Spring Budget 2025: what it means for the retail industry

The UK retail sector has been navigating a volatile economic landscape, with rising operational costs, shifts in consumer spending, and policy changes placing unprecedented pressure on businesses. 

The Spring Budget 2025, delivered by Chancellor Rachel Reeves, was highly anticipated by industry leaders, who had hoped for measures that would alleviate financial burdens and promote growth. However, reactions from key retail organisations and industry experts indicate that the budget has fallen short in addressing their most pressing concerns.

Rising costs and employment challenges

One of the most significant challenges facing retailers in the wake of the Spring Budget is the impact of rising labour costs. The budget confirmed an increase in the National Minimum Wage and National Living Wage, adding to the financial strain on businesses that are already grappling with higher National Insurance contributions and an evolving regulatory environment.

Mark Williams, managing director EMEA at WorkJam, highlighted the mounting pressures on large retailers. “As a result of the NICs rise, alongside increases to the National Living Wage, the UK’s largest retailers are expecting an additional £7bn increase in annual costs,” he says. “It is inevitable that businesses will attempt to lower costs by halting recruitment drives and, unfortunately, making redundancies, only further damaging the economy.”

Andrew Taylor, Audit Manager at Menzies, echoed these concerns, noting that the impact of the increase in the National Minimum Wage and Living Wage is “expected to be significant to the retail sector who tend to employ a large number of minimum wage workers and lead to further stretching of already tight profit margins”. He added: “The impact on human capital is likely to result in pay compression, further reductions in hiring, reduction in employee hours, and a bigger push in automation and technology becoming more attractive.”

Retail organisations have expressed concerns about the budget’s shortcomings in addressing key industry challenges. Helen Dickinson, chief executive of the British Retail Consortium (BRC), recognised the government’s focus on economic growth but cautioned that the additional costs introduced by the budget, along with uncertainty surrounding the Employment Rights Bill and changes to business rates policy, would make it significantly more difficult for retailers to continue generating jobs.

The impact on independent retailers

Independent retailers, many of whom operate on slim margins, were particularly disappointed by the budget. Andrew Goodacre, CEO of the British Independent Retailers Association (BIRA), criticised the lack of targeted support: “While we welcome the Chancellor’s focus on economic growth, we are deeply concerned that the Spring Statement has overlooked the immediate crisis facing independent retailers. Our members are confronting a perfect storm of rising costs – from the 140% increase in business rates to the National Living Wage rise and National Insurance changes – all while consumer spending remains subdued.”

Goodacre also pointed out that while the Chancellor’s projections of improved household income might provide some long-term optimism, they failed to address the immediate cash flow challenges facing independent retailers. He highlighted that many businesses were currently struggling to determine whether they could continue operating under the present economic conditions.

Retail crime and government inaction

Retailers have also been grappling with an increase in retail crime, an issue that the budget failed to address. Williams linked the rise in retail crime to broader economic struggles. “The rise in retail crime and aggression towards staff can largely be attributed to the accumulating cost of living crisis, which is putting increasing pressure on shoppers from almost all demographics,” he says.

BIRA had previously called for “fully funded policing to address retail crime,” yet their pleas went unanswered. Goodacre voiced his frustration over the lack of action, stating that the association had explicitly called for sustained investment in high streets, adequate funding to address retail crime, and a statutory obligation for local authorities to prioritise economic development. He found it disappointing that Rachel Reeves had not addressed any of these critical issues in her statement.

Welfare cuts, consumer spending and business rates

Retailers are also bracing for the impact of welfare cuts, which could further dampen consumer spending. James Rigg, CEO of Trojan Electronics, explains: “As someone who’s tracked consumer behaviour for years, I can tell you that welfare cuts directly translate to people having less disposable income. This not only squeezes consumer spending on non-essential goods but also affects the fundamentals of retail stockholding and pricing.”

Rigg reflected on the effects of austerity in the early 2010s, drawing parallels to today’s challenges. “Austerity measures created a leaner and, in many ways, more risk-averse retail environment. Consumers reined in spending on higher-value products, forcing retailers to adapt or fold. Those that offered practical, cost-effective solutions – such as refurbished electronics – weathered the storm far better than those who simply tried to ride it out,” he notes.

One of the few bright spots in the budget was the government’s commitment to business rates reform, though details remain sparse. Andrew Taylor pointed out that “The government has stated that this is currently under review and further detail will be released in time for the autumn budget later in the year.”

However, Taylor also stressed the need for additional support, including “employee cost relief” and “support for independent retailers.” He argued that “encouraging digital adoption through subsidies or training programs” could help retailers modernise and remain competitive in a challenging economic environment.

Rigg emphasised the importance of digital diversification as a strategy for survival. “Retailers would be wise to broaden their ecommerce platforms and online marketplace presence – especially in tighter economic times. By expanding your reach digitally, you can attract more cost-conscious consumers who are actively seeking deals and comparisons before they buy.”

Post-Budget economy

So far, the retail industry’s response to the Spring Budget 2025 is largely one of frustration and uncertainty. While the government’s focus on economic growth is welcomed, industry leaders feel that the measures introduced do little to alleviate the immediate pressures facing retailers. Rising employment costs, inadequate action on retail crime, welfare cuts, and a lack of immediate business rates relief are key concerns that remain unaddressed.

Goodacre summed up the sentiment among independent retailers: “If the government truly wants to ‘deliver prosperity for working people,’ as the Chancellor stated, they must not forget the thousands of independent retailers who provide jobs and services in communities across Britain.”

The coming months will reveal how well retailers can adapt to these challenges. Whether through investment in digital transformation, operational efficiencies, or lobbying for further government intervention, the industry must navigate a difficult path ahead. As Williams concludes: “It is crucial that businesses are utilising tools that will protect the employee experience whilst driving productivity. Technology can play an important role in achieving this.”