Retailers are preparing to reduce staff hours and pause further recruitment, as rising government-imposed employment costs intensify pressure on the industry, according to the latest figures by the British Retail Consortium (BRC).

The research found that 61 per cent of retail CFOs and finance directors plan to reduce staff hours and overtime within the upcoming 12 months, while 45 per cent are expecting to freeze recruitment.

Additionally, over half (55 per cent) are looking to reduce head office headcount and 42 per cent are considering downsizing store roles.

The BRC found that employment costs increased by £5bn in 2025 following a rise in employer National Insurance contributions and the National Living Wage.

The cost of labour and employment are now among the top three concerns for 84 per cent of retail finance chiefs, up from 21 per cent last year in July.

Helen Dickinson, chief executive of the BRC, says: “We all want more high-quality, well-paid jobs. But retail has already lost 250,000 roles in the past five years, and youth unemployment is climbing fast.

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“The Employment Rights Act is the biggest shake-up of employment rules in a generation, and how it is delivered will make or break job opportunities.”

There is also a negative consumer sentiment across the retail sector, with over two-thirds (69 per cent) of CFOs describing themselves as pessimistic or very pessimistic about the upcoming year, which is a rise from 56 per cent six months ago.

The BRC estimates that the cost of employing a full-time entry-level worker went up by 10 per cent, while the rate for part-time workers was over 13 per cent.

Moving forward, a further 4.1 per cent rise in the National Living Wage is expected in April, with three-quarters believing that the 2025 Budget will make it harder to invest.

Dickson cautioned that elements of the legislation, including proposals around guaranteed hours and union rights, may lead to higher costs and complexity if not implemented with sufficient flexibility.

The research found that 68 per cent plan to work on higher productivity from existing teams, while 61 per cent intend to invest in automation to offset the workforce reductions.