How can retailers thrive in a challenging environment?
This article is provided by BRC Associate Member, Moore Kingston Smith.
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The UK retail sector continues to operate in a demanding environment shaped by economic pressures, evolving consumer behaviour and recent policy changes. Following the recent Spring Budget, retailers must adapt to new reforms and policies already shifting the landscape. Despite the challenges, opportunities remain for businesses that act proactively and strategically.
Managing rising employment costs
Effective from 6 April, employer National Insurance Contributions rose from 13.8% to 15%, with the threshold reduced from £9,100 to £5,000. This places additional strain on payroll costs – particularly for labour-intensive businesses.
The National Living Wage is now £12.20 for over-21s, and the Minimum Wage for 18-20-year-olds has increased to £10. With many store staff in these brackets, retailers are facing sharper wage bills.
Retailers should review staffing structures and invest in workforce planning to manage higher costs without sacrificing quality.
Adapting to reduced financial relief
As confirmed in the Budget, business rates relief for retail, hospitality, and leisure sectors has been reduced from 75% to 40% – increasing fixed costs for many brick-and-mortar operations.
A fresh assessment of store-level profitability, renegotiation of leases where possible and streamlining property portfolios can help to focus on viable, high-performing locations.
Inflation, interest and taxes
As of May 2025, CPI inflation stood at 3.7%, and interest rates remain high at 4.25%. With wage growth still outpacing inflation, there is upward pressure on prices and uncertainty around further rate adjustments. Moreover, with no change to personal tax thresholds, many consumers are experiencing a stealth tax rise through fiscal drag, reducing disposable income and tightening retail-focused spending activity.
Targeted adjustments, such as optimising stock levels, renegotiating supplier terms, or reassessing financing, can enhance liquidity and flexibility, helping businesses adapt early and avoid future distress.
Responding to global pressures
The ongoing global trade disputes, including the US’s 10% tariff on UK goods, along with disruptions from international conflicts, are creating volatility in supply chains and driving up costs.
Proactively assessing supply chain risks and cost exposures is crucial, as well as stress-testing for disruption and addressing procurement vulnerabilities. Diversifying supply and building contractual flexibility support broader contingency and early restructuring strategies to enhance resilience
Embracing evolving behaviours
Consumers are increasingly values-led and experience-focused. Ethical consumption, sustainability, and digital convenience are front of mind. Meanwhile, declining footfall on the high street continues as online and omnichannel retail dominate. Investment in digital channels, seamless customer experiences, and values-driven branding are critical to staying relevant and attracting customers.
How we can help
We recognise the importance of understanding your needs and developing tailored strategies that strengthen resilience and agility in navigating the challenges of today’s landscape. Our experienced team works with you to stress-test plans, manage risks, and maximise opportunities, ensuring your business is well-prepared to protect value and drive sustainable growth. Contact us today.
