Many UK retail CFOs pessimistic about trading conditions for 2025 as budget adds £7bn to bills

A British Retail Consortium survey of CFOs (Chief Financial Officers) at 52 UK retailers reveals significant concern about trading conditions over the next 12 months.

Sentiment languished at -57 with 70% of respondents “pessimistic” or “very pessimistic” about trading conditions over the coming 12 months, while just 13% said they were “optimistic” or very “optimistic” (17% were neither optimistic nor pessimistic).

The biggest concerns, all appearing in over 60% of CFO’s “top three concerns for their business” were falling demand for goods and services, inflation for goods and services, and the increasing tax and regulatory burden.

When asked how they would be responding to the increases in employers’ national insurance contributions (NICs) (from April 2025), two-thirds stated they would raise prices (67%), while around half said they would be reducing ‘number of hours/overtime’ (56%), ‘head office headcount’ (52%), and ‘stores headcount’ (46%). Almost one third said the increased costs would lead to further automation (31%).

The impact of the budget on wider business investment was also clear, with 46% of CFOs saying they would ‘reduce capital expenditure’ and 25% stating they would ‘delay new store openings.’ 44% of respondents expected reduced profits, which will further limit the capacity for investment.

The survey comes only a few weeks after 81 retail CEOs wrote to the Chancellor Rachel Reeves with their concerns about the economic consequences of the budget. The letter noted that the retail industry’s costs could rise by over £7 billion in 2025 as a result of changes to employers’ NICs (£2.33 billion), national living wage increases (£2.73 billion) and the reformed packaging levy (£2 billion). 

Weak consumer confidence and low consumer demand also an issue. As part of the survey, CFOs offered their forecasts for the year ahead. These suggest that shop price inflation, currently at 0.5%, will rise to an average of 2.2% in the second half of 2025. This would be most pronounced for food, where inflation is expected to hit an average of 4.2% in the second half of the year.

The forecast for sales was more muted. While sales growth is expected to improve on the 2024 level of just 0.7% , at just 1.2% this would still be below inflation. This means the industry could be facing a year of falling sales volumes at the same time as huge new costs resulting from the budget.

Helen Dickinson, Chief Executive at the BRC, says: “With the budget adding over £7 billion to their bills in 2025, retailers are now facing into the difficult decisions about future investment, employment and pricing. As the largest private sector employer, employing many part-time and seasonal workers, the changes to the NI threshold have a disproportionate effect on both retailers and their supply chains, who together employ 5.7 million people across the country." 

“Retailers have worked hard to shield their customers from higher costs, but with slow market growth and margins already stretched thin, it is inevitable that consumers will bear some of the burden. The majority of retailers have little choice but to raise prices in response to these increased costs, and food inflation is expected to rise steadily over the year."

"Local communities may find themselves with sparser high streets and fewer retail jobs available. government can still take steps to shore up retail investment and confidence. Business rates remain the biggest roadblock to new shops and jobs, with retailers paying over a fifth of the total rates bill. The government must confirm the planned reforms will make a meaningful difference to retailers’ bills and that no shop will end up paying more.”

2024 RTIH INNOVATION AWARDS

UK retail was a key focus area at the sixth edition of the RTIH Innovation Awards.

The awards celebrate global tech innovation in a fast moving omnichannel world.

Our 2024 hall of fame entrants were revealed during an event which took place at RIBA’s 66 Portland Place HQ in Central London on 21st November, and consisted of a drinks reception, three course meal, and awards ceremony presided over by comedian Lucy Porter.

In his welcome speech, Scott Thompson, Founder and Editor, RTIH, said: “The event is now into its sixth year and what a journey it has been. The awards started life as an online only affair during the Covid outbreak, before launching as a small scale in real life event and growing year on year to the point where we’re now selling out this fine, historic venue.”

He added: “Congratulations to all of our finalists. Many submissions did not make it through to the final stage, and getting to this point is no mean feat. Checkout-free stores, automated supply chains, immersive experiences, on-demand delivery, next generation loyalty offerings, inclusive retail, green technology. We’ve got all the cool stuff covered this evening.”

“But just importantly we’ve got lots of great examples of companies taking innovative tech and making it usable in everyday operations - resulting in more efficiency and profitability in all areas.”

Congratulations to our 2024 winners, and a big thank you to our sponsors, judging panel, the legend that is Lucy Porter, and all those who attended November's gathering.