Two-thirds of major retailers will hike prices and more than half will cut working hours as a result of Labour’s £25 billion national insurance raid, a major new survey reveals today.
The new findings from the British Retail Consortium (BRC) lay bare the dire impact of Rachel Reeves’s Budget on the high street and the cost of living.
They come as official figures published today are expected to show inflation remaining at a stubbornly high 2.6 per cent last month – above the Bank of England’s 2 per cent target.
The pain for consumers looks set to intensify over the course of the year according to the BRC figures which suggest food price inflation will rise to 4.2 per cent by the second half of 2025.
Some 67 per cent of firms said they plan to raise prices in response to the NI hike, with 56 per cent cutting back on working hours, 52 per cent cutting head office staff and 46 per cent taking an axe to store worker numbers.
BRC chief executive Helen Dickinson said: ‘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.’
The new findings from the British Retail Consortium (BRC) lay bare the dire impact of Rachel Reeves’ (pictured) Budget on the high street and the cost of living
Official figures published today are expected to show inflation remaining at a stubbornly high 2.6 per cent last month – above the Bank of England’s 2 per cent target (pictured)
The BRC findings reveal in detail how Britain’s biggest retailers will respond after the Chancellor lifted the employer national insurance contribution rate from 13.8 per cent to 15 per cent.
And the threshold for paying it will be reduced from £9,100 to £5,000, with the changes coming to effect in April.
The hike will disproportionately affect companies with a large proportion of minimum wage workers such as those in the retail sector, which employ 5.7 million people across the country.
‘Retailers are now facing into difficult decisions about future investment, employment and pricing,’ Ms Dickinson said.
The survey gathered responses from finance chiefs at 52 leading retailers with combined sales of £65bn a year, which employ 478,000 people and operate 17,500 UK stores.
It found 70 per cent of firms were ‘pessimistic’ or ‘very pessimistic’ about trading over the next 12 months.
And 31 per cent said the higher costs would mean ‘further automation’ – code for replacing staff with robots.
The BRC has previously estimated that the Budget will cost the sector £7 billion a year – with £2.3 billion coming from the NI hike, £2.7bn from the rise in the minimum wage and £2 billion from a levy on packaging.
In November, the bosses of 81 retailers including Tesco and John Lewis wrote to the Chancellor to warn of the dire consequences for inflation, employment and investment
In November, the bosses of 81 retailers including Tesco and John Lewis wrote to the Chancellor to warn of the dire consequences for inflation, employment and investment.
There was also further evidence yesterday that hospitality businesses will take a major hit, affecting operators in town and city centres across the UK.
Louise Maclean, director of sales and marketing at Signature group, which operates bars, restaurants and hotels across Scotland, employing 700 people, said it would mean big price rises.
She told the BBC: ‘Everything will have to go up about 10pc if we want to remain in business.
‘We’re seeing a raft of hospitality closures, we’re seeing people pulling back hours.
‘You only have to walk round George Street in Edinburgh at this time of year and 50 per cent of the venues are shut on Mondays and Tuesdays.
‘Everyone is having to rein it back in.’
Elsewhere, latest figures from white collar recruitment firm Robert Walters suggested the jobs gloom had even spread to office workers.
It said fees income in the UK fell 15 per cent in the final quarter of last year ‘as the October UK Budget announcement impacted employer hiring plans’.