ULEZ, NI hikes, Brexit, Business Rates hikes, etc - God help you if you are trying to run a post Covid small business!

Pic Courtesy of Daily Telegraph, click for article

Over the past couple of weeks, I've found myself, rather unexpectedly, as a minor star of the anti ULEZ movement. I've done TV interviews with ITV, BBC, had an article in the Daily Telegraph and even had a request from GB News to have a chat with Andrew Pierce today about the issue. Unlike most ULEZ opponents, I am not rabidly anti Sadiq Khan. I do not like the way he runs City Hall, but it is not a personal thing and nothing to do with his racial origins. He is just pretty useless as a Mayor and doesn't listen. His only real talent is being very astute at assembling an electoral majority in London. He's been helped by the complete inability of the Tories to pick a candidate who has a Scooby Doo!

But Sadiq Khan and ULEZ is just one element of a very hostile environment for anyone trying to run a small business. My business is facong multiple existensial threats. After 46 years of successfully running a music studio business, April could well see the end. We will not go down without a fight, but at what stage does a man who is 62 say "Sod this for a game of soldiers". So lets look at each of these threats and how they affect us.

First of all, our business has not fully recovered from the pandemic. Looking  at the year so far, our turnover is 16% down on what it was for the equivalent period in 2019, which was the last full pre covid year. In 2020, as the pandemic hit, we were 6% down, In 2021, when lockdowns were in place for some, we were 70% down, in 2022 it was 30% down, in 2023, it was 20% down, in 2024 it was 8% down and this year, it has dipped again. The first quarter is always a strange one. The day of the week the year starts on affects the turnover in January and also the day of the week that Valentines day falls on (musicians don't rehearse, so you lose a days turnover. Also, we tend to do maintenance in the 1st quarter, as we did this year, which closes studios etc and affects turnover. But even so, we are nowhere near back to pre pandemic levels. There is simply less work for musicians and this has a knock on effect with a lack of need for rehearsals. The only real saving grace is that most of our competetors, who were around in 2020 have ceased trading. 

So what are the challenges. 

Business rates. The chancellor announced that Business Rates relief for leisure and retail busnesses will reduce from 75% to 40%. With the rates increases to these, that means that our rates bill will double from 2024. Barnet council only collect rates for ten months, we get some respite in February and March, but we will have huge bills in April. If we trade at the same level as last year, this will gobble up all of our profit.

NI hikes. The government has changed the thresholds for NI. It is unclear to me at this point how this will affect us. It may be that we can partially mitigate this, but it is a tax on employing people. We have changed our staffing patterns, we may have to rejig things further, amend our opening hours, so we are not paying people at quieter times. We've always opened, even if there is only one band rehearsing and it doesn't pay wages. As these wages and NI costs have spiralled, we need to review this. 

Minimum wages. Historically, the studio has always paid above minimum wage. We did this as we wanted the best staff. As the government realised they can cut benefit bills for people in work by raising this, they've massively hiked employment costs. Up until 2019, this wasnt' so much of a problem. Now with the business on life support, it puts a huge strain on our budget. We've cut two members of staff and run single man shifts at quiet times. Cutting staff costs is just about the only tool a business such as ours has. The government makes these changes, businesses like us cut staff costs and the government gets less tax. It means that they can't balance the books. It is basic econmics.

Brexit. This has affected our business in three ways. The first way is that tier 4/5 bands (bands playing small venues, working professionally) used to survive by touring Europe. Brexit has made this almost unfeasable for small bands. The tax rules around selling merchandise and getting paid make it impractical. Less work means less rehearsals. The second way is that less musicians are coming to London to work from EU countries. That also means less work. The third way is that our music equipment company has stopped selling in Europe. It is just too much hassle for the rewards.

ULEZ - We are on the edge of the ULEZ zone. For bands and musicians living in Hertfordshire, rehearsing, or buying strings, etc, if they have a non compliant vehicle it adds £12.50 to the bill. If you are a guitarist and you want to buy a new E string  for £1.50, as you have a gig tonight, will you pay that money or will you drive to Hatfield/Watford and buy them there, even if it's three times as far and it costs a couple of quid in petrol and parking (parking is free at our place). There is also the hassle of paying the charge. Around 40% of our customers are based outside of London. Of these 25/30% have non compliant vehicles. Our tracking of booking data indicates that we are seeing 10-15% less bookings due to ULEZ at a conservative estimate. Being on the edge of the zone, it effects us disproportionately. The same is true of pubs, restaurants and other businesses on the boundary.

Energy costs. Like everyone, we've been clobbered by rising utility costs. UK businesses pay the highest energy costs in Europe. We have largely moved to energy efficient bulbs, etc and are looking at other savings, but I suspect we've drank this well dry. 

So what can we do to survive?

Staff - As mentioned above, we are looking at our staffing patterns and opening hours. Should we trim these? Do our opening hours really suite our customers and our business model? Is there scope for reorganising things.

Advertising -  We've done very little advertising in the last two years. We've recently run some rather innovative campaigns, that have delivered a great response. For years we sinply relied on Google adwords to bring in new customers. We've moved away from this. It has saved money and we are using far more targetted advertising. We've also realised that targetting Hertfordshire is pretty much a waste of time.

New income streams - Attracting different types of business, which have not traditionally used the studio. We've done OK at this historically. Adding dance and photography studios has paid dividends. We are also used for things such as casting. The tuition side of the business has also brought in a reasonable amount of income, as well as building a strong base of future customers.

Add ons - this is making sure our customers spend more money when they are in the studios.  We recently installed a better coffee machine. We hope this will increase our drinks turnover by £1-2,000. Not a huge amount in the scheme of things, but such small margins make can be the difference some months, between paying the bills or not.

Raising studio costs - We did this in January in anticipation of the cost hikes in April. It is a double edged sword. Price rises always make customers review their arrangements. There seems to be a movement towards shorter sessions. Bands book 3 hours where they previously booked four, etc. As they use less electricity etc, you make a bit more per session in profit, and it frees space at busy times, but it takes a year before you really appreciate the effects.

Other cost savings -  There are always savings to be made. It is a question of seeing the wood for the trees. Energy contracts, insurance costs etc are always worth looking at.

So where are we? The rest of this month, I will be spending my time looking at all of this. When you've run a business for 46 years, you don't just throw the towel in. In 2020, my expectation would be that by 2025, we'd either have shut or we'd be making a fortune. In truth, we are doing neither. We are just about breaking even and I suspect that this is what we will continue to do. I wouldn't advise anyone to start a music business now. The Mayor won't support you, the government won't support you, your utility suppliers will shaft you and everyone is out to screw you. 

Here's a song that sort of sums up how I feel about it all right now, as we crunch the numbers. I am sure that by the end of the month, I'll feel better!