Jobs in the UK’s retail and hospitality sectors have declined at their fastest rate in recent history following Chancellor Rachel Reeves’s October budget, which increased employer National Insurance Contributions (NICs) by £25 billion.
According to analysis of HMRC payroll data by The Times, employment in supermarkets, pubs, bars, and hotels has contracted sharply since the announcement, reversing a decade-long trend of job creation in these sectors.
Retail alone saw 45,600 jobs lost in the nine months following the budget—compared to an average increase of 3,400 jobs over the same period in each of the previous ten years. In hospitality, pay-rolled employment shrank by 83,800, reversing what would normally have been a gain of nearly 31,000 jobs.
The findings suggest that the combination of higher employer NICs and the 6.7% minimum wage increase implemented in April has significantly raised the cost of employing entry-level and part-time staff—leading many businesses to reduce headcount.
Across the economy, payrolls have declined by 184,700 since October, with 70% of those job losses concentrated in retail and hospitality.
Business leaders have criticised the chancellor’s strategy, warning that the government’s tax policy is disproportionately impacting sectors that provide flexible work and vital first-job opportunities—particularly for young people and returners.
Helen Dickinson, Chief Executive of the British Retail Consortium, warned that the cost of employing entry-level workers has jumped by 10% in recent months, while the cost of part-time roles has soared by over 13%.
“From young people taking their first step into the world of work to parents and carers returning to the workforce, retail offers opportunities that meet the needs of people in all corners of the country,” she said. “These increases in employment costs are putting those opportunities at risk.”
The job losses coincide with a rise in the UK unemployment rate to 4.7%—its highest in four years—and the slowest private sector wage growth since 2022, according to the latest data from the Office for National Statistics.
Economists now expect that Reeves may announce further tax increases in the autumn to plug a growing hole in the government’s finances. Analysts estimate that weak growth and higher borrowing costs have pushed the Treasury £20 billion over its fiscal target of funding day-to-day spending entirely through tax revenues.
Labour’s manifesto ruled out raising income tax, VAT, or individual NICs, placing pressure on the chancellor to seek additional revenue from businesses and capital taxes. Some economists have suggested that Reeves could reverse the four-point cut to employee NICs introduced by former Chancellor Jeremy Hunt—potentially recouping tens of billions of pounds.
The continued deterioration in labour market conditions is likely to increase pressure on the Bank of England to cut interest rates at its next meeting in August. Despite a slight uptick in inflation to 3.6%, markets are still betting on a quarter-point cut to bring the base rate down to 4%, with further easing expected before the end of the year.
Philip Shaw, Chief UK Economist at Investec, said: “Very little has taken place over the past month to shake our view that interest rates will come down again in both August and November.”
For now, businesses in the UK’s most labour-intensive sectors remain braced for more financial strain—and are urging the government to reconsider policies they argue are punishing employment and undermining recovery.
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Hospitality and retail jobs plummet since Rachel Reeves’s budget, sparking backlash over NICs hike