The UK’s High Street is grappling with a significant employment crisis as over 225,000 retail jobs have vanished in the past five years. The British Retail Consortium (BRC) reports a decline in retail employment from 3.1 million in 2019 to under 2.9 million in 2023. This trend reflects deeper systemic issues, including rising operational costs and outdated tax structures.
Amid these challenges, Rachel Reeves is under mounting pressure to reform the business rates system, which many argue disproportionately penalizes physical stores while benefiting online giants like Amazon. The decline in retail jobs, alongside falling job creation across sectors such as UK hospitality and retail, underscores the urgency for comprehensive policy adjustments.
Key Takeaways
The UK's High Street is facing a significant employment crisis due to rising costs, stagnant reforms, and outdated tax structures.
- Over 225,000 retail jobs have vanished in the past five years, with a decline in retail employment from 3.1 million in 2019 to under 2.9 million in 2023.
- The current business rates system disproportionately penalises physical stores while benefiting online giants like Amazon, leading to increased financial strain on retailers.
- Experts and business leaders are urging the government to implement long-term reforms to level the playing field between physical and online retailers, including reinstating pandemic-era relief measures and restructuring tax policies.
Challenges in the High Street ecosystem
The current business rates system remains a major pain point for brick-and-mortar retailers. This tax, calculated based on a property’s rental value, levies higher burdens on physical stores than their online counterparts. Retailers such as Currys and Primark warn that increased business rates, rising minimum wages, and a recent hike in employer national insurance contributions are unsustainable.
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Labour’s national insurance adjustments, estimated to cost businesses £7 billion annually, have intensified the financial strain. Retailers argue these measures contradict previous commitments to reduce their tax burden. Compounding these issues, the reduction in hospitality and retail business rates relief—from 75% during the pandemic to just 40%—has left businesses struggling to recover fully.
Helen Dickinson, CEO of the BRC, emphasised that without meaningful reform, more shops will close, leading to the loss of vital retail and hospitality jobs in communities across the country.
Automation and workforce downsizing
The rising costs are driving many retailers towards automation as a cost-cutting strategy. While this may improve efficiency, it risks employment in a sector already reeling from widespread job losses. A survey by the Institute of Directors (IoD) paints a grim picture, with hiring intentions across the economy falling to their lowest levels since the height of the COVID-19 pandemic.
Figures from the Office for National Statistics (ONS) show a drop of 35,000 in UK employee numbers in November, alongside a decline of 31,000 in job vacancies, marking 29 consecutive periods of vacancy reductions.
Wage growth and interest rate projections
Adding to the retail sector’s woes is the unexpected surge in wage growth, which climbed 5.2% in the three months to October, surpassing economists’ expectations. While higher wages provide some relief to workers, they complicate the Bank of England’s efforts to curb inflation.
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Wage growth has dampened hopes for an imminent interest rate cut, with UK government bond yields rising sharply. Thomas Pugh of RSM UK remarked that stronger wages are a setback for rate cuts, with investors now expecting fewer reductions through 2025.
Economic challenges are impacting multiple sectors. Alexandra Hall-Chen of the IoD warned of a "worrying outlook for job creation," as declining hiring and rising borrowing costs threaten career opportunities in retail and hospitality.
Solutions for revitalising the High Street
Experts and business leaders are urging the government to implement long-term reforms to level the playing field between physical and online retailers. Proposals include reinstating pandemic-era relief measures, introducing a permanent reduction in business rates, and restructuring tax policies to address inequalities between traditional and e-commerce businesses.
Some proposals suggest shifting the tax burden to larger commercial premises, including warehouses used by online giants like Amazon. However, critics warn that such measures could inadvertently harm larger brick-and-mortar retailers, exacerbating their financial challenges.
Boosting investment and protecting jobs
Retailers and policymakers agree that protecting retail and UK hospitality jobs requires fostering a business environment conducive to investment. This includes ensuring that reforms do not inadvertently raise costs for struggling shops.
Helen Dickinson emphasised the importance of timely reforms, stating that the government has a lever to protect future investment and must ensure that no shop pays more under the new measures.
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UK High Streets are at a critical juncture. Addressing rising costs, outdated taxes, and declining job creation is essential to prevent further store closures and job losses. Policymakers must balance economic growth with community and workforce protection.
Sustaining retail and expanding career opportunities will rely on the government’s ability to implement timely and effective reforms.