There is widespread apprehension about the UK’s economic climate in 2025, with overall mood among retail finance leaders down, according to the BRC’s sentiment index. The majority (70%) expressed a lack of confidence in future trading conditions, while only 13% showed an optimistic view. The remaining 17% remained neutral.

The chief concerns of CFOs include a decline in demand, rising inflation rates and increasing fiscal and regulatory pressures.

With the next Employer’s National Insurance (NIC) contribution rise due in April 2025, many are considering cost-cutting measures: 56% may reduce hours or overtime, 52% are looking to reduce head office staff and 46% are considering store staff reductions. In addition, about a third indicated that rising costs could drive further automation efforts.

These data appear shortly after a group of 81 retail chief executives took their budget concerns to the chancellor in a letter outlining potential cost increases for the industry totaling more than £7 billion ($8.56 billion) by 2025. due to NIC changes (£2.33bn), increases to the National Living Wage (£2.73bn) and a restructured packing tax (£2bn).

BRC Chief Executive Helen Dickinson said: “With the Budget adding more than £7bn to their bills by 2025, retailers now face difficult decisions about future investment, employment and prices As the largest business in the private sector, employing many part-time and seasonal workers, changes to the NI threshold have a disproportionate effect on both retailers and their supply chains, which together employ 5.7 million people across the country.”

The influence of the recent UK Autumn Budget on wider business investment is also evident, with almost half of CFOs planning to cut capital expenditure and a quarter anticipating delays in new store openings. 44% of respondents anticipate falling profits, which could tighten investment capabilities.

Retailers also face challenges beyond budget, including weak consumer confidence and demand. They predict a reduction in consumer spending in early 2025 as concerns about the economic outlook growcausing a decrease in consumer confidence.

CFOs’ projections indicate that shop price inflation could rise from the current rate of 0.5% to an average of 2.2% in the second half of 2025, with food inflation likely to average of 4.2% and non-food at 1.2%.

Retail sales growth expectations remain moderate; although an improvement over the previous year is expected, the expected growth rate of 1.2% remains below inflation rates.

The story continues