Challenges Facing the UK Storage Industry |
Posted: December 2, 2016 |
The UK storage industry has undergone immense changes in the past number of years, rising from an average performing industry into one of the best sectors in the economy. This huge boom in the past ten years or so can be attributed to the increasing demand for space, especially office space by startup ventures or existing businesses that are expanding. Self storage services have also become very popular among individuals, especially those who are in need of temporary storage solutions – mostly during home moves. However, despite the huge boom that the storage industry has enjoyed in the past decade, it has been experiencing quite a slow growth rate in the past few years, as it is evident from an annual storage survey report for the industry by the Self Storage Association of the UK (SSA), which shows that there has been very little expansion in the past few years. So, what has been causing a slow growth rate in the industry? Below is a look at some of the challenges that might be causing the industry to expand at a slow rate: 1. High real estate prices One of the main challenges facing the UK self-storage industry is the high real estate prices, which have driven the rental rates and the price of buying property to an all-time high. This means that self-storage companies in the UK are paying high prices for their storage facility, which significantly reduces their bottom line. As a result, a number of storage companies might not be able to expand due to reduced returns. In addition, the high real estate prices are a huge challenge for any with plans to establish a self-storage business. 2. High operating expenses In addition to the high real estate prices, self-storage businesses in the UK have to deal with high operating expenses such as electricity, water, and other utilities. The businesses must also provide adequate security for the storage facilities, hire personnel to maintain and operate their facilities, and provide insurance to the clients. This, just like with the high real estate prices, affects the amount of profits earned, thus making it quite hard for self-storage businesses to expand. The high operating costs are also a huge challenge for startups in their initial months of operation, where they are likely to be driven out of business due to operating at a loss. 3. Seasonal business nature The self-storage business in the UK is mainly dependent on the removals industry http://wynnesremovals.co.uk/removals/, where the storage businesses offer storage services as a paid add-on service when delivering UK removals. While this makes it easy for self-storage businesses to find customers (individual or businesses when they are moving), it also means that the industry is affected by the negative traits of the removals industry. For example, moving home in the UK is a seasonal task, where most people move during the months of July to September (when the weather is favourable), and January (planning for the start of the new year). During the months of November and December (cold weather) most people rarely move, which makes it a slow period for the removals industry, and consequently, for the self-storage industry. This seasonal nature that the UK storage industry experiences is a big challenge for most businesses, as they continue operating at very high costs during certain periods of the year where the revenue is diminished. 4. Localised nature of the storage business Another main challenge facing the UK storage industry is the localised nature of most businesses that operate in the sector; most storage businesses prefer to operate in a local area as opposed to serving a national or international market. This means that they have access to only a small segment of the market base, and thus they are not able to operate at their optimal potential. As a result, they miss out on a lot of revenue, which could have helped to increase their bottom line and give them access to capital that they could use for expansion. 5. Impact of the economy In 2008, the UK economy went into a financial crisis and recession http://positivemoney.org/issues/recessions-crisis/, and the country has been in recovery since then. While the UK economy is still one of the best-performing economies in the world, the crisis affected several businesses in the country (including self-storage) industry negatively. The industry is also constantly affected by the ripple effect of the economy (high real estate prices, the high cost of utilities, etc). This makes it difficult for self-storage businesses to expand while making it almost impossible for aspiring self-storage business owners to establish their ventures. 6. The impact of Brexit Another major challenge that the self-storage industry is facing is the impact of Brexit and the ripple effect it created in both the UK and World economy. The Brexit impact on the UK economy has been quite significant, which has led to a slowed growth, a weakening currency, a destabilisation in the financial sector, and a cloud of uncertainty on what Brexit has in store for the UK economy. As a result, several businesses in the UK (including those in the self-storage industry) have reacted to the Brexit move with caution, meaning that most of them are not in a hurry to expand until the economy stabilises. 7. Problems with acquiring business loans Acquiring a loan in the UK is quite a challenge, especially for small and medium-sized enterprises, as they are required to have a very good borrowing capacity amongst other requirements before being offered a loan. Therefore, several businesses are denied access to one of the best sources of capital that can be used in the expansion or establishment of self-storage businesses. Conclusion The self-storage has faced – and is still facing – a lot of challenges that might be hindering a faster growth. However, despite all these challenges, the industry has managed to perform very admirably over the past decades, and it is expected to continue growing as the need for personal and business storage services continue to increase. Therefore, the future of businesses such as Wynnes Removals & Storage seems bright, despite the challenges the industry is facing.
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