was about £1,500 a month you’d probably have a heart attack right?," she says. "Well, what if I told you that when the energy crisis began our energy bill overnight went up by 300%? Shocked yet?
“We couldn’t up our price to reflect this inflated bill anyway as we’d need to start charging maybe £20 a loaf to compensate which is why so many businesses in the UK just simply pay what they can and rack up a debt that we all hope this government will finally deal with."
Risk of insolvency wave
Despite the government’s recent announcement of a six-month price cap on business energy, many fear a tide of bakery insolvencies may be inevitable, says CompanyDebt.
Bakeries are fundamentally dependent on wheat prices, as the core ingredient in most pies, pastries and breads. Since May 2021, wheat prices have gone up 165% due to the war in Ukraine. Those with fleets of delivery vehicles also face the cost of soaring fuel prices. Key ingredients like butter and oil have risen steeply, while the whole UK food sector faces massive staff vacancies due to Brexit.
For more information, visit: Company Debt's website.