Two-thirds of British retailers plan to raise prices in response to increased National Insurance costs coming into effect this April, according to a new survey from the British Retail Consortium (BRC).

The survey of chief financial officers at 52 leading retailers revealed widespread concern about trading conditions in 2025, with 70 per cent feeling "pessimistic" or "very pessimistic" about the year ahead. Just 13 per cent expressed optimism about trading conditions.

Around half of retailers plan to reduce staff hours and cut headcount at both stores and head offices to manage the increased costs. Nearly one-third indicated they would accelerate automation initiatives.

The changes come as retailers face a £7 billion increase in costs in 2025 due to higher employer National Insurance contributions, National Living Wage increases, and reformed packaging levies. The industry is particularly exposed to the National Insurance changes as the largest private sector employer, with retailers and their supply chains employing 5.7 million people across the country.

Helen Dickinson, chief executive at the BRC, said: "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 survey suggests shop price inflation could rise to an average of 2.2 per cent in the second half of 2025, with food inflation potentially reaching 4.2 per cent. Meanwhile, sales growth is expected to remain weak at just 1.2 per cent, below the rate of inflation.

The pressure on retailers is leading many to scale back investment plans, with 46 per cent saying they would reduce capital expenditure and 25 per cent planning to delay new store openings.

"Local communities may find themselves with sparser high streets and fewer retail jobs available," Dickinson warned. "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 BRC is calling on the government to ensure planned business rates reforms will make a meaningful difference to retailers' bills without increasing costs for any shops.

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