A survey of CFOs (Chief Financial Officers) at 52 leading
retailers has revealed significant concern about trading
conditions over the next 12 months.
Sentiment languished at a concerning -57 with 70% of respondents
“pessimistic” or “very pessimistic” about trading conditions over
the coming 12 months, while just 13% said they were “optimistic”
or very “optimistic” (17% were neither optimistic nor
pessimistic).
The biggest concerns, all appearing in over 60% of CFO's “top 3
concerns for their business” were falling demand for goods and
services, inflation for goods and services, and the increasing
tax and regulatory burden.
When asked how they would be responding to the increases in
employers' National Insurance Contributions(NICs) (from April
2025), two-thirds stated they would raise prices (67%), while
around half said they would be reducing ‘number of
hours/overtime' (56%), ‘head office headcount' (52%), and ‘stores
headcount' (46%). Almost one third said the increased costs would
lead to further automation (31%).
The impact of the Budget on wider business investment was also
clear, with 46% of CFOs saying they would ‘reduce capital
expenditure' and 25% saying they would ‘delay new store
openings.' 44% of respondents expected reduced profits, which
will further limit the capacity for investment.
This survey comes only a few weeks after 81 retail CEOs wrote to the
Chancellor with their concerns about the economic
consequences of the Budget. The letter noted that the retail
industry's costs could rise by over £7 billion in 2025 as a
result of changes to employers' NICs (£2.33 bn), National Living
Wage increases (£2.73bn) and the reformed packaging levy (£2
billion).
The Budget is not the only challenge retailers are facing, with
weak consumer confidence and low consumer demand also an issue.
As part of the survey, CFOs offered their forecasts for the year
ahead. These suggest that shop price inflation, currently at
0.5%, will rise to an average of 2.2% in the second half of 2025.
This would be most pronounced for food, where inflation is
expected to hit an average of 4.2% in the second half of the
year.
Shop Prices – Actual and
Forecast
The forecast for sales was more muted. While sales growth is
expected to improve on the 2024 level of just 0.7% , at just 1.2%
this would still be below inflation. This means the industry
could be facing a year of falling sales volumes at the same time
as huge new costs resulting from the Budget.
Retail Sales – Actual and Forecast
Helen Dickinson, Chief Executive at the BRC,
said:
“With the Budget adding over £7bn to their bills in 2025,
retailers are now facing into the difficult decisions about
future investment, employment and pricing. As the largest private
sector employer, employing many part-time and seasonal workers,
the changes to the NI threshold have a disproportionate effect on
both retailers and their supply chains, who together employ 5.7m
people across the country.
“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. The majority of retailers have little choice but to raise
prices in response to these increased costs, and food inflation
is expected to rise steadily over the year. Local communities may
find themselves with sparser high streets and fewer retail jobs
available. Government can still take steps to shore up retail
investment and confidence. Business rates remain the biggest
roadblock to new shops and jobs, with retailers paying over a
fifth of the total rates bill. The Government must confirm the
planned reforms will make a meaningful difference to retailers'
bills and that no shop will end up paying more.”
-ENDS-
CFO Survey:
CFO Survey took place between 18th Nov –
9th Dec and was completed by CFOs and Finance
Directors. Responses were received from 52 members whose
businesses turnover £65bn per year, employing 478,000 people and
operating 17,500 stores across the UK.
