Britain’s largest retailers are warning they may very well be compelled to chop 1000’s of jobs this yr because the trade braces for larger taxes and employment prices after a bleak Christmas buying season.

Within the newest signal of robust buying and selling circumstances on the excessive avenue, figures from the British Retail Consortium (BRC) present gross sales development over the “golden quarter” between October and December got here near flatlining.

For the three months to December – when many retailers make the majority of their annual earnings – the BRC stated complete UK retail gross sales development was 0.4% yr on yr as buyers prioritised spending on foods and drinks over the festive season. As soon as inflation was factored in, retail gross sales by quantity slid over the yr.

For 2024 general, complete gross sales elevated by 0.7% from 2023, highlighting a cautious method to client spending as households proceed to grapple with larger costs after the worst inflation shock in many years.

Separate figures from Barclays present zero development in client card spending in December, as households in the reduction of on important objects and pub and restaurant meals in favour of spending on experiences.

Helen Dickinson, the chief govt of the BRC, stated retailers had been poised for a difficult yr as they confronted £7bn of further prices from tax will increase and new rules deliberate by the federal government.

Stress is mounting on Keir Starmer’s authorities amid indicators of a worsening slowdown within the British economic system, with development on observe to have flatlined for your entire second half of 2024.

Enterprise leaders have warned that measures in Labour’s funds to extend employer national insurance contributions by £25bn from April and a 6.7% rise in the national minimum wage will drive firms to chop jobs or go on the upper employment prices within the type of larger costs.

Clive Black, a retail trade analyst, stated he had doubled his forecast for meals inflation to three% for 2025 from 1.5%, claiming it was “UK authorities coverage that’s now the prime supply of grocery worth appreciation”.

Retailers together with Tesco, Marks & Spencer and Next wrote to Rachel Reeves in November to warn {that a} £7bn improve in annual prices afterthe funds would result in job cuts and better costs.

Dickinson stated the federal government wanted to take steps to ease the strain on struggling retailers, or threat widespread job losses.

“With little hope of protecting these prices by way of larger gross sales, retailers will probably push up costs and reduce funding in shops and jobs, harming our excessive streets and the communities that depend on them,” she stated.

The chancellor has rebuked critics of her budget for offering no alternatives, arguing tax will increase are very important for fixing austerity-starved public companies whereas guaranteeing sustainable authorities funds.

Client spending has come below strain after inflation rocketed to a peak of 11.1% in October 2022 after the exit from pandemic lockdowns and Russia’s invasion of Ukraine triggered a surge in residing prices, main the Bank of England to boost rates of interest to the very best degree in 15 years.

Inflation has fallen again to extra regular ranges, however is forecast to stay above the Financial institution’s 2% goal till 2027 – limiting its scope for charge cuts. Households have begun to restore the harm to their funds after a interval of wages rising above inflation, however customers have maintained a cautious method to spending.

Separate figures from the audit agency BDO present retail gross sales in discretionary spend classes grew by 2% yr on yr within the golden quarter, in contrast with a fall of 1.6% in the identical interval in 2023.

Nonetheless, it warned a lot of the rise was pushed by on-line gross sales, as excessive avenue shops continued to wrestle with gross sales development of simply 0.1% within the closing three months of the yr.

BDO stated that dangerous climate and flooding in components of the UK could have pushed customers to buy on-line, the place gross sales elevated by 20.7%. Nonetheless, the audit agency warned the struggling efficiency on the excessive avenue may very well be compounded by larger employment prices and tax rises.

Sophie Michael, head of retail and wholesale at BDO, stated: “Companies are but to really feel the influence of elevated wage prices launched within the funds which disproportionately impacts consumer-facing sectors. Current stories observe that 170,000 store staff misplaced their jobs in 2024, with an expectation that this quantity will solely improve in 2025.”

The federal government has been approached for remark.