Retailers fear rising employment costs are putting jobs at risk

A survey of chief financial officers and finance directors by the British Retail Consortium found that 69% are “pessimistic or very pessimistic” about the next 12 months, compared to just 14% who said they were optimistic.

The downbeat outlook mostly stemmed from the 2025 Budget, which 74% of respondents said would make it “harder to invest” this year.

However, labour market pressures continue to dominate chief financial officers’ worries for the year, with 84% of respondents saying it was in their top three concerns. Other significant risks include falling demand (77%), rising input costs (39%), and the growing tax and regulatory burden (29%).

It comes as retail employment costs topped £5bn in 2025, owing to increases in employer national insurance contributions and a higher national living wage.

BRC said it had calculated that the cost of employing a full-time entry-level worker rose by 10% and 13% for part-time workers.

At the same time, youth unemployment rose to 15.9%, with 730,000 under-24’s unable to find work.

A majority of chief financial officers (52%) blame higher employment costs for their decision to “reduce number of hours/overtime” for staff this year, while 32% said they need to “freeze recruitment” entirely.

Almost half of respondents (48%) said they were also planning on reducing headcount at head office this year, while 32% said they planned on reducing headcount across their store estates.

More than half of respondents (55%) said they were also planning on reducing headcount at head office this year, while 42% said they planned on reducing headcount across their store estates.

Driving higher productivity (68%) and investing in automation (61%) are both on the majority of agendas, as retailers look to make up for smaller workforces.

The BRC said this shows that the aims of the Employment Rights Act are not to blame, but how it has been “implemented”, adding retailers fear that clauses – such as guaranteed hours – could add “significant cost and complexity for retailers, while reducing job flexibility and employment opportunities”.

“If job flexibility is treated as job insecurity by default,” the BRC continues, “employers will become more cautious – resulting in fewer entry-level roles, fewer part-time opportunities, and reduced hiring of those with limited experience or complex needs”.

BRC chief executive Helen Dickinson said: “The economy is expected to remain fragile, with weak wage growth, unemployment rising, and low consumer confidence, all pointing towards falling demand. At the same time, businesses face sharply higher costs, from rising input prices and wage bills to new burdens created by government policy.

“We all want more high-quality, well-paid jobs. But retail has already lost 250,000 roles in the past five years, and youth unemployment is climbing fast. The Employment Rights Act is the biggest shake-up of employment rules in a generation, and how it is delivered will make or break job opportunities.

“Done well, the reforms can raise standards while supporting flexible and entry-level roles that are vital for people whose lives don’t fit a fixed 9-5 pattern. If the government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needs them most.”