Two-thirds of UK retail chief financial officers (CFOs) are planning to hike prices in response to the impending increases in employers’ National Insurance contributions (NICs), set to take effect from April 2025, according to survey data published by the British Retail Consortium (BRC).
The UK retail sector is poised on the brink of a challenging fiscal period, according to a survey of chief CFOs from 52 premier retail companies.
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The sentiment among the financial officers has plummeted to -57, with an overwhelming 70% expressing pessimism regarding the trading conditions anticipated in 2025.
13% were optimistic and 17% neutral in their expectations.
The concerns dominating the CFOs’ agendas were a decline in demand for goods and services, inflationary pressures and an escalating tax and regulatory burden. Each was cited by more than 60% of respondents as a primary anxiety.
More than half are considering cuts in labour hours, including overtime (56%), reductions in head office personnel (52%) and trimming store staff (46%).
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The implications of the budget extend to broader business investments, with 46% of CFOs intending to curtail capital expenditure and 25% contemplating delays in new store inaugurations.
44% anticipate diminished profits, which could further constrict investment capabilities.
The data emerges in the wake of a collective appeal from 81 retail CEOs to the UK Chancellor, highlighting their apprehensions about the economic impacts of the October 2024 Budget.
The industry faces a potential surge in costs exceeding £7bn in 2025 due to NIC changes (£2.33bn), hikes in the National Living Wage (£2.73bn) and revisions to the packaging levy (£2bn).
The budget’s implications are not the sole hurdle, with weak consumer confidence and subdued demand also looming large.
BRC chief executive Helen Dickinson said: “With the budget adding over £7bn to their bills in 2025, retailers are now facing difficult decisions about future investment, employment and pricing. As the largest private sector employer, employing many part-time and seasonal workers, the changes to the NI threshold have a disproportionate effect on both retailers and their supply chains, who together employ 5.7m people across the country.
“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.”
Shop price inflation is expected to escalate from its current rate of 0.5% to an average of 2.2% in late 2025.
Food prices could see even steeper inflation rates, averaging 4.2%.
Sales forecasts offer little solace. Although an uptick is anticipated from the growth of 0.7% seen in 2024, the expected increase to 1.2% still trails behind inflation rates.
Dickinson added: “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.
“Government can still take steps to shore up retail investment and confidence. Business rates remain the biggest roadblock to new shops and jobs, with retailers paying over a fifth of the total rates bill. The government must confirm the planned reforms will make a meaningful difference to retailers’ bills and that no shop will end up paying more.”
