UK high street retailers face a difficult festive season due to increased taxes and rising costs.
- Sales growth in October was minimal, posing challenges for retailers even before the recent budget.
- A £25 billion tax hike on employers could impact the high street significantly.
- Higher National Insurance and minimum wage increases are adding to retailers’ financial burdens.
- These challenges may force retailers to reconsider their high street presence, impacting town centres.
The recent BDO report highlights the minimal growth in in-store sales, which increased by only 1.7% in October compared to the previous year. This indicates the struggles retailers are experiencing even before the implementation of the new budget. An overall rise in retail sales of 4.1% was noted, yet certain sectors, including fashion and homeware, did not perform well.
BDO’s head of retail and wholesale, Sophie Michael, expressed concern about the current state of sales, mentioning that volumes have not yet returned to 2022 levels. A slow start to the festive season could mean an exceptionally challenging period for the retail industry.
The Chancellor’s budget introduced a £25 billion tax increase, alongside a rise in employers’ National Insurance contributions by 1.2 percentage points to 15%, effective from April. This is set to occur along with a decrease in the contribution threshold. Such measures are expected to create financial pressure on retailers.
In addition to tax increases, retailers face a 6.7% rise in the minimum wage starting next April. This change could elevate employment costs by up to 10% for some businesses, further tightening financial constraints.
The financial pressures inflicted by these policies are likely to hinder high street investment, potentially causing retailers to reconsider any planned expansion or refurbishment projects. During a critical time like the festive period, increased economic strain might lead to some stores reevaluating their presence on the high street, exacerbating challenges across UK towns and cities.
The challenging fiscal environment may lead to a reevaluation of high street operations by retailers throughout the UK.
