Retailers in the UK are bracing for a staggering £7 billion increase in costs due to rising national insurance contributions, living wage hikes, and new packaging levies, which could lead to significant job cuts and reduced investment.

Major retailers, including Tesco and Marks & Spencer, have issued warnings that these additional costs will likely result in job losses and higher prices for consumers.

Helen Dickinson, the CEO of the British Retail Consortium, expressed deep concern over the disappointing holiday shopping season, attributing it to weak consumer confidence and broader economic challenges.

Sales growth during the crucial 'golden quarter' from October to December was a mere 0.4% year-on-year, with consumers increasingly prioritizing spending on food and drink.

Over 60% of businesses are worried about increased tax demands, with many executives indicating that they may need to raise prices due to economic pressures, reflecting the lowest business confidence since 2022.

While discretionary retail sales saw a 2% year-on-year growth in the golden quarter, this was primarily driven by online shopping, as high street sales only grew by 0.1%.

Inflation has been a significant concern, having peaked at 11.1% in October 2022, leading the Bank of England to raise interest rates to a 15-year high, and it is expected to remain above the target of 2% until 2027.

Analyst Clive Black predicts that food inflation will rise to 3% in 2025, largely due to government policies affecting grocery prices.

Dickinson highlighted that the combined impact of government tax increases and regulations is placing an additional £7 billion burden on retailers.

Bad weather and flooding have shifted consumer behavior towards online shopping, which surged by 20.7%, yet high street stores remain vulnerable to rising employment costs and taxes.

Data from BDO indicates that 170,000 shop workers lost their jobs in 2024, with expectations of further job losses in 2025 as the retail sector grapples with these economic challenges.

Looking ahead, sales growth is anticipated to be only 1.2% in 2025, which is below the projected 1.8% shop price inflation, suggesting a decline in retail volumes.