Labour's Employment Reforms Trigger Retail Sector Alarm Over Job Losses
Retail industry leaders are warning that Labour's Employment Rights Act could lead to significant workforce reductions, with more than half of chief financial officers planning to cut hours or eliminate positions entirely. According to a comprehensive survey conducted by the British Retail Consortium (BRC), employment costs have surged to the top of concerns among retail executives since the implementation of the new legislation.
Survey Reveals Widespread Workforce Reduction Plans
The BRC's latest survey of retail chief finance officers and finance directors paints a concerning picture for employment in the sector. The data shows that 61 percent of those surveyed plan to reduce working hours or overtime, while 55 percent intend to decrease office headcount. Additionally, 44 percent of retail leaders anticipate cutting jobs in physical stores as a direct response to the new employment regulations.
Helen Dickinson, chief executive of the BRC, emphasized the critical nature of the government's approach, stating that the Employment Rights Act could "make or break job opportunities" for workers across the country. She urged Labour to implement the reforms with careful consideration of business needs.
Growing Pessimism Among Retail Leaders
The survey reveals a significant deterioration in sentiment among retail executives. Currently, 69 percent of CFOs describe their outlook as either "pessimistic" or "very pessimistic" about the retail industry's future. This represents a substantial increase from July, when 56 percent expressed negative views, and none reported being "very pessimistic" at that time.
Notably, none of the retail leaders surveyed by the BRC reported feeling "very optimistic" about current trading conditions, mirroring the sentiment recorded in July's survey.
Employment Concerns Dominate Executive Priorities
Labour and employment issues have dramatically risen in importance for retail CFOs, appearing in 84 percent of their top three concerns. This represents a massive increase from just 21 percent in July, highlighting how quickly the new legislation has reshaped business priorities.
Other significant concerns identified in the survey include falling consumer demand (77 percent), rising input costs (39 percent), and increasing tax and regulatory burdens (29 percent). Retail firms specifically worry that certain provisions in the Act, such as guaranteed hours requirements, could substantially increase operational costs and reduce the availability of entry-level positions.
Rising Employment Costs Compound Challenges
BRC analysis reveals that hiring costs have already increased significantly, with full-time retail staff costs rising by 10 percent and part-time staff costs increasing by 13 percent during 2025. Business leaders and analysts have directly attributed rising unemployment figures to the impact of the Employment Rights Act.
Dickinson elaborated on the potential consequences, noting: "Done well, the reforms can raise standards while supporting flexible and entry-level roles that are vital for people whose lives don't fit a fixed 9-5 pattern. If the Government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needs them most."
Legal Experts Warn of Sector-Specific Challenges
Tom Moyes, an employment partner at Blacks Solicitors, explained to City AM that while the Employment Rights Bill doesn't prohibit hiring, it creates particular challenges for industries like retail and hospitality that depend on flexible staffing arrangements.
"The Employment Rights Bill doesn't stop businesses hiring, but it does reduce the margin for error — which is challenging for hospitality and retail where demand and staffing needs change week to week," Moyes stated. "Businesses that adapt their processes should manage the impact, but those reliant on informal or flexible arrangements will likely see higher costs through turnover, disputes and scheduling inefficiencies."
Government Response and Future Support
A Government spokesperson acknowledged the challenges facing retailers while defending the Employment Rights Act reforms: "We know retailers are facing a difficult time, but our Employment Rights Act reforms will boost productivity and retention in workplaces across the UK and give job security to over 18 million workers. We are also supporting retailers through our Small Business Plan, and we will work with business including the BRC to see what further support we can provide ahead of publishing our High Streets Strategy later this year."
The survey results highlight the delicate balance policymakers must strike between protecting workers' rights and maintaining employment opportunities, particularly in sectors like retail that traditionally offer flexible, entry-level positions. As implementation of the Employment Rights Act continues, both businesses and workers will be watching closely to see whether the government's promised benefits materialize or whether the predicted job losses become reality.
