Europe Economy

'It's starting to cripple us': British fish and chip shops fear for their survival as costs surge

Key Points
  • The U.K. faces a historic cost-of-living crisis due to a persistent upward spiral in energy bills, which has driven inflation to double figures and is expected to worsen into next year.
  • Fish and chip shop owners told CNBC that they are fearing for their future as the rising costs of fish and energy squeeze margins.
SKEGNESS, England - Aug. 30, 2022: Salt's fish and chip shop in Skegness, Lincolnshire. Manager Liam Parker told CNBC the family business is looking to cut costs through the winter as soaring energy and fish prices weigh on small businesses.
Elliot Smith/CNBC

SKEGNESS, England — Traditional British fish and chip shops are facing an "extinction event" as prices for energy and fish skyrocket, the industry's official body and shop owners have warned.

The U.K. faces a historic cost-of-living crisis due to a persistent upward spiral in energy bills, which has driven inflation to double figures and is expected to worsen into next year, hammering consumers and small businesses.

Meanwhile, the prices of fish, potatoes and oil have soared in light of Russia's invasion of Ukraine and a subsequent suite of international sanctions. Russia is one of the world's largest seafood producers, and is a key supplier of white fish to many countries.

"It's starting to cripple us a little bit — the [school summer] holiday finishes next week and people will be concentrating on energy prices themselves, so I think this winter is going to be hard," David Wilkinson, owner of The Blue Fin restaurant in Skegness, Lincolnshire, told CNBC last week, adding that the business had already seen a 60% increase in its energy bills this year.

"Most people are talking about just a few days a week opening up, because it's so quiet here. I think a lot are going to go to the wall unless we get some help from the government."

David and his partner Eileen Beckford have run the restaurant in the center of the east coast seaside town, a traditional domestic summer vacation destination for many Brits, for seven years.

SKEGNESS, England - August 30, 2022: David Wilkinson (R) and partner Eileen Beckford (L), owners of the The Blue Fin in Skegness, Lincolnshire, are worried about the future as rising fish and energy prices hammer traditional British fish and chip shops.
Elliot Smith/CNBC

"I used to have the restaurant open upstairs and downstairs, plenty of staff — can't do it now, we just have to put it on trays, charge the same price, save money on costs, which helps relieve the cost a little bit. It's a fine margin now, that's for sure," he said. The Blue Fin is also struggling to find staff as the country's labor market remains extremely tight.

Prior to the pandemic, he used to pay £70 ($81.16) for 3 stone (42 lbs) of fish, but that has now reached £270, with much of his fish coming from Russia. The U.K. government has implemented an additional 35% tariff on seafood imports from Russia as part of its punitive measures following the war in Ukraine, and Wilkinson's suppliers have informed him that this is likely to hit even harder through the winter.

Many fish and chip shops are instead turning to Scandinavia, and representatives from the National Federation of Fish Friers (NFFF) recently traveled to Norway to attempt to mitigate the problem of soaring prices.

A key issue faced by the industry is the extent to which fish and chip shops can pass cost increases onto consumers before they begin to lose business, with fish and chips having long been considered an affordable treat, especially in traditionally working class areas of the country.

'We are scared'

Liam Parker, manager of Salt's Fish and Chip Shop at the opposite end of the town, has seen energy prices double while it opened for extended trading hours during the summer, and the business is looking to conserve energy as much as possible throughout the winter.

"In the winter, Skegness goes from really busy to a bit of a ghost town. We'll be keeping an eye on everything and not overdoing it," he told CNBC last week.

"Obviously hours shorten a little bit, but we look to try and earn as much money as we can in the summer just to get us through the winter."

The UK's labor market is very tight by historic standards, economist says
VIDEO3:5103:51
The UK's labor market is very tight by historic standards, economist says

The family-owned business has been forced to increase its fish prices twice this year due to wholesale prices rising by around £20 per box, Parker estimated. Suppliers have cited greater travel requirements and rising fuel costs to collect fish as key drivers of price increases.

"We're hoping at the minute, but don't get me wrong, as owners, we are scared. We have had conversations between the whole family, what we're reading, and we're uncertain what the future is going to hold," Parker said.

The business has been contacting suppliers to try to lock in prices for a year or more, but the uncertainty of the macroeconomic and geopolitical outlook means many are not willing to enter into such conversations, he added.

'Extinction event'

Andrew Crook, president of the U.K.'s National Federation of Fish Friers and owner of the Skippers of Euxton restaurant in Chorley, Lancashire, told CNBC on Monday that this was potentially the worst crisis the industry has ever faced.

The price of fish and chips at Skippers has risen by £1.60 since the beginning of the year, but Crook said the price he pays for fish has now doubled. He suggested the outlook is "very scary indeed" as the impact of the 35% tariff on Russian imports is yet to feed through fully into prices being charged by suppliers.

Meanwhile, a drought in the U.K. has hampered the growing of crops, which Crook anticipates will further drive up potato prices, and the price of sunflower oil, used by many fish and chip shops, has doubled, though has begun to level off as supply shortages ease.

"It's a very bleak picture, but we're resilient, we've got a great product and I'm sure the industry will get through it. It might bring quite a few people down along the way — I'm pretty sure it will," Crook said. 

"I don't think it's just fish and chip shops that are affected, although we do have some unique pressures because of the conflict our reliance on some of the products that come out of Russia and Ukraine, so we are probably taking the brunt of it, but I think this really is an extinction event for small business without the government stepping in."

SKEGNESS, England - Aug. 30, 2022: High Street in Skegness, Lincolnshire, colloquially known as Chip Pan Alley.
Elliot Smith/CNBC

The NFFF has been lobbying the British government to reform its tax system for small businesses, with VAT (value added tax) — a levy on goods and services at each stage of the supply chain — returning to 20% from April after a relief package during the Covid-19 pandemic.

"We've always had quite a tight margin because fish is expensive, and we've always had quite a low sale price, but we work on volume. We've always felt the pain of VAT – I think now the rest of hospitality are all saying the same thing," Crook said. 

"Now is the time. We need a brave government that is going to take these difficult decisions and recognize it as an investment in the future, because we do provide great jobs."

Commercial energy customers do not enjoy the same freedoms as households to switch to a new provider during the contract term, he explained. The NFFF is also calling for a review of the energy supply system to offer greater reward for businesses investing in staff and environmentally friendly operating practices.

"Small businesses are the biggest employer in the country. We were always known as a nation of shopkeepers — I don't know what we are now, to be honest," Crook said.