UK retailers face a £5.6 billion surge in costs this financial year – equivalent to 195,000 full-time retail jobs – forcing the sector to increase prices and cut costs while facing a hit on profits, according to research from Retail Economics and frontline operations specialist, YOOBIC.

Its latest Unlocking Retail Profitability report suggests retailers are grappling with rising operating costs following the Autumn Budget, as changes to statutory minimum wages, employment taxes and business rates put intense pressure on profitability. 

It estimates UK retailers face £5.56billion in total additional costs in 2025/26 compared with the previous year, with operating costs rising by an average of +3.9% year-on-year, equivalent in cost to 195,000 full-time retail jobs. This is being driven by changes in retail business rates relief and higher minimum wages, which both came into effect on 01 April 2025, and increases in employer National Insurance Contributions (NICs), effective as of yesterday, 06 April 2025.

“Retailers are staring down the barrel of a £5.6 billion wave of additional costs that will squeeze margins and threaten jobs across the industry,” Richard Lim, CEO at Retail Economics, said. “With operating costs rising sharply, many retailers have little choice but to absorb some of the financial pain while cautiously passing costs onto consumers already facing their own pressures. The scale of this challenge risks stalling investment, accelerating store closures, and reshaping the retail landscape in the year ahead.”

With costs set to rise, 89% of retailers have calculated the potential ‘Budget burden’ and are implementing strategies, including pricing adjustments, operational efficiencies, and cost absorption, to mitigate against the impact.

“As cost pressures rise, retailers must rethink their approach to frontline operations, which are too often seen as a cost centre rather than a competitive advantage and a strategic driver of profitability,” Fabrice Haiat, CEO of YOOBIC, added.

“To mitigate the impact of cost increases, efficiency and productivity are core mitigation tactics. Retailers need to accelerate digital transformation and automation of their processes in stores to avoid hefty price increases for consumers.”

Fabrice Haiat, CEO, YOOBIC

Last week, Morrisons announced it would power task management and communication for its supermarket colleagues across all its UK stores nationwide, partnering with YOOBIC.

As part of the rollout, Morrisons will leverage YOOBIC’s all-in-one mobile platform to digitise store operations, streamline task execution and improve real-time communication among frontline teams. The platform will play a central role in driving operational efficiency and enhancing performance across Morrisons’ store network, while empowering store colleagues with the tools they need to succeed in a fast-paced retail environment.