High Street retailers have urged Chancellor John Healey to roll back an employer National Insurance tax increase in a bid to turn the tide on rising unemployment across the retail sector.
Trade body the British Retail Consortium wrote to the Chancellor requesting that the annual salary threshold at which businesses start paying National Insurance contributions be raised to £6,000 to encourage hiring.
The British Retail Consortium represents major British supermarket chains and store operators, including Sainsbury's and Tesco. As the primary trade association for UK retail, the organization monitors employment trends and economic pressure across thousands of high street businesses and shopping centers.
According to estimates by the trade group, previous changes to employer payroll taxes combined with mandatory minimum wage increases have cost the retail industry £6.5billion. The combined financial burden has resulted in the loss of 115,000 jobs across the sector.
Impact of previous tax changes
The payroll tax changes were originally announced in 2024 by Rachel Reeves and came into effect in April 2025. Under the reform, the annual salary threshold at which employers are required to pay National Insurance contributions was reduced from £9,100 to £5,000.
At the same time, the main rate of employer National Insurance contributions rose from 13.8 per cent to 15 per cent. High Street businesses reeled as the lower threshold made employers liable to pay tax on many more staff members, including young people working on a part-time basis.
The British Retail Consortium estimates that the reduction in the tax threshold alone cost the retail sector £1.74billion. Raising the threshold to £6,000 would undo some of that financial damage and provide relief to struggling store operators.
National Insurance contributions are a UK payroll tax paid by both employees and employers to fund state benefits and public services. Employer contributions are calculated as a percentage of an employee's earnings above the statutory threshold. Lowering that threshold significantly increases tax liability for businesses with large part-time workforces.
Retail leaders highlighted the issue as the country battles a "crisis" of young people who are currently not "earning or learning". British Retail Consortium chief executive Helen Dickinson stated that the retail sector "is uniquely placed to play a central role" in addressing youth unemployment if tax pressures are relieved.
Upcoming Budget and business costs
Businesses are issuing urgent pleas ahead of the upcoming Budget scheduled for October 28. The intervention follows statements from the Government declaring that it is "committed to restoring high streets and bringing back hope across Britain".
Dickinson stated that thriving shopping streets are "essential to achieving stronger growth and raising living standards", but argued that retail firms have been consistently held back by compounding operational expenses. She explained that higher employment costs, energy bills, packaging taxes and business rates have "reduced the industry's capacity to invest, create opportunities for young people and support growth".
Dickinson noted that the October 28 Budget could serve as a "turning point" to "help deliver Government's missions on growth, jobs and thriving high streets". In addition to the National Insurance threshold change, retailers are asking the Government to take action on extra levies on energy bills and to ease planned increases in business rates.
Business rates are a property tax levied on non-domestic properties such as shops, offices, pubs and warehouses in Great Britain. The tax is calculated based on the estimated rental value of the property, representing one of the largest fixed overhead costs for traditional physical retailers.
Workplace reforms and flexible staffing
Concerns over employment costs have also been raised by the Association of Convenience Stores. The industry body urged the Government to "keep the cost of employment under control and ensure workplace reforms support, rather than limit, job creation".
The Association of Convenience Stores represents thousands of local neighborhood shops, corner stores and independent mini-marts across Great Britain. These businesses rely heavily on flexible, part-time and seasonal labor to maintain extended operating hours and serve local communities.
Retailers across the sector remain concerned that proposed workers' rights reforms will introduce additional red tape and administrative expenses. Industry representatives warn these extra costs will make it harder for businesses to employ staff on a flexible basis, affecting opportunities for students and temporary workers hired during the busy Christmas trading period.
