Most British retailers plan to cut staff hours or freeze recruitment over the coming year, according to a new survey from the British Retail Consortium (BRC), as rising employment costs and weak consumer demand weigh on the sector.

The BRC survey of retail chief financial officers and finance directors found that 52 per cent plan to reduce staff hours or overtime, while 32 per cent expect to freeze recruitment. Almost half, 48 per cent, plan to cut head office roles, and 32 per cent plan to reduce store-level headcount.

Confidence in the sector has fallen sharply. More than two-thirds of finance chiefs, 69 per cent, described themselves as pessimistic or very pessimistic about the year ahead, up from 56 per cent in July 2025. Only 14 per cent said they were optimistic. Three-quarters, 74 per cent, said the 2025 Budget would make it harder to invest.

Labour costs now dominate retailers’ worries. The survey found that 84 per cent of finance chiefs ranked labour and employment costs among their top three concerns for the year ahead, up from just 21 per cent last July. Falling demand was cited by 77 per cent, rising input costs by 39 per cent, and the growing tax and regulatory burden by 29 per cent.

The BRC calculated that retail employment costs rose by £5 billion in 2025, driven by higher employer National Insurance contributions and a higher National Living Wage. The cost of employing a full-time entry-level worker rose by 10 per cent, while the cost for a part-time worker rose by more than 13 per cent. A further 4.1 per cent rise in the National Living Wage is due in April.

Retail has already been losing jobs. The sector shed 74,000 jobs in the past year, taking total retail employment to 2.76 million, the lowest level on record according to the BRC. More than 250,000 retail roles have been lost over the past five years.

Retailers say they will try to do more with fewer staff. The survey found that 68 per cent plan to drive higher productivity from existing teams, while 61 per cent plan to invest in automation.

Helen Dickinson, chief executive of the BRC, said the economy was expected to remain fragile, with weak wage growth, rising unemployment and low consumer confidence all pointing towards falling demand, while businesses faced sharply higher costs from input prices, wage bills and government policy.

She warned that the Employment Rights Act, which became law in January, was the biggest shake-up of employment rules in a generation, and that how it was delivered would make or break job opportunities. Retailers fear that clauses on issues such as guaranteed hours could add cost and complexity while reducing flexibility.

Dickinson said that if the government failed to consider business needs on guaranteed hours and union rights, the changes would add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needed them most.

The warning matters for young workers in particular. Youth unemployment has risen to 15.9 per cent, with 730,000 people under 24 unable to find work, according to the BRC. Retail is the largest private-sector employer in the UK and has traditionally provided many of the entry-level and part-time roles that young people rely on for a first job.

Secondary legislation for the Employment Rights Act is now going out for consultation, and the BRC says the detail of how the new rules are implemented will be critical for jobs, flexibility and hiring in the months ahead.