Retail finance chiefs are sounding the alarm over surging labour costs, warning that the sector could face a wave of job losses and reduced opportunities if the Employment Rights Act, which came into force in January, is not implemented carefully.
The British Retail Consortium (BRC) has published its latest survey of retail Chief Financial Officers (CFOs) and Finance Directors, revealing a sharp deterioration in confidence.
Over two-thirds (69%) of respondents describe themselves as “Pessimistic” or “Very Pessimistic”, up from 56% in July 2025, while only 14% consider themselves optimistic.
“Three-quarters of CFOs suggested the 2025 Budget would make it harder to invest,” the BRC report notes, reflecting widespread unease about the combined pressures of rising employment costs, weak wage growth, and low consumer confidence.
Labour Costs Top Concerns
The survey highlights that labour and employment costs have become the dominant worry for retailers.
A striking 84% of CFOs ranked these costs in their top three concerns for the year ahead, up dramatically from 21% last July. Other major challenges include falling demand (77%), rising input costs (39%), and the growing tax and regulatory burden (29%).
The BRC calculates that retail employment costs rose by £5 billion in 2025, driven by increases to employer National Insurance Contributions and the higher National Living Wage. The cost of employing a full-time entry-level worker increased by 10%, while part-time roles saw costs rise by over 13%. Meanwhile, youth unemployment has climbed to 15.9%, leaving around 730,000 under-24s unable to find work.
Impact on Jobs and Recruitment
The survey suggests the cost pressures are already influencing workforce decisions:
- 61% of retailers plan to reduce staff hours or overtime.
- 45% intend to freeze recruitment.
- More than half (55%) are looking to reduce head office headcount, with 42% planning cuts in store roles.
To maintain productivity with smaller teams, retailers are focusing on automation (61%) and driving efficiency (68%).
Retail is the UK’s largest private-sector employer and provides vital entry-level and part-time jobs. Yet the sector has lost 74,000 roles in the past year and more than 250,000 over the past five years, underscoring the scale of the challenge.
Employment Rights Act: Opportunity or Risk?
The BRC stresses that the risk does not lie with the Act’s goals, but in its implementation. Provisions such as guaranteed hours could add costs and reduce flexibility for retailers, leading to fewer entry-level and part-time opportunities.
“If job flexibility is treated as job insecurity by default, employers will become more cautious – resulting in fewer entry-level roles, fewer part-time opportunities, and reduced hiring of those with limited experience or complex needs,” the report warns.
Helen Dickinson, Chief Executive of the BRC, said:
“The Employment Rights Act is the biggest shakeup of employment rules in a generation, and how it is delivered will make or break job opportunities. Done well, the reforms can raise standards while supporting flexible and entry-level roles that are vital for people whose lives don’t fit a fixed 9-5 pattern. If the Government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needs them most.”
Outlook for Retail
With rising labour costs, inflationary pressures, and low consumer confidence, retailers face a challenging year ahead. The BRC’s survey paints a picture of a sector grappling with tough financial choices, from cutting staff hours to freezing recruitment, while also trying to maintain the flexible roles that are critical to young people and part-time workers.
“We all want more high-quality, well-paid jobs,” Dickinson said. “But retail has already lost 250,000 roles in the past five years, and youth unemployment is climbing fast. Without careful policy implementation, the Employment Rights Act risks making a bad situation worse.”
The survey signals an urgent call for government engagement, highlighting that the way policies are implemented will determine whether the retail sector can continue to provide entry-level opportunities and support for millions of workers across the country.
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