If you run a small business in the UK, the story of “M&M Custard” will feel painfully familiar. This beloved, family-run dessert shop, a fixture on its local high street for over a decade, is facing a fight for survival. But this isn’t just a story of one business struggling—it’s a case study for thousands of UK SMEs caught between soaring global costs and the direct impact of UK government policy.
In this deep dive, we’ll dissect the precise financial troubles facing a business like M&M Custard. More importantly, we’ll connect the dots to specific Gov.uk policies on tax, energy, and finance and provide an actionable survival guide to help you navigate these choppy waters.
The Perfect Storm: Why M&M Custard is Struggling to Stay Afloat
M&M Custard isn’t failing because of a bad product or poor service. Their custard is legendary. Instead, they are battling a “perfect storm” of economic pressures that are squeezing their margins to breaking point.
1. The Stranglehold of Soaring Input Costs
The very ingredients that make their custard so creamy are becoming unaffordable. The prices of milk, cream, sugar, eggs, and flavorings have skyrocketed due to global supply chain disruptions and post-Brexit import complexities. Every tub of custard now costs significantly more to produce than it did just 18 months ago.
2. The Energy Bill Iceberg
Running industrial freezers, refrigerators, and cooking vats is incredibly energy-intensive. The skyrocketing cost of gas and electricity has been a body blow to their profitability. For a business that relies on constant refrigeration, this isn’t a variable cost that can be easily cut; it’s a fixed cost threatening their very existence.
3. The Consumer Spending Squeeze
This is the demand-side problem. Even the most loyal customers are feeling the pinch from their own rising mortgages, food bills, and fuel costs. A luxury like a pot of artisan custard is one of the first “non-essential” items cut from the family budget. Footfall is down, and average spend per customer is falling.
The Gov.uk Policy Link: How National Decisions Hit Main Street
This is where the story moves from the economic to the political. The UK government’s policy decisions, while designed for national-scale issues, have direct and often severe consequences for small businesses like M&M Custard.
The COVID Support Cliff-Edge
During the pandemic, government schemes were a lifeline.
- Bounce Back Loans (BBLs): M&M Custard took a £30,000 BBL to cover rent and fixed costs while closed. This debt, now in repayment, is a significant monthly overhead at the worst possible time.
- Furlough Scheme: Its end meant the business had to shoulder its full wage bill again, just as other costs began their dramatic rise.
The Tax Squeeze: Business Rates and VAT
- Business Rates: For a high-street shop like M&M Custard, business rates are a massive fixed cost. While temporary relief has been available, the underlying system remains. The government’s periodic revaluations and relief schemes create uncertainty, making long-term financial planning a nightmare.
- VAT Rollercoaster: The temporary VAT cut to 5% for hospitality was a crucial buffer. Its subsequent rise to 12.5% and then back to the standard 20% forced an impossible choice: absorb the cost and destroy already thin margins, or pass it on to customers and risk losing them.
Monetary Policy: The Interest Rate Domino Effect
To combat nationwide inflation, the Bank of England (working towards the government’s inflation target) has raised interest rates. This hits small businesses like M&M Custard in two ways:
- It increases the cost of servicing any variable-rate debt or overdrafts.
- It further reduces consumer spending power, as mortgage holders have less disposable income.
The Post-Brexit Reality for Suppliers
If M&M Custard sources unique vanilla or packaging from the EU, they now face new import duties, customs paperwork, and delays. This adds cost, administrative hassle, and supply chain uncertainty, making it harder and more expensive to operate.
Your Business Survival Guide: Navigating the Policy Landscape
The situation is tough, but it’s not hopeless. Proactive business owners can take steps to mitigate these pressures. Here is an actionable guide, leveraging both government resources and smart financial strategy.
1. Scrutinise Every Government Support Scheme
Don’t assume you know what’s available. The Gov.uk Business Finance and Support Finder is your best friend. Regularly check for:
- Business Rates Relief: Ensure you are receiving every discount you’re entitled to, such as the Retail, Hospitality, and Leisure Relief (RHL).
- Help to Grow Schemes: The Help to Grow: Management and Help to Grow: Digital schemes can provide funded training and software discounts to improve your efficiency and online presence—a crucial step if footfall is down.
- Local Grants: Your local authority may offer grants for energy efficiency improvements or high street regeneration.
How [Your Website Name] Can Help: Our team specializes in navigating the complex landscape of government policies. Visit our blog, and we’ll identify every penny of support your business qualifies for.
2. Tackle Your Energy Costs Head-On
- Review Your Contract: Don’t auto-renew. Use the third-party switching sites accredited by Ofgem to find the best possible deal.
- Invest in Efficiency: Even small investments like LED lighting, better insulation for your freezers, and smart thermostats can significantly reduce your long-term energy consumption. Some of these may qualify for tax relief.
3. Manage Debt and Cash Flow Proactively
- Talk to Your Lender: If you’re struggling with BBL repayments, communicate with your bank immediately. They may offer payment holidays or restructuring plans. Silence is your worst enemy.
- Forecast Rigorously: Create a detailed, rolling 12-month cash flow forecast. Model different scenarios (e.g., a 10% drop in sales, a 15% rise in energy costs) so you aren’t caught off guard.
How [Your Website Name] Can Help: Cash flow is the lifeblood of your business. Our website includes robust cash flow forecasting to give you the clarity and confidence to make tough decisions.
4. Diversify Revenue and Re-engage Customers
- Go Online: Could M&M Custard offer local delivery or a “postable” product line? An e-commerce site can open up new revenue streams beyond the high street.
- Reinforce Your Value: In a cost-of-living crisis, remind customers why you’re worth it. Emphasize quality, local ingredients, and the experience you provide. Run targeted, value-focused promotions to bring lapsed customers back.
M&M Custard: Financial Troubles & UK Policy Impact
| Pressure on Business | Related UK Government Policy | Impact & Consequence |
|---|---|---|
| Soaring Input Costs | Post-Brexit Trade Rules | Increased cost and hassle for importing ingredients and equipment. |
| Sky-High Energy Bills | End of Full Energy Bill Relief | Business faces unsubsidized, high wholesale prices, a major fixed cost. |
| Consumer Spending Squeeze | Bank of England Interest Rate Hikes | Customers have less disposable income, reducing demand for non-essentials. |
| Debt Repayment Burden | End of COVID Bounce Back Loan Scheme | Previously deferred government-backed loans now require repayment, straining cash flow. |
| High Fixed Business Tax | Business Rates & VAT Increase | Significant fixed property tax and 20% sales tax reduce margins and profitability. |
Summary: The business is caught in a “perfect storm” where global economic pressures are directly amplified by the withdrawal of pandemic support and current UK fiscal and monetary policies.
Conclusion: From Surviving to Thriving
The financial troubles of M&M Custard are a symptom of a wider economic climate. The link between Gov.uk policies and their bottom line is direct and powerful. Understanding this link is the first step toward crafting a resilient business strategy.
The path forward requires a combination of leveraging available support, implementing operational efficiencies, and strategic financial planning. By taking a proactive, informed approach, small businesses can do more than just survive this storm—they can position themselves to thrive when conditions improve.