This month, new pay regulations outlined in the autumn Budget came into effect, significantly impacting businesses across the retail sector. The Government's plan aims to deliver a "genuine living wage" to support workers amidst rising living costs, while also driving economic growth.
The National Living Wage for workers aged 21 and over increased from £11.44 to £12.21 per hour. The National Minimum Wage for those aged 18-20 rose from £8.60 to £10 per hour, while the apprenticeship rate for 16-17-year-olds increased from £6.40 to £7.55 per hour. The Government states that more than three million workers will benefit from the pay rise, equating to an additional £1,400 per year for a full-time worker.
However, concerns are growing within the retail industry regarding the financial strain of the changes. Businesses are also faced with an increase in National Insurance (NI) rates and a reduction in the NI threshold, measures expected to generate £25 billion annually.
A recent survey by the British Retail Consortium (BRC) revealed that 67% of retailers plan to increase prices to offset costs, while many are considering reducing staff hours and headcounts. Additionally, nearly half of surveyed CFOs anticipate reduced capital expenditure and store openings.
The BRC estimates that retailers could face £7 billion in additional costs by 2025 due to increased NI contributions, higher wages, and a revised packaging levy. BRC chief executive Helen Dickinson warned that retailers, already struggling with slow market growth and thin profit margins, may have no option but to raise consumer prices.
Industry figures, including M&S boss Stuart Machine, have criticised the measures, warning that the changes could lead to store closures and job losses. Some furniture retailers have already cited rising tax costs as a factor in recent shutdowns. As the new framework takes effect, businesses are assessing how to balance increased expenses with long-term growth plans.
Source: www.furniturenews.net