Retail chains are preparing for a difficult Christmas period as higher taxes and rising costs raise concerns about the viability of many businesses in city centers.
A recent report from consultancy BDO shows that turnover in stores increased by only 1.7% in October compared to the previous year. This underlines the problems retailers were facing even before last week’s Budget, which included a £25 billion tax increase on employers.
Combined retail sales, including online, rose 4.1% year-on-year, but sectors such as fashion and homewares underperformed. Sophie Michael, head of retail and wholesale at BDO, expressed concern about the weak start to the festive season, noting that sales volumes are “not back to 2022 levels.” Michael warned that if sales continue at this pace, the sector will face an ‘exceptionally tough festive period’.
The Chancellor’s Budget has compounded these concerns with a 1.2 percentage point increase in National Insurance for employers to 15% from April, alongside a reduced contribution threshold. Retailers also face a 6.7% minimum wage increase in April, which could drive up labor costs by as much as 10% for some businesses.
BDO warns that these higher costs are likely to hamper investment in the high street, with retailers potentially forced to halt expansion or renovation plans. With the festive period being crucial for the sector, the additional costs and economic pressures could lead to more stores reconsidering their presence on the high street, exacerbating problems in city centers across the UK.