The British Retail Consortium’s (BRC’s) latest survey of retail chief financial officers (CFOs) and finance directors found most were worried about rising labour costs, with pessimism growing since the Employment Rights Act became law in January.
Over two-thirds (69%) described themselves as pessimistic or very pessimistic, while only 14% said they were optimistic.
Labour and employment costs ranked as a top concern for 84% of finance chiefs, up from 21% last July.
Other main risks included falling demand (77%), rising input costs (39%), and a heavier tax and regulatory burden (29%).
Retail employment costs increased by £5bn in 2025 after higher employer national insurance contributions and the national living wage.
The cost of employing a full-time entry-level worker went up by 10%, with part-time costs rising over 13%.
Youth unemployment reached 15.9%, with 730,000 under-24s out of work.
Most finance chiefs planned to cut staff hours or overtime (52%), and almost a third (32%) said recruitment would be frozen.
Nearly half (48%) wanted to reduce head office roles, and 32% planned to cut store headcount.
Retailers said they would drive higher productivity (68%) and invest in automation (61%) to cover a smaller workforce.
Retail has lost 74,000 jobs in the past year and over 250,000 in the last five years.
With secondary legislation for the Employment Rights Act out for consultation, concerns remain about how the act will be delivered.
Retailers said the act’s clauses, such as guaranteed hours, could add cost and complexity, reduce job flexibility and limit opportunities.
Helen Dickinson, CEO at the BRC, said: “The economy is expected to remain fragile, with weak wage growth, unemployment rising, and low consumer confidence, all pointing towards falling demand.
“At the same time, businesses face sharply higher costs, from rising input prices and wage bills to new burdens created by government policy.
“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.”
Dickinson added: “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.”
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