UK retailers are bracing for a challenging year, facing rising costs and weak consumer demand, potentially impacting jobs and high streets. The Christmas trading period, crucial for annual forecasts, delivered disappointing results, failing to boost optimism for 2025.
The Retail Consortium (BRC) and KPMG, a global accounting firm, project sales growth of only 1.2 percent in 2025, significantly lagging behind projected price inflation of 1.8 percent. This shortfall, combined with increased regulatory and tax burdens (estimated at £7 billion from factors like the national insurance increase and higher living wage), leaves retailers with little option but to raise prices and potentially cut investment in staff and stores.
BRC Chief Executive Helen Dickinson highlights the detrimental effect of these factors. "Volumes are likely to fall this year, placing further strain on retailers' finances," she warned. "Without significant government intervention, price increases and job losses are likely." She calls for adjustments to business rates, urging the government to support retailers to avoid further damage to the retail sector and the communities it serves.
The recent economic downturn, marked by a 0.1 percent contraction in the UK economy in October, further exacerbates the situation. This consecutive monthly decline, the first since the COVID-19 pandemic, fuels fears of a looming recession.
The government's proposed national insurance hike, estimated to generate £25.7 billion annually, is facing criticism for its potential to harm businesses, especially small and medium-sized enterprises. The hike, coupled with rising costs, is pushing businesses to cut investment and potentially increase prices, hitting consumers hard.
Businesses are expressing concerns about the tax burden. A survey by the British Chambers of Commerce (BCC) found over 60% of firms worried about the government's expanded tax demands, up from 48% in previous months. This reflects a decline in confidence, currently at its lowest point since Liz Truss's 2022 mini-budget.
The combined pressures are prompting price increases and, inevitably, job cuts. Nearly half of executives surveyed anticipate raising prices over the next three months. This points to a challenging year ahead for the UK retail sector, and potential consequences for consumer spending and the broader economy.
