Retailers are preparing to cut staff hours and freeze recruitment, as rising government-imposed employment costs intensify pressure on an already fragile sector.

A survey released today by the British Retail Consortium (BRC) of retail CFOs and finance directors found that 61 per cent plan to reduce staff hours and overtime over the next 12 months, while 45 per cent expect to freeze recruitment.

More than half (55 per cent) are looking to cut head office headcount and 42 per cent are considering reductions in store roles.

The warning comes after a year in which the sector shed 74,000 jobs, taking total retail employment to 2.76 million, the lowest level on record. Over the past five years, the industry has lost more than 250,000 roles.

According to the BRC, employment costs rose by £5bn in 2025 following increases to employer National Insurance Contributions and the National Living Wage.

It estimates the cost of employing a full-time entry-level worker rose by 10%, while the increase for part-time workers exceeded 13 per cent. A further 4.1 per cent rise in the National Living Wage is due to take effect in April.

The BRC’s latest survey suggests anxiety around labour costs has ‘shot up the agenda’ since the phased implementation of the Employment Rights Act, which became law in January.

Labour and employment costs now rank among the top three concerns for 84 per cent of retail finance chiefs, compared with just 21 per cent last July.

Sentiment across the sector has deteriorated sharply. More than two-thirds (69 per cent) of CFOs describe themselves as pessimistic or very pessimistic about the year ahead, up from 56 per cent six months ago.

Three-quarters believe the 2025 Budget will make it harder to invest.

These concerns are unfolding against a weakening economic backdrop.

The UK unemployment rate has risen to around 5 per cent, its highest level in five years, while youth unemployment stands at 16.1 per cent, with 730,000 under-24s currently out of work.

Retail, as the largest private-sector employer and a key provider of entry-level and part-time roles, is particularly exposed.

Helen Dickinson, chief executive of the BRC, says: “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.”

Dickinson warns that elements of the legislation, including proposals around guaranteed hours and union rights, risk adding cost and complexity if not implemented with sufficient flexibility.

If job flexibility is treated as insecurity by default, she argues, employers will become more cautious, reducing entry-level and part-time opportunities.

Retailers are also responding by focusing on productivity gains. The survey found 68 per cent plan to drive higher productivity from existing teams, while 61 per cent intend to invest in automation to offset workforce reductions.

For retail leaders, without careful implementation of policy and a clearer path to cost stability, employment across the sector is likely to contract further before it recovers.

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