Background
BRI Business Recovery and Insolvency (“BRI”) was contacted by an accountant who requested a joint meeting with their client who owned a hairdressing salon located in a thriving town centre. As trading was through a company, the owner benefitted from limited liability meaning that personal assets were out of reach of the salon’s creditors.
The salon occupied two retail units (combined into one trading premise) with a number of qualified staff and also staff working under an apprenticeship scheme with a local training college. Throughout 2025 and into 2026 we are seeing an increase in hair salons closing. There are several contributing factors to this.
What are the Reasons for the Increase in Hair Salons Closing?
There were a number of different factors why the owner of this hair salon sought advice, together with their accountant, from a qualified insolvency practitioner. A number of these are affecting small and medium enterprises (“SMEs”) across the country trading in completely different service industries. Many of these form part of concerns expressed by business groups seeking to represent SMEs and raise awareness within all forms of government, both local and national.
In a number of cases BRI sees, directors have already reduced their salaries and do not take any dividends. Once their hours are taken into account, directors are often themselves receiving much less than the minimum wage.
Some of these common factors include:
- Cost of living crisis reducing customers’ discretionary spending
- Increased product cost due to COVID, BREXIT and the war in Ukraine
- Reduced margins as not all increases in cost being passed on to customers
- Higher Corporation Tax rate of 25% resulting in reduced returns for shareholders
- Repayment of Bounce Back Loans reduces available cash flow
These factors are affecting all businesses. If you find that your business is facing financial difficulty and you need some professional advice, contact BRI today.
Are Apprenticeships Contributing to the Rise in Hair Salons Closing?
There has been much in the press recently about apprenticeships within the hairdressing industry. In many cases, the requisite investment in staff members’ training is not necessarily the overriding concern. The significant monetary implication for a salon can be the opportunity cost of the owner’s time in managing staff, dealing with issues as and when they arise together with the “red tape” surrounding apprenticeships in general. Owners try to minimise this opportunity cost by dealing with the administrative and finance function outside salon opening times.
Why is COVID Still Having an Impact on Hair Salons Struggling?
Arguably, the main effect of COVID was not short-term but longer term in nature as loan repayments had to be met out of cash flow. For hair salons, the industry landscape was changed irrevocably after the pandemic. This was mainly due to changes in consumers’ buying habits which resulted in a significant loss in turnover (estimated to be 35% to 40%) for the following reasons:
- Working from home meant fewer hair appointments per year as clients had a longer time between hair appointments
- Clients spent significantly less on hair colouring in the salon as a result of either abandoning it altogether or doing it themselves in their own home
- Clients bought significantly less hair products from the salon
What Are Some Non-Financial Considerations for an Owner of a Struggling Business?
There is no question that running a business that is struggling financially is incredibly stressful and, for a sole director, there is limited (if any) support in the workplace. BRI often meets directors in this predicament where their own health suffers at such a difficult time for both them personally and their family.
Faced with ill health, directors sometimes make a “lifestyle choice” in continuing with their passion of their chosen occupation but without the additional stresses and responsibilities that comes with employing staff. Armed with an independent valuation from a suitably qualified and experienced agent, a sole director can purchase a company’s intangible assets, the main one often being goodwill. Some examples of these assets include the trading name, website and customer list. Provided the agent is willing to recommend the sale to the subsequently appointed insolvency practitioner as being at “fair” or “market” value, the former director can potentially set up a successful home-based business going forward.
What Are Some of the Ramifications for UK PLC?
In this case, another employer is lost with no future apprenticeship opportunities for young people in this location. The hair salon trading premises also remain empty which is problematic for both the landlord and the town centre as a whole.
If you are a director of a business and are experiencing financial difficulty, contact the team at BRI. We are always here to provide advice and help where we can.