Rising labour costs push UK retailers toward job cuts: survey

UK retailers are preparing to cut staff hours, reduce overtime, and eliminate jobs as rising labour costs reshape hiring decisions.

New data from the British Retail Consortium shows employment expenses are forcing companies to reassess workforce plans.

These changes come at a time when economic confidence remains weak, and competition is intensifying.

Retailers are adjusting staffing levels while investing in technology to control costs.

The shift reflects a broader transformation in how retail businesses operate, with labour becoming one of the most significant financial pressures across the sector.

Employment costs rose by £5 billion in 2025 after increases in employer national insurance contributions and a higher legal minimum wage.

Retail finance leaders now view labour expenses as a critical challenge affecting profitability and hiring.

Job reductions

According to the survey, 61% of retail finance bosses said they plan to reduce working hours or cut overtime.

Meanwhile, 55% expect to eliminate jobs at head offices, and 42% intend to reduce staff numbers in stores.

These reductions follow a decline in retail employment in recent years.

The sector has already lost 74,000 jobs in the past year. Over the past five years, retail employment has fallen by 250,000 roles.

Fewer retail jobs are likely to affect younger workers most.

Retail and hospitality traditionally provide entry-level employment, but reduced hiring could limit opportunities and increase pressure on policymakers to support youth employment.

Technology shift

Retailers are increasingly turning to automation and digital tools to reduce labour dependence.

AI-powered marketing systems, automated tills, and digital stock management platforms are helping businesses improve efficiency while lowering staffing needs.

Technology adoption is accelerating as companies respond to rising wage bills and regulatory changes.

Retailers are prioritising productivity improvements to offset higher employment expenses and maintain competitiveness.

These changes are contributing to the restructuring of retail jobs, with automation replacing traditional roles while reshaping workforce requirements.

Demand pressure

Retailers are also facing weaker consumer demand and rising competition.

Online platforms such as Shein, Vinted, and Temu continue to attract shoppers with lower prices, increasing pressure on traditional retailers.

Households remain cautious as higher food and energy costs affect spending patterns.

Many consumers are saving more amid employment uncertainty and geopolitical risks, reducing discretionary purchases.

Economic sentiment among retail finance leaders has worsened.

The survey found that 69% described themselves as pessimistic or very pessimistic about economic conditions, compared with 56% in July last year.

Only 14% said they were optimistic, slightly higher than 11%.

Labour costs are now one of the biggest concerns across the sector.

A total of 84% of finance leaders ranked labour expenses among their top three challenges, compared with 21% previously.

Policy uncertainty

Retailers are also monitoring new employment rights reforms set to begin from April.

These changes will gradually introduce worker protections over the coming years.

Businesses say the details of these policies will influence hiring decisions and workforce flexibility.

Entry-level and part-time roles remain essential to the sector, but rising costs and regulatory changes are forcing retailers to reconsider staffing models.