15th Jan 2025 06:26
(Alliance News) - Two-thirds of chief financial officers at 52 leading retailers said they would raise prices in response to the UK government's decision to hike employer national insurance contributions, a survey on Wednesday showed.
The British Retail Consortium UK CFO survey found that 70% of respondents were "pessimistic" or "very pessimistic" about trading conditions for the next 12 months. Only 13% said they were "optimistic" or "very optimistic".
The most commonly occurring concerns for CFOs were falling demand for goods and services, inflation and the increasing tax and regulatory burden.
The survey found that 67% would raise prices to respond to the national insurance rise. The survey showed 56% said they would reduce the number of hours or overtime, 52% said they would cut head office headcount and 46% said they would reduce stores' headcount. In addition, 31% of the CFOs said the increased costs would lead to further automation.
The BRC said the results also showed there would be an impact on wider business investment with 46% of CFOs saying they would reduce capital expenditure and 25% saying they would delay new store openings. Moreover, 44% expected reduced profit because of the changes.
BRC Chief Executive Helen Dickinson 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 majority of retailers have little choice but to raise prices in response to these increased costs."
As part of the survey, the CFOs also offered their forecasts for the year ahead.
The BRC said this suggested shop price inflation would rise to an average 2.2% in the second half of 2025, from 0.5% currently. Food inflation is expected to hit 4.2%.
BRC Chief Executive Helen Dickinson said: "Local communities may find themselves with sparser high streets and fewer retail jobs available. The 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."
The CFO survey took place between November 18 and December 9.
By Michael Hennessey, Alliance News reporter
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