Rachel Reeves’s Budget tax raid will result in fewer workers across the retail sector, sparking fears that customers will receive worse customer service.
As well as warning of price rises following the Budget, the British Retail Consortium (BRC) has said employers are also preparing to cut back on staffing to cover the cost of higher National Insurance rates.
In its latest survey, the lobby group revealed that almost half of retail bosses expect to trim headcount in shops (46pc), while the majority of businesses (56pc) are also planning to reduce hours and pare back overtime.
At least a third of retailers (31pc) are also planning to invest more in automation, with staff being replaced by more self-checkouts.
It comes after the Chancellor raised employer National Insurance (NI) rates from 13.8pc to 15pc in her maiden Budget, while also reducing the threshold at which they are paid from £9,100 to £5,000.
Helen Dickinson, the BRC’s chief executive, said retailers had been forced to cut costs as a result of the tax raid.
She 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.
“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.”
Staffing has already tumbled in recent years, with overall headcount in retail down from more than 3.1m before the pandemic to 2.8m by late last year, according to the Office for National Statistics.
Self-checkouts have been blamed for dwindling customer satisfaction levels in recent years and for enabling a wave of shoplifting.
However, it is not only retailers suffering from higher taxes and an increase in the minimum wage.
Business confidence overall has plunged to its lowest level since the wake of Liz Truss’s 2022 mini-Budget, according to a survey from the Institute of Chartered Accountants in England and Wales (ICAEW).
The mounting tax burden was cited by 41pc of businesses as their biggest challenge, a record high in the survey’s history.
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Suren Thiru, of the ICAEW, said “The UK economy endured a rather traumatic end to 2024”.
“Slowing domestic activity and the aftershocks from a difficult budget caused business confidence to nosedive,” he said.
“While this significant slide in sentiment was broad-based, retailers suffered a particularly difficult time, reflecting their greater exposure to the impact of October’s budget, including the looming increase in national insurance.”
A Treasury spokesperson said: “We delivered a once-in-a-Parliament budget to wipe the slate clean and deliver the stability businesses so desperately need while not increasing taxes on working people.
“By bringing back political and financial stability, we are creating the conditions for growth with business investment in October to November up 4.5pc compared to this time last year.
“Capping the rate of corporation tax, establishing a National Wealth Fund and creating pension megafunds is just the start of our Plan for Change which will get Britain building, unlock investment and support business so we can make all parts of the country better off.”