Every British retailer is preparing to cut jobs as the impact of Rachel Reeves’ brutal autumn Budget comes home to roost, a top industry figure has said.
The estimated £25billion rise in employers’ National Insurance (NI) contributions announced in last October’s statement will be delivered next month – against a backdrop of cuts at major supermarkets including Morrisons, Sainsbury’s and Tesco.
Morrisons said on Monday it was placing 365 jobs at risk as it planned to close 52 in-store cafés, all 18 Market Kitchen hot food counters as well as 17 convenience stores, along with 35 meat and fish counters. It had already cut 200 jobs in January.
Morrisons chief executive Rami Baitiéh said it was a ‘necessary’ measure following what the chain called ‘recent significant cost increases’ – a less-than-subtle attack on the Chancellor’s war on employers.
Hours beforehand, the chair of the British Retail Consortium said ‘every retailer’ in the country was looking at ways to mitigate the impending economic gut punch of a 6.7 per cent minimum wage hike and the rise in NI.
Andy Higginson told the BBC: ‘Every retailer in the country at the moment is looking at job cuts and cutting back on investment for new stores.’
His comments are doubly embarrassing for Labour as he was the only FTSE 100 boss – as chair of JD Sports – to put his name to a letter endorsing the party for its economic policies ahead of the election last year.
But Mr Higginson appeared to experience buyer’s remorse as he warned the pressure of Labour’s policies would lead to higher costs for Brits as well as further desperate measures like job cuts.
Every retailer in Britain is looking at measures like job cuts ahead of Rachel Reeves’ brutal business gut punch next month, a top industry figure has claimed
Andy Higginson, chair of the British Retail Consortium, says retailers are either looking at cutting jobs or stunting their own growth to combat the wage and tax bill
Rachel Reeves announced the hike in NI employer contributions, coupled with a cut in the threshold at which they are paid, in October’s autumn Budget
‘Retailers are all looking at the moment at reducing costs, taking jobs out, maybe cutting opening programmes – all the things that might lead to growth,’ he said.
‘We’ve gone off the growth agenda and are very much focused on ‘How do we absorb these costs?’.
‘Only a very small proportion will have to be absorbed and in time the rest will come through in higher prices, I fear.’
Chancellor Rachel Reeves announced in October that employers will pay a 15 per cent National Insurance rate on staff salaries above £5,000, rather than the current 13.8 per cent levy on wages exceeding £9,100.
And the National Living Wage will go up by 6.7 per cent to £12.21 per hour, while the minimum wage for 18 to 20-year-olds will soar by 16.3 per cent to £10 per hour.
She also said the rebate enjoyed by hospitality operators on their business rates bills would be reduced from 75 per cent to 40 per cent, with discounts capped at £110,000 per firm.
The plans to hike National Insurance employer contributions and cut the level at which employers begin paying it is thought to have cost Morrisons some £75million.
Morrisons boss Mr Baitiéh – the Lebanon-born ex-Air Force colonel who previously headed up French chain Carrefour – said the impending cuts were ‘necessary changes’ in parts of the business that were ‘simply uneconomic’.
And his plans for further cuts come months after Sainsbury’s said it would lay off 3,000 staff due to what it called a ‘particularly challenging cost environment’, another jaded swipe at the Chancellor’s sucker punch to employers.
Morrisons boss Rami Baitiéh said the cuts were ‘necessary’. The chain blamed ‘recent significant cost increases’ for the move – a less-than-subtle swipe at the NI bill
Wetherspoons boss Sir Tim Martin has warned pubs will be at risk because of the hikes – with wages taking up more than the third of a cost of a pint
Retail bosses have warned since the Budget that they will be forced to take drastic action to offset the additional costs associated with NI and the higher minimum wage
Yesterday, Wetherspoon chair Sir Tim Martin added his voice to the growing dissent against Labour’s NI hike – claiming that trying to speak to the Chancellor now is a ‘lost cause’ as he warned pubs were equally at risk of cutting jobs and closing down.
‘Particularly in pubs, Rachel, 35 per cent of the cost of a pint is wages,’ he addressed the Chancellor, in an interview with the Daily Star.
‘When you buy a pint in the supermarket, it’s only five per cent or six per cent so (there is a) far lower impact on supermarkets when you push up things like employers’ National Insurance.’
The average cost of a pint is expected to soar past £5 for the first time next month as the changes to National Insurance and minimum wage kick in.
He added in an outright warning to Ms Reeves: ‘You see how important pubs are when there aren’t any.’
More than 400 pubs closed in 2024 according to analysis of government figures by property data company Altus Group – at a rate of more than 34 every month.
Alex Probyn of Altus said many pubs would ‘no longer be viable’ following the changes coming in the Budget.
‘Many publicans that I speak to are extremely worried that this could be their last Christmas given the combination of hiking the amount employers will have to pay in national insurance, increases to the minimum wage and the business rates discount being slashed from 75% to 40% in 2025,’ he said.
Rachel Reeves is under intense pressure to help businesses after scores signed an open letter to the Treasury warning they faced a £7bn bill to meet the extra demands of the wage and NI hikes.
‘The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty,’ the letter, published in November, had warned.
Morrisons has made two rounds of cuts since the Chancellor’s Budget statement – and is far from the only employer to have done so
It will close several cafés (pictured) as well as 35 meat and fish counters and a number of its Morrisons Daily convenience stores
Vacancies were effectively stalled in the three months to February, as experts warned there is little sign of ‘momentum’ as ‘choppier waters’ loom
British Chambers of Commerce boss Shevaun Haviland has called on the Chancellor to give businesses ‘respite’ from the salvo of wage and tax hikes
The Chancellor’s spring statement on Wednesday is expected to set a gloomy tone for the economic year amid stagnant economic growth and a planned £5billion of welfare cuts.
Official figures published last week revealed vacancies in the British jobs market have stalled in the three months to February, with unemployment stuck at 4.4 per cent in the quarter to January.
Economists fear that, while tomorrow’s announcement may not result in new tax rises, it could open up months of speculation of hikes to come in her autumn Budget.
Shevaun Haviland, Director General of the British Chambers of Commerce, has called on Rachel Reeves to use her statement to ‘offer some respite’ to businesses, of which it is estimated 82 per cent will feel the pinch of the NI increase.
‘Our asks of the Chancellor are clear. We want to see her outline a wider tax roadmap, which includes national insurance and business rates, giving firms a clearer idea of when costs will be lowered,’ Ms Haviland said.
‘Businesses are key to getting the economy out of its current growth rut. The Chancellor needs to pull ever lever possible this week, and in the coming months, to get firms investing, recruiting and exporting.’
Meanwhile, Bank of England Governor Andrew Bailey has called for global economies to unite to help ease trade tensions amid a mounting tariff war brought about by US President Donald Trump’s policies.
In a speech at Leicester University yesterday, he said: ‘These two points, domestic macroeconomic forces and trade policy, are not incompatible.
‘They sit together. To solve these issues, we need authorities to come together and strengthen the rules of engagement in a multilateral setting.’
Mr Trump has imposed tariffs in recent weeks on UK and EU steel and aluminium imports as well as on Canada, China and Mexico, leading to a wave of retaliatory tariffs around the world.
The Treasury was contacted for comment.
