British retailers’ optimism has fallen to a two-year low following finance minister Rachel Reeves’ first budget, the Confederation of British Industry (CBI) has said.
The dip in optimism comes as retailers brace for higher employment costs and softer consumer demand.
Reeves announced a £25 billion increase in employment taxes in her 30 October budget and a 7% rise in the minimum wage, both of which will particularly hurt retailers with low margins and high staff numbers.
CBI lead economist Ben Jones said, “The last time retailers felt this gloomy was back in November 2022, at the peak of the inflation shock.
“The stark rise in Employers’ National Insurance next year will hit retailers hard.”
The CBI’s quarterly survey of retailers showed their assessment of the business situation dropped to -21 in November from -13 in August.
When the optimism balance was last lower, surging food and energy costs were causing consumers to tighten budgets and former prime minister Liz Truss’s budget plans had led to a jump in mortgage rates.
Consumers
Consumers’ mood has been subdued, though it has not been as bad as it was two years ago.
The CBI’s monthly retail sales balance sank to -18 in November from October’s -6, its lowest since August, while the outlook for December retail sales sank to -29.
Official retail data for October showed a sharp fall in sales volumes.
Reeves told the CBI’s annual conference on Monday that she would never again make similar tax rises to those made last month.
Before Labour’s election victory on 4 July, Reeves had outlined only limited tax rises, but after coming to power she said the outgoing Conservative government had left a much worse fiscal legacy than expected.
CBI chief executive Rain Newton-Smith said the tax rises had caught businesses off guard and would lead to lower business investment and slower economic growth.
Tuesday’s survey showed retailers planned to cut investment and hiring, though less so than August.
The survey was based on responses from 75 retail chains between 29 October and 14 November.
Read More: UK Shop Prices Fall Faster But Retailers Warn Of Budget Risks – BRC
