Source: Local Economies (UK)
Author: Amanda Vlietstra
Date published: 2026-02-17
[original article can be accessed via hyperlink at the end]
UK unemployment has reached its highest in nearly five years at 5.2%, according to the latest figures from the Office of National Statistics (ONS). Retail employment stands at 2.82 million, according to data sourced by the British Retail Consortium (BRC). This represents a year‑on‑year loss of 74,000 jobs, signalling a structural contraction rather than a temporary dip.
Businesses attribute this to higher labour costs. The hike in employers’ National Insurance contributions, combined with rises in the national minimum wage, has led to many businesses slowing down on hiring. Younger workers are bearing the brunt of this, with unemployment for 18 to 24-year-olds at 14% in the three months to December 2025, also the highest rate in five years.
Martin Beck, the chief economist at WPI Strategy, told the Guardian: “Higher labour costs, reflecting last year’s increase in employer NICs and rises in the adult minimum wage appear to be weighing most heavily on entry-level hiring. At the same time, firms are likely reassessing junior roles in the face of rapid advances in AI.”
Retail hit by labour costs
Consumer-facing businesses, notably the retail and hospitality sectors, have been the hardest hit. Faced with weak consumer confidence and rising labour costs, many retailers have slowed hiring or laid off staff. Morrisons, River Island, New Look and Poundland were among the major UK retailers restructuring in 2025, with LK Bennett, Claire’s and Bodycare among those going into administration.
“The number of employees on payroll has fallen again, with reductions over the last year concentrated in retail and hospitality, and reflecting ongoing weak hiring activity,” said Liz McKeown, director of economic statistics at the ONS.
Helen Dickinson, chief executive at the British Retail Consortium, pointed out that the upcoming Employment Rights Bill could exacerbate the problem. “Retail jobs are a vital step on the path back to the workplace – combining local opportunity with the flexibility to work around other commitments,” she said. “As the numbers of such jobs dry up, the bigger the challenge for Government. This could become even harder if the Employment Rights Bill limits such flexibility; for instance, the Government’s current proposals on Guaranteed Hours would make it harder for retailers to offer local, flexible, and part-time jobs.”
Wage growth also slowing
Wage growth has also slowed down as the job market cools, with growth propped up by the public sector. In the private sector, pay rose by 3.4%, the lowest level in five years, while wages in the public sector rose by 7.2%.
The figures suggest that the Bank of England will cut interest rates, as inflationary pressures intensified by high wage growth appear to be easing. Inflation was 3.4% in December.
The work and pensions secretary, Pat McFadden, said: “We know there is more to do to get people into jobs. Our £1.5bn drive to tackle youth unemployment is a key priority and this month we announced that we’ll make it easier for young people to find and secure an apprenticeship.”
Stay informed
Our editor carefully curates two newsletters a week filled with up-to-date news, analysis and research. Click here to subscribe to the FREE newsletter sent straight to your inbox. Why not follow us on LinkedIn to receive the latest updates on our research and analysis?
The post Retail layoffs mount as UK unemployment climbs to five-year peak appeared first on InternetRetailing.
Retail layoffs mount as UK unemployment climbs to five-year peak