Half of UK retailers plan to cut workforce in 2025 - and even more will raise prices

Two thirds of leading retailers warned they will be forced to hike prices to cope with the increase to National Insurance costs amid mounting pressure on the Chancellor.

Two thirds (67 per cent) of 52 chief financial officers surveyed for the British Retail Consortium (BRC) said they would raise prices in response to increases in employers’ National Insurance Contributions from April.

Greggs recently revealed they would be hiking prices during the coming year, while clothing retailer Next said they would implement a one per cent prise rise to offset some of the costs of increased wages and NI contributions.

Just over half (56 per cent) said they would be reducing their paid number of hours and overtime, while 46 per cent said they have to reduce headcount in stores and 31 per cent said the increased costs would lead to further automation.

Some 70 per cent said they were “pessimistic” or “very pessimistic” about trading conditions over the coming 12 months, while just 13 per cent said they were “optimistic” or “very optimistic”.

The biggest concerns, cited by more than 60 per cent of the CFO’s, were falling demand for goods and services, inflation for goods and services, and the increasing tax and regulatory burden.

The impact of the Budget on wider business investment was also “clear”, the BRC said, with 46 per cent of CFOs saying they would reduce capital expenditure and 25 per cent expecting to delay new store openings.

Some 44 per cent of respondents expected reduced profits.

The survey follows 81 retail chief executives writing to the Chancellor with their concerns about the economic consequences of the Budget, claiming that the industry’s costs could rise by over £7 billion in 2025 as a result of changes to employers’ National Insurance contributions, National Living Wage increases and the reformed packaging levy.

The CFOs also suggested that shop price inflation, currently at -1 per cent, will rise to an average of 2.2 per cent in the second half of 2025.

The BRC reported last week that they expected food inflation to reach an average of 4.2 per cent in the second half of this year.

Marks and Spencer have said they will pass on “as little as possible” in costs to customers and intimated the Budget brought in an unexpected element to planning.

The findings comes as Chancellor Rachel Reeves continues to face pressure amid market turmoil. It comes after Sir Keir Starmer appeared to waver in his support for the Chancellor when he said he had confidence in her but refused to say she would keep her role until the next general election.

Downing Street clarified hours later that Ms Reeves would stay in post for “the whole of this Parliament”.

BRC chief executive Helen Dickinson said: “With the Budget adding over £7 billion to their bills in 2025, retailers are now facing into the difficult decisions about future investment, employment and pricing.

“As the largest private sector employer, employing many part-time and seasonal workers, the changes to the National Insurance threshold have a disproportionate effect on both retailers and their supply chains, who together employ 5.7 million people across the country.

“Retailers have worked hard to shield their customers from higher costs, but with slow market growth and margins already stretched thin, it is inevitable that consumers will bear some of the burden.

“The majority of retailers have little choice but to raise prices in response to these increased costs, and food inflation is expected to rise steadily over the year.

“Local communities may find themselves with sparser high streets and fewer retail jobs available.”