Britain’s high streets will take another battering this year as labour costs and rate hikes push more firms to the brink of insolvency, experts have warned
It’s an unhappy New Year for the UK economy as experts warn more high street chains could go bust – while millions turn to discount shopping.
Bosses claim the pressure on restaurants and shops will only “intensify” in 2026, sparking fresh waves of job losses and insolvencies. They blame higher labour costs and business rate hikes set to kick in from April.
Meanwhile discount chain Lidl has reported a “record-breaking” Christmas with a 10% surge in sales.
Insolvency chief Matthew Richards, from business advisory firm Azets, said: “The last three months have seen a spike in retail and hospitality insolvencies and enquiries as a toxic cocktail of financial issues has taken its toll on businesses in these sectors.
“The increases to national minimum wage and employers’ NI (national insurance) earlier this year were a blow – and pushed up costs at a time when many businesses were fighting to stay solvent.
“With new business rates and a higher national minimum wage taking effect from April 2026, we expect retail and hospitality insolvencies to rise.”
It comes after a raft of brands like River Island, Pizza Hut and Claire’s Accessories faced branch closures last year amid money woes. Official data shows insolvencies up to November were “slightly higher” than in 2024.
Will Wright, UK chief executive at Interpath, which has overseen processes for Claire’s and TGI Friday’s, highlighted the pressure on cash-strapped consumers.
He said: “Retailers, leisure operators and hospitality groups were hoping for a little breathing space after a bruising couple of years.
“Instead, rising operating costs, tighter household budgets and increases to business rates mean that pressure is likely to intensify as we move through 2026.
“Against this backdrop, we do expect to see an uptick in restructuring activity. Not a collapse, but a definite shift.”
Consumers hoping to save cash have been turning to discount stores like Lidl, which attracted 51million shoppers in the run-up to Christmas.
The German-owned group said its UK business made more than £1.1 billion in turnover in the four weeks leading up to Christmas Eve.
Shopper numbers rose 8% year-on-year to a record high, with Lidl notching up almost four million more customers than the previous year.
Ryan McDonnell, chief executive at Lidl GB, said: “2025 was a record-breaking Christmas for Lidl – with more customers choosing to shop with us than ever before.
“By continuing to invest in low prices and champion British food, all without compromising on quality, we’ve seen loyalty soar.”
The figures see the group fire the starting gun on festive trading updates from the retail sector, with supermarket giants Tesco and Sainsbury’s following suit next week, alongside the likes of Next and Marks & Spencer.
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