How Rising Costs Are Forcing UK Retailers to Cut Back and Raise Prices

Across the UK, retailers are navigating a fresh set of challenges that feel both familiar and more pressing than ever. It’s 2025, and the sector is under pressure once again, not from sudden shocks, but from a steady squeeze on costs that’s leaving little room to breathe.

From independents to national chains, decisions that once felt strategic now feel survival-based. Whether it’s holding off on hiring, rethinking store investments, or increasing prices just to stay level, the realities of doing business in today’s climate are hitting hard.

Costs Are Climbing – Fast

Let’s start with the numbers. Several policy changes have kicked in this year, and they’re having a real impact on the bottom line.

• Employer National Insurance Contributions have increased from 13.8% to 15%. Add to that a lower threshold, and the cost of employing staff is rising sharply.

• The National Living Wage and Minimum Wage have gone up, boosting take-home pay for many workers but putting additional strain on employers.

• Business rates and other taxes are also taking a bite. The total extra cost for the sector? Over £7 billion in 2025 alone.

That’s not just a figure in a report. It’s the difference between hiring or holding back, investing or pausing, opening a new store or closing one that’s struggling.

Retailers Respond: Holding Back to Stay Afloat

These pressures are reshaping priorities on the shop floor and in the boardroom:

• Hiring is slowing down. Retail employment dropped year-on-year in May, with more retailers freezing recruitment, trimming hours or even making redundancies to manage overheads.

• Investment plans are being shelved. Nearly half of retail CFOs report plans to cut back on capital spending, and around a quarter are delaying new store openings or refurbishments.

• Prices are going up. With margins already under strain, two-thirds of retailers say they’ll need to pass on some of the costs. Shop price inflation is expected to hit 2.2% later this year, with food inflation rising even faster.

What It Means for Independents

For independent retailers, the challenge is particularly stark. Without the financial buffers or buying power of the big players, there’s often less room to manoeuvre. Each price rise risks alienating loyal customers. Each delayed hire stretches already thin teams.

But while the challenges are real, so is the capacity to adapt.

Three Ways to Respond

• Get lean behind the scenes. Look for ways to tighten up operations without compromising service – whether that’s renegotiating contracts, adopting affordable tech, or simplifying processes.

• Speak to your customers. Be honest about the pressures you’re facing and remind people of the value you bring – not just in price, but in product quality and community connection.

• Double down on local. When shoppers understand the stakes, many want to help. Make it easy for them to back your business by showing up authentically and consistently.

Looking Ahead

This year may feel like a balancing act, but it’s also a time for considered choices and clear communication. The sector isn’t standing still, it’s adjusting, recalibrating, and finding new ways to serve under pressure.

“Retailers have worked hard to shield their customers from higher costs, but with slow market growth and margins already stretched thin, it is inevitable that consumers will bear some of the burden.”
Helen Dickinson, Chief Executive, British Retail Consortium
Source: British Retail Consortium, May 2025 press statement

The stakes are high, but so is the resolve. Independent retailers have always been defined by their adaptability. Now, more than ever, that strength matters.