State of the Industry Survey Summary

Key findings

Following a difficult winter and slower than expected spring, partly due to the emergence of multiple Omicron variants, sector businesses are finally starting to show again the more positive signs of recovery that we first saw in September 2021:

• 44% of businesses are now making a small or good profit (up from 30% in April). 36% are breaking even. However, one fifth of businesses (20%, down from 27%) are still making a small or substantial loss.

• Raising prices is now a consistent trend: 62% raised their prices over the last three months (up from 43% in April). A further 51% will do so over the next three months (down from 58% in April).

• Reliance on external support has reached its lowest point over the last two years, but is still high, with 50% of businesses (down from 58% in April) that are either partially or completely reliant on Government support.

 

Staffing, recruitment and apprentices

• Recruitment intentions are showing slight improvements: in the next three months, 27% are definitely or likely to take on new staff (up from 17% in April).

• Over the last three months, 17% have cut back on apprentices (similar to 16% in April). More positively, one fifth (21%) (doubled from 9% in April) were definitely or likely to take on apprentices in the next three months.

 

Looking to the future

• Business confidence in the sector has strengthened further and is now back in line with the positivity we saw in September 2021. Two-thirds (64%) of businesses are now confident of their survival (up from 57% in April). However, it is still significant that a third (31%) are not sure that they will survive until the end of the year.

• Growth intentions remain balanced, with 39% saying that they intend to grow their business (similar to 38% in April), 45% intending to remain the same size and a consistent 17% are planning to downsize or hand over the business.

 

Key insights

1.      After enduring a difficult winter of the Omicron BA.2 variant and a challenging spring of rising business costs, following two years of pandemic and restrictions, sector businesses are finally starting to show again the signs of recovery that we first saw in September 2021.

2.      2. Current indications of both business activity and business confidence are back at levels seen in September 2021. Businesses are busier than they were, but still not operating at full capacity, with clients not returning for a full array of treatments with the same regularity as they did before the pandemic.

3.      3. The overwhelming reliance on external support that we saw in January has now eased. However, half of businesses are still either partially or fully reliant on government support in some form to keep their operations going. Business growth intentions are still balanced.

4.      4. This continues to be a challenging time for businesses within the sector, with the continuing challenges of rising business costs (energy prices and staff costs), coupled with the long shadow of business debt that will take many businesses more than two years to clear.

5.      5. With the latest wave in Omicron cases (BA.4, BA.5) and escalating costs set to continue through the year, the business environment remains uncertain. However, the signs of recovery shown in this latest set of results are very welcome.

6.      6. The recent NHBF report, Careers At The Cutting Edge, outlined a ‘skills crisis' in the sector. The future of the sector in terms of female entrepreneurship, employment, training and apprenticeships remains a concern unless businesses are offered further incentives and government support.

 

Background

Businesses have weathered the storm through the winter and finally, after two years of lockdown and restrictions, are starting to show signs of recovery.

Businesses seeking to recoup losses from a challenging winter, then experiencing soaring costs of doing business and the latest Omicron variants, find themselves once again dealing with increases in appointment cancellations and reduced income.

The positivity in terms of business activity and survival expectations is counter balanced by the enduring reliance on government support and lingering business debts after businesses have worked their way through reserves and dipped into personal savings.

The Local Data Company estimates that, up to May 2021, 16% of the industry was lost to the crisis. Our surveys find a consistent figure of 17% of businesses deciding to downsize or close.

Businesses have benefitted from an array of support from the UK and devolved governments over recent months, which carried them through the winter. However, the sector recovery is still fragile and further support is needed.

The NHBF has conducted its latest ‘state of the industry' quarterly survey to gain an accurate reflection as to how the industry has fared over the last quarter and is looking ahead to the autumn.

 

 Responses

The survey received 499 responses between 27 June and 8 July. It gathered views from a good representation of businesses in the personal care sector across all areas including city centres, town centres and villages in England, Northern Ireland, Scotland and Wales.

Respondents included salon or barbershop owners, chair or room renters, home-based business owners, mobile or freelance practitioners, employers and the self-employed. The vast majority (87%) of respondents were salon or barbershop owners, 13% are self-employed individuals and 12% involved in the wider space renting, mobile and freelance part of the sector; this is either the sole focus of their business or in addition to being a salon or barbershop owner.

Full details of the responses to the individual questions can be seen on request in the survey data document. Comparisons with data collected through previous quarterly State of the Industry surveys conducted over the last two years are also available.

 

The financial picture

More businesses are now making a small or good profit (44%) (up from 30% in April). This is the highest since the fledgling recovery we saw in September 2021. 36% of businesses are breaking 3 even. However, one fifth of businesses (20%) (down from 27% in April) are either making a small or substantial loss (Q7).

Businesses are experiencing a ‘perfect storm' of rising energy costs, supply price inflation and increases to National Minimum Wage/National Living Wage (NMW/NLW) and National Insurance Contributions (NICs). In terms of direct impact on the business, there is most concern about energy costs (77%), increased cost of trade suppliers (61%), increases to NMW/NLW (43%), increases to NICs (32%) and increasing wage expectations (26%) (Q10).

In response to these rising costs of doing business, the most common actions that businesses are taking include removing any non-essential expenditure (64%), putting up prices (59%), reducing costs/making cost efficiencies (46%), holding off taking on new staff/apprentices (44%) and reducing energy usage (37%) (Q11).

Looking ahead to the autumn, we predict that there will be further signs of recovery. Despite COVID, barbers and beauty salons were both in the top ten retail categories showing the most growth in numbers in the first half of 2021, and the sector continues to show remarkably high rates of business survival (NHBF Industry Statistics 2021).

 

Current situation

Following a difficult winter and slower spring, a more encouraging 23% of businesses are now busy and 42% steady (65% combined, up from 41% in April). Around a quarter (27%) of businesses still report that they are quiet or really quiet (7%) (34% combined, down from 57% in April) (Q6).

0 10 20 30 40 50 Aug-20 Nov-20 Mar-21 Jul-21 Sep-21 Jan-22 Apr-22 Jul-22 Making a profit/loss/breaking even Yes, still making a good profit Yes, we are making a small profit Breaking even Small loss Substantial loss 0 10 20 30 40 50 Jul-21 Sep-21 Jan-22 Apr-22 Jul-22 How busy are you? Busy Steady Quieter Really quiet Other 4 The trend towards increasing prices continues. 62% of businesses raised their prices over the last three months (up from 43% in April). A further 51% will do so over the next three months (down from 58% in April). This is due to a combination of factors including the difficult business environment, rising staff and business costs (Q8, Q9).

Reliance on external support has reached its lowest point over the last two years, but is still high with 50% of businesses (down from 58% in April) either partially or completely reliant on Government support. This has reduced from a high of 81% in January 2022, and is an improvement on the figure of 66% from September 2021. A solid 50% say that they are not reliant on continued support (up from 43% in April) (Q12).

Over the last three months, the vast majority of businesses (88%) have not made any redundancies. Only 4% of businesses made staff redundancies and, in the majority of cases, just one member of staff (Q24).

The picture with regard to staff hours is looking more positive also, with only 24% of businesses being forced to cut staff hours in the past three months (down from 43% in April and 58% in January). Three quarters (76%) did not need to cut staff hours (Q21).

 

Staffing, recruitment and apprentices

Staffing and recruitment intentions remain relatively static, albeit slightly more optimistic for the future.

The workforce has stayed the same over the last three months for 57% of respondents (slightly down from 62% in April, but similar to 58% in January). 28% reported a decrease (previously 31%) and 15% had increased staff (doubled from 7% in April). Of those citing an increase, the majority (56%) had added one member of staff and 42% 2-4 staff. Of those citing a decrease, 46% had reduced staff by between one and 44% 2-4 staff (Q18-20).

In the next three months, 27% are definitely or likely to take on new staff (up from 17% in April and matching 27% seen in September 2021), with two thirds (62%) saying that it was unlikely or that they definitely would not (down from 75% in April). Of those intending to take on staff, the majority (58%) would add one person and 40% 2-4 people (Q22, Q23).

The Careers at the Cutting Edge report outlined the continued decline in apprenticeship starts in the UK. In line with this, over the last three months, 17% have cut back on apprentices (16% in April). However, more positively, one fifth (21%) (doubled from 9% in April) are definitely or likely to take on apprentices in the next three months (Q25, Q26).

 

Looking ahead – barriers to growth and aspirations

The trend for turnover appears relatively static. Most businesses (48%) expect their turnover level to remain the same over the next three months (slightly higher than the 43% expressing this in April). 26% expect it to increase slightly or significantly (similar to 28% in April), with 28% saying they expected a decrease slightly or significantly (in line with 30% in April) (Q13).

Business confidence in the sector has strengthened further and is back in line with the positivity we saw in September 2021. Two thirds (64%) of businesses are now confident of their survival (up from 57% in April). However, it is still significant that a third (31%, reduced from 52% in April) are not sure whether they will survive over the next six months until the end of the year.

Growth intentions remain balanced, with 39% saying that they intend to grow their business either rapidly or moderately (similar to 38% in April). A consistent 45% intend to remain the same size (similar level to 44% in April). A consistent 17% are planning to downsize or handover the business similar to April and January (Q15).

In terms of barriers to growth, 70% of businesses cite the current economic conditions (down from 80% in January), difficulties in recruiting more experienced staff (40%) (up from 26% in January), satisfied with current size (20%), difficulties in recruiting new entrants or apprentices (17%), wanting to stay below the VAT threshold (17%) and the risk of being subject to more regulations (16%) (Q16).

Conclusion and Recommendations

The latest survey findings show that, after a long, hard two years, the sector is finally recovering, as we see the return of the confidence levels seen in September 2021.

The NHBF welcomes the Government support that has been provided to businesses in the sector over the last two years or more. However, with the sector still in a fragile place within a ‘perfect storm' of rising staff costs, energy prices and supply price inflation, governments across the UK should continue to monitor the sector's recovery.

The Careers at the Cutting Edge report makes it clear that the longer-term future of the personal care sector depends on multiple interventions, ensuring a pipeline of new talent and business owners being able to afford to keep staff. Employment intentions remain relatively static and there remain few incentives for businesses to take on apprentices in the future.

We continue to call for:

• An increase in the 50% discount on business rates for 2022-23 in England and further discounts in the other nations, as well as flexibility on repayments of CBILS (Coronavirus Business Interruption Loan Scheme) and bounce back loans, to offer much needed support to those suffering financial hardship.

• The reintroduction of the Job Retention Bonus (£1,000 per eligible employee) through to the autumn of 2022 to sustain jobs and businesses and restraint on further increases to the National Minimum Wage and apprenticeship rate until the recovery is more sure-footed.

• More attractive apprenticeship incentives to employers, focusing on the development of affordable apprenticeship schemes specifically for small businesses in order to make it financially viable for them to recruit and retain apprentices. In particular, finding ways to fund the gap between the apprentice wage and minimum wage for apprentices aged 19+, which is currently difficult for businesses to afford.

• Restraint from the Low Pay Commission when advising the Government on rises to the National Minimum Wage (NMW) and National Living Wage (NLW) in 2023/24, given the escalating costs around doing business.

• Government to lead a crack-down on informal tax evading businesses in the sector that are driving down prices and undermining legitimate businesses under pressure.

With continued support from each national Government, further UK government support into the autumn and incentives for apprenticeships, we are confident that the personal care sector will play an important role in the UK's sustainable economic recovery, the future of thriving high streets and community wellbeing.

 

 

Annex – net charts

The net trend is obtained by deducting the negative answers from the positive, while discounting the neutral answers. For example, the profitability net trend is found by deducting those reporting they are making a loss from those who say they are making a profit, and not including those who say they are breaking even.

The following charts show the tracking trends for Charts 1, 2 and 4 in the main summary.

Chart 1a shows the profit or loss trend, illustrating an initial recovery from July to September 2021, fall in businesses making a profit to January 2022 then a recovery again to July 2022.

 

Chart 2a below shows the business activity trend. The chart shows a recovery in business activity to September 2021, a fall in January 2022 with a recovery again into July 2022.

 

Chart 4a below shows the trend for whether businesses expect to survive over the next six months. After a low point in November 2020, confidence increases to September 2021, falls in January 2022 after a difficult winter and rises again to July 2022.