The retail sector, as revealed in the latest November 2024 UK labour market report, continues to navigate a complex landscape marked by declining vacancies and modest wage growth.
Despite an overall stabilisation in the labour market, retail faces persistent challenges from post-Budget cost headwinds, inflation, and shifting consumer spending patterns.
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Employment trends: a mixed outlook
The latest figures from the Office for National Statistics (ONS) highlight a cooling labour market across many sectors, with retail experiencing a significant drop in job vacancies.
Between August and October 2024, retail vacancies, grouped with wholesale trade and motor vehicle repair, fell by 29,000 compared to pre-pandemic levels.
This decrease contributed to a broader reduction of 88,000 vacancies across industries, pointing to a slowdown in hiring activity. This marks a 13.6% year-on-year decline in job openings across 14 of 18 major sectors, signalling a cooling in the post-pandemic recovery.
Retail’s challenges are compounded by a tight labour market, where competition for workers continues to intensify.
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By GlobalDataAlthough there has been a slight dip in overall employment figures, vacancies persist, and employers are struggling to attract talent due to rising wage expectations and inflation.
Slower hiring rates indicate that many businesses are adopting a more cautious approach to staffing, influenced by economic uncertainty and a shift in consumer behaviour.
Post-budget cost headwinds: impact on retail staffing
The UK Government’s recent budget measures, such as the increase in the National Living Wage, provide some relief but come with their own set of challenges for retailers.
With rising operational costs, particularly driven by inflation and the cost of doing business in a post-pandemic world, retailers are feeling the pressure. Supply chain issues, rising energy prices, and the burden of higher wages due to government interventions create significant cost headwinds for the sector.
For retailers, the immediate impact is evident in their staffing strategies. Despite the higher cost of living and wage increases, many employers are wary of expanding their workforces significantly, given the uncertain economic outlook.
There is also a growing concern over how to balance these rising wage expectations with the financial strain of higher operational costs, including rent and utilities.
Wage growth: modest but retail wages still lag behind national average
Wages in the retail sector have seen modest growth, but they still trail behind the national average. According to the ONS, average weekly earnings in retail have risen year-on-year, but the increase remains modest compared to other sectors.
Retail assistants and customer service roles typically earn between £10-£12 per hour, while more senior roles in retail management see annual salaries ranging from £30,000 to £40,000 or higher. This wage growth is largely driven by inflationary pressures and the need to attract and retain workers in a competitive market.
However, these wage increases are not necessarily keeping pace with the rising cost of living. As inflation continues to erode disposable income, many workers in the retail sector are finding that their pay rises do not offset the higher costs of essentials, contributing to a sense of financial insecurity in the workforce.
This, in turn, places added pressure on retailers to offer competitive compensation packages that balance wage growth with profit margins.
While the retail sector shows some signs of resilience with moderate wage growth and stable employment figures, it remains under significant strain due to the post-Budget economic pressures.
Retailers are navigating a difficult environment, balancing the need for wage increases and attracting talent with rising operational costs and uncertain consumer demand.
The months ahead will be critical in determining whether the sector can weather these challenges and sustain its recovery.
