There were more than a few surprised faces when UK car park giant, NCP announced that it was entering administration recently. Car parks have routinely been held up in the past as a superb way to raise income from land in and around town centres. In fact, as businesses go, it seems almost as passive a means of generating money as you can hope to find.
This hasn’t been the case for NCP though, and the 95-year-old company now faces some tough decisions as it faces £305m of debt with almost 700 jobs at risk.
So, what went wrong for NCP?
Energy costs and inflation
Despite NCP’s British roots, they’ve actually had several takeovers and currently have a Japanese parent company, Park24. They have blamed NCP’s current woes on energy price increases resulting from Russia’s invasion of Ukraine.
While a car park doesn’t instantly stand out as an energy-guzzling enterprise, the sheer number of lights and machines that require electricity across the hundreds of car parks they own would surely add up to a sizeable energy bill.
Alongside this, Park24 also mentioned the UK’s high inflation rate in recent years. This has pushed the rent up on many of its sites.
Despite these price increases, though, you’d perhaps still expect a company of this size to be able to weather the storm somewhat. Unfortunately for them, there seems to be other salient factors to consider.
Working from home
With their sites predominantly enjoying city centre locations, a big driver of NPC’s revenue is commuter parking. Since the pandemic, however, profits have slumped as a result of the advent of hybrid and remote working.
No longer were they able to bank on season tickets or year-long passes from workers looking to take advantage of any possible discount they could get. Years of being the only option for many workers had led NPC to increase their prices to eye-watering levels in some areas. Seeing the substantial savings they could make, many simply stayed at home to work when possible.
Pricing
On the subject of price, NPC did little to alter the the public perception of them by jacking their prices up to a daily rate of £65 in certain London locations. In fact, misalignment in their pricing structures caused many users to not pay at all: risking a fine often worked out cheaper than the actual cost of parking.
The amount of revenue lost by people risking fines instead of paying can’t be measured but could have been highly significant.
Short-sighted leases
While NPC’s portfolio of hundreds of car parks looks impressive, it has also become somewhat of an albatross for the fallen giant.
Administrators have identified a considerable number of long-term leases that are rigid in their conditions. This has left NPC with very little scope for renegotiating rents or letting go of less profitable sites.
With already high prices being charged, simply upping their prices isn’t a viable option; customers are already looking elsewhere to save money.
The fall of the high street
Besides commuters, NPC’s other key target market are shoppers.
There’s little to be said about the state of the UK’s high streets that hasn’t already been written, but the decrease in footfall is there for all to see in almost every town or city centre.
As the average high street loses more and more shops, there is understandably a drop off in shoppers wanting to visit, let alone pay for parking.
Is your business finding conditions difficult?
Nothing stays still for long in business. Your company needs to be able to adapt to sifting landscapes in order to stay successful. At Forbes Burton, we’re able to help with restructuring plans, strategise the best way to exit, or even find a buyer for your business.
Call today on 0800 060 8398 or email advice@forbesburton.com for a free consultation with one of our expert advisers and find out how we can help business owners navigate an uncertain future.
