Britain’s high street is sounding the alarm. The country, retailers warn, is drifting towards a generation locked out of work, with the Chancellor’s tax and wage decisions accused of choking off the very entry-level jobs that young people rely on to begin their careers.
In a sharply worded intervention, the British Retail Consortium (BRC) has urged Rachel Reeves to halt what it describes as a relentless climb in the cost of employing people. The trade body estimates that the combined effect of higher employer National Insurance contributions and a steeper minimum wage added roughly £6.5bn to retailers’ wage bills in the last financial year alone, a sum that, on the BRC’s reading, is now translating directly into hiring freezes, reduced rotas and shrinking opportunities at the bottom of the ladder.
Helen Dickinson, the BRC’s chief executive, did not mince her words, accusing ministers of allowing an upward spiral in employment costs and red tape that is pushing young workers out of the labour market. Opportunities, she said, are vanishing in real time as businesses absorb a level of cost inflation many smaller operators simply cannot pass on to shoppers.
The political backdrop is unforgiving. Polling for the BRC by Opinium suggests that 49 per cent of the public believes Labour must do more to help unemployed young people, a finding that lands awkwardly for a government already battling questions over its handling of the wider economy. In March, ministers extended a scheme offering taxpayer-funded subsidies to firms hiring under-25s who have been claiming benefits for more than six months. Retailers, however, regard the measure as well-intentioned but undersized given the scale of the problem now bearing down on the sector.
The numbers tell their own story. Office for National Statistics data shows that more than nine million people aged 16 to 64 were economically inactive between December and February, neither in work nor looking for it, an inactivity rate of 21 per cent. Vacancies have fallen by 18 per cent since Labour took office in July 2024, the equivalent of around 156,000 jobs disappearing from the economy. The pain has been concentrated in precisely those industries, retail, hospitality and leisure, that have traditionally given school leavers and students their first taste of the world of work.
For Britain’s under-25s, the squeeze is acute. The unemployment rate for 16 to 24-year-olds reached 15.8 per cent in the three months to February, more than three times the overall jobless rate of 4.9 per cent. Behind that figure sits a generation of would-be Saturday-job applicants, gap-year workers and graduate hopefuls finding doors quietly closed before they have had a chance to knock.
Adding to the anxiety is the rapid arrival of artificial intelligence on the office floor. A survey by the Institute for Student Employers found that nearly nine in ten employers expect AI to reshape entry-level hiring, with almost a third anticipating significant changes to the way they recruit junior staff. Tourism and the legal profession are among the sectors expected to feel the impact first, raising the prospect of a double squeeze: rising employment costs at one end, technology displacing graduate roles at the other.
The Government has pushed back. Peter Kyle, the Business Secretary, argues that the Budget steadied the economy and pointed to 332,000 more people in work than a year ago. Ministers maintain that lifting the minimum wage was the right call for households still wrestling with the cost of living. For SME owners watching their wage bills climb and their till receipts soften, it is a defence that increasingly fails to land.
The deeper risk, as Dickinson’s warning makes clear, is structural. Once a cohort of young people misses that critical first rung, the part-time shop floor shift, the warehouse weekend, the graduate scheme, the economic and social cost of bringing them back can stretch over decades. For Britain’s SMEs, the question now is not whether the Chancellor will hear the message, but whether she will act before the damage hardens into something much harder to undo.
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Retailers warn Reeves is creating a ‘jobless generation’ as hiring costs spiral