Britain’s largest retailers have reduced their workforce by almost 18,000 employees over the past year, as businesses grapple with rising labour costs linked to higher employer taxes and increases in the National Living Wage.
Analysis of annual reports from some of the UK’s biggest retail groups shows significant reductions in headcount across the sector, highlighting mounting pressures on an industry that remains one of the country’s largest private-sector employers.
The largest reduction was reported by Tesco, the UK’s biggest supermarket chain, which said its workforce in the UK and Ireland fell by nearly 5,000 employees in the year to March 2026.
Other major retailers also reported sizeable declines. Sainsbury’s, the John Lewis Partnership, owner of John Lewis and Waitrose, and Kingfisher, the owner of B&Q and Screwfix, each recorded workforce reductions of around 3,000 employees compared with the previous year.
Fashion retailer Next and sportswear group JD Sports also reported falls in employee numbers of approximately 1,500 each, according to analysis of company filings. Workforce reductions may reflect redundancies as well as employees leaving roles that are subsequently left unfilled.
The figures come amid growing concern about the outlook for the UK labour market. This week, the Organisation for Economic Co-operation and Development (OECD) warned that Britain is expected to experience the largest increase in unemployment among major advanced economies over the next year.
The OECD said demand for workers had continued to weaken, particularly in sectors most exposed to increases in minimum wages. The organisation forecasts that the UK’s unemployment rate will rise from 4.8 per cent in 2025 to 5.5 per cent in 2026.
Retailers have pointed to a combination of rising wage bills and higher employer National Insurance contributions as key factors affecting hiring decisions. The British Retail Consortium (BRC) estimates that recent increases in employment costs have added around £6.5 billion to annual costs across the retail sector.
Businesses are also facing wider inflationary pressures, including higher energy and transport costs linked to ongoing instability in the Middle East.
The retail and hospitality sectors have been particularly exposed to rising employment costs because of their large workforces and reliance on entry-level and part-time positions. Industry leaders have warned that such roles, often used by young people to gain their first experience of work, are becoming increasingly difficult to sustain.
The concerns coincide with a rise in the number of young people not in education, employment or training. According to the Office for National Statistics, more than one million people aged between 16 and 24 fell into that category during the first three months of 2026, the highest figure since 2013.
Former cabinet minister Alan Milburn recently described the growth in the number of young people outside work and education as one of the country’s most significant social and economic challenges.
Helen Dickinson, chief executive of the British Retail Consortium, said rising business costs were having a direct impact on employers across the sector.
“Soaring business costs, including higher wages, increases to employer National Insurance contributions, and the new packaging tax, have put retail businesses under significant pressure in the last two years,” she said.
“The impact is being felt across retail and in the growing number of young people not in employment, education or training.
“As the largest private-sector employer, retail could be part of the solution to the youth unemployment crisis, but government must join the dots between tax, regulation and its efforts to reduce unemployment.”
Business groups have also raised concerns about the cumulative impact of tax changes on investment and job creation. Earlier this month, the Confederation of British Industry said companies had paid a record £345 billion in taxes to the Treasury last year and warned against placing further burdens on employers.
Meanwhile, Archie Norman, chairman of Marks & Spencer, said the UK had become a less attractive environment for growth and investment. Speaking this week, he said that “rarely in the history” of the retailer had Britain been “less friendly to growth and investment”.
While Marks & Spencer reported relatively stable employment levels, Norman warned that higher taxes were contributing to continued pressures on local high streets, particularly for smaller businesses with fewer resources to absorb rising costs.
The Government has defended increases to the National Living Wage, arguing that higher pay boosts household incomes and consumer spending. Ministers have also said that stronger wage growth is an important part of improving living standards and reducing in-work poverty.
However, retailers and business groups continue to argue that rising employment costs are making it more difficult to recruit staff and maintain existing roles, particularly in sectors that traditionally provide large numbers of entry-level jobs.
With unemployment forecast to rise and labour demand continuing to soften, the retail sector is likely to remain at the centre of the debate over the balance between improving pay and sustaining employment growth.
