Some of Britain’s largest retailers reported a combined reduction of almost 18,000 employees over the past year, as businesses across the sector contend with rising labour costs and a challenging economic environment.
Analysis of annual reports from leading retail groups shows workforce numbers declined across several major employers during the year to 2026, with companies citing a range of pressures including higher wage costs, increased employer National Insurance contributions and broader inflationary challenges.
Tesco, the UK’s largest supermarket chain, reported the biggest fall in employee numbers, with its UK and Ireland workforce decreasing by nearly 5,000 in the year to March 2026.
Sainsbury’s, the John Lewis Partnership, which owns John Lewis and Waitrose, and Kingfisher, owner of B&Q and Screwfix, each reported headcount reductions of around 3,000 employees compared with the previous year.
Next and JD Sports also recorded workforce declines of approximately 1,500 employees each, according to analysis of company filings. Changes in headcount can reflect redundancies as well as natural staff turnover where vacancies are not subsequently filled.
The figures emerge amid growing concern about the outlook for the UK labour market. The Organisation for Economic Co-operation and Development (OECD) said this week that demand for workers had continued to slow, particularly in sectors most exposed to increases in minimum wages.
The Paris-based organisation forecasts that the UK’s unemployment rate will rise from 4.8 per cent in 2025 to 5.5 per cent in 2026, representing one of the largest projected increases among advanced economies.
Retailers have argued that recent policy changes have increased operating costs. The British Retail Consortium (BRC) estimates that higher employer National Insurance contributions and increases to the National Living Wage have added around £6.5 billion in costs to the retail sector.
Businesses are also facing wider inflationary pressures, including higher energy and transport costs linked to ongoing geopolitical instability in the Middle East.
The retail and hospitality sectors remain among the largest private-sector employers in the UK and have traditionally provided a significant number of entry-level, part-time and seasonal jobs. Industry leaders have warned that rising employment costs could affect the availability of such roles.
The concerns come as the number of young people not in education, employment or training continues to rise. According to the Office for National Statistics, more than one million people aged 16 to 24 were classified as not in education, employment or training during the first three months of 2026, the highest figure recorded since 2013.
Alan Milburn, the former cabinet minister who chairs the government’s Youth Employment Group, recently described the increase in young people outside education and work as one of the country’s most significant challenges.
Helen Dickinson, chief executive of the British Retail Consortium, said rising costs were placing increasing pressure 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 expressed concerns about the wider impact of tax changes on investment and job creation. The Confederation of British Industry recently said companies paid a record £345 billion to the Treasury last year and warned against imposing further costs on employers.
Archie Norman, chairman of Marks & Spencer, said this week that Britain had become a less attractive environment for growth and investment. While employment levels at the retailer remained broadly stable, he warned that higher costs were creating challenges for businesses across the high street.
The Government has defended increases to the National Living Wage, arguing that higher pay helps improve living standards and increases spending power for workers. Ministers have also said stronger wage growth forms part of a broader strategy to support household incomes and reduce in-work poverty.
However, business organisations continue to argue that rising employment costs are making recruitment and workforce expansion more difficult, particularly in sectors that employ large numbers of lower-paid and entry-level workers.
With unemployment forecast to rise and labour demand showing signs of weakening, the debate over how best to balance higher wages with employment growth is likely to remain a key issue for both policymakers and employers in the months ahead.
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