UK retailers' labour cost fears jump after reforms, survey shows
- By Reuters -
- Feb 20, 2026
UK retailers have grown markedly more anxious about rising labour costs over the next year after new employment rights began to be implemented, a trade body survey of finance chiefs showed on Thursday.
UK Prime Minister Keir Starmer’s Labour government secured parliamentary approval for its Employment Rights Act in December.
The UK government has called the legislation the biggest upgrade to UK workers’ rights in a generation, arguing it is the best way to avoid the industrial action that has disrupted services in recent years.
While original plans for protections against unfair dismissal for new workers were softened, new rules on sick pay, zero-hours contracts and union rights remain. Secondary legislation for the Act has gone out for consultation.
FINANCE CHIEFS SAY LABOUR COSTS A TOP CONCERN
Trade body the British Retail Consortium (BRC) said its survey of finance chiefs found 84% ranked labour and employment costs in their top three concerns, up from 21% last July.
The BRC said 61% plan to reduce the number of hours staff work and/or reduce overtime and 45% would need to freeze recruitment.
It said 55% plan to reduce head office headcount and 42% plan to reduce stores headcount. It said 68% will try to make up for a smaller workforce by driving higher productivity, while 61% will invest in automation.
The retail industry is Britain’s biggest private sector employer, but has shed 250,000 jobs over the last five years, according to the BRC.
The BRC said the risk does not lie with the Employment Rights Act’s aims, but in how it is implemented.
“If the Government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needs them most,” BRC CEO Helen Dickinson said.
Several UK retailers, including John Lewis and Sainsbury’s, have recently announced above-inflation pay rises for their workers that partly reflect another hike in the main government mandated minimum wage.
A survey published on Monday by the Chartered Institute of Personnel and Development found that more than one in three UK employers plan to cut their hiring of permanent staff due to costs introduced by the labour law reforms.