A recent survey of Chief Financial Officers (CFOs) from 52 leading retailers paints a bleak picture of the trading landscape for 2025.
The survey recorded a net sentiment score of -57, with 70% of respondents expressing pessimism about trading conditions in the next 12 months. Only 13% of CFOs reported optimism, while 17% remained neutral.
The survey highlighted three primary concerns dominating the agenda for over 60% of CFOs: declining demand for goods and services, persistent inflation, and the rising tax and regulatory burden.
As one CFO put it, “The combination of weak consumer confidence and rising costs leaves little room for manoeuvre in the year ahead.”
Price increases and workforce adjustments loom
The rise in employers’ National Insurance Contributions (NICs) from April 2025 is prompting retailers to make tough decisions.
Two-thirds of respondents (67%) confirmed plans to raise prices, while significant portions also cited reductions in head office headcount (52%), store-level staff (46%), and overtime hours (56%) as measures to offset the increased costs.
Automation is also on the rise, with nearly a third of respondents (31%) exploring this route to manage expenses. The broader impact on investment is striking, with 46% planning to cut capital expenditure and 25% delaying new store openings.
Almost half (44%) of CFOs anticipate reduced profits, further limiting their ability to invest in growth.
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), commented on the challenges, stating:
“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. The majority of retailers have little choice but to raise prices in response to these increased costs.”
Food inflation expected to surge
Economic forecasts from the survey suggest further strain on consumers. While overall shop price inflation is predicted to rise from the current 0.5% to an average of 2.2% by late 2025, food prices could see an even sharper increase, with inflation hitting an average of 4.2%.
This marks a significant challenge for households already grappling with cost-of-living pressures.
Sales growth is forecasted to improve slightly to 1.2% in 2025, compared to 0.7% in 2024. However, this figure remains below inflation, suggesting a potential decline in sales volumes.
Retailers are thus preparing for a year characterised by reduced profitability and difficult decisions.
The situation is compounded by additional burdens highlighted in a letter from 81 retail CEOs to the Chancellor. The letter warned that the Budget changes, including NICs, National Living Wage increases, and a reformed packaging levy, could cost the retail sector over £7 billion in 2025.
Dickinson emphasised the need for government intervention, noting:
“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.”
As the largest private sector employer in the UK, the retail industry faces significant challenges that will likely have ripple effects across local communities, supply chains, and consumers alike.
Whether these measures can stave off further disruption remains to be seen.
