UK retailers may have to cut thousands of jobs after gloomy Christmas | Retail industry

Britain’s biggest retailers warn they could be forced to cut thousands of jobs this year as the sector braces for higher taxes and labor costs after a dismal Christmas shopping period .

In the latest sign of difficult trading conditions in retail, figures from the British Retail Consortium (BRC) show that sales growth in the “golden quarter” between October and December was close to stagnant.

For the three months to December – when many retailers make the bulk of their annual profits – the BRC said total UK retail sales growth was 0.4% year-on-year, with shoppers prioritizing spending on food and drink during the festive period. Once inflation is taken into account, retail sales volume declined over the year.

For full-year 2024, total sales rose 0.7% from 2023, highlighting a cautious approach to consumer spending as households continue to face higher prices after the worst shock inflationary for decades.

Separate figures from Barclays show zero growth in consumer card spending in December, with households cutting back on essential items and meals at pubs and restaurants in favor of spending on experiences.

Helen Dickinson, chief executive of the BRC, said retailers were prepared for a tough year as they faced £7 billion in extra costs from tax rises and new regulations planned by the Government.

Pressure is mounting on Keir Starmer’s government amid signs of a growing slowdown in the UK economy, with growth set to stagnate throughout the second half of 2024.

Business leaders have warned that measures in the Labor budget to increase employers’ social security contributions by £25 billion from April and increase the national minimum wage by 6.7% will force businesses to eliminate jobs or pass on rising labor costs in the form of higher prices.

Retail industry analyst Clive Black said he had doubled his forecast for food inflation from 1.5% to 3% for 2025, saying it was “government policy which is now the main source of price appreciation for food products.

Retailers including Tesco, Marks & Spencer and Next wrote to Rachel Reeves in November warning that a £7 billion rise in annual costs after the budget would lead to job cuts and rising prices.

Dickinson said the government must take action to ease pressure on struggling retailers or risk widespread job losses.

“With little hope of covering these costs through higher sales, retailers are likely to raise prices and cut investment in stores and jobs, harming our high streets and the communities that depend on them,” he said. she declared.

The chancellor has criticized critics of her budget for offering no alternatives, arguing that tax increases are essential to repair public services starved by austerity while ensuring the sustainability of public finances.

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Consumer spending came under pressure after inflation peaked at 11.1% in October 2022, after the exit from pandemic lockdowns and Russia’s invasion of Ukraine triggered a surge in the cost of living, leading the Bank of England to raise interest rates to the highest level of the year. 15 years old.

Inflation has fallen to more normal levels, but is expected to remain above the Bank’s 2% target through 2027, limiting its scope for rate cuts. Households have begun to repair the damage done to their finances after a period when wages outpaced inflation, but consumers remained cautious about spending.

Separate figures from auditing firm BDO show retail sales in discretionary spending categories rose 2% year-on-year in the golden quarter, compared with a 1.6% decline in the same period in 2023.

However, it warned that much of this increase was due to online sales, with department stores continuing to struggle with sales growth of just 0.1% in the last three months of the year.

BDO said bad weather and flooding in parts of the UK may have pushed consumers to shop online, where sales increased by 20.7%. However, the audit firm warned that the public sector’s poor performance could be made worse by rising employment costs and tax increases.

Sophie Michael, head of retail and wholesale at BDO, said: “Businesses are yet to feel the impact of the increase in wage costs introduced in the Budget, which disproportionately impacts hard-hit sectors. with consumers. Recent reports indicate that 170,000 shop floor workers lost their jobs in 2024, and this number is only expected to increase in 2025.”

The government has been contacted for comment.