Death by a thousand national insurance contributions. That’s the fate of many retailers since the October 2024 budget which imposed higher employment taxes.
Retailers are feeling the pinch yet again, leading to the most recent closure of a host of high street shops, including the high-profile fashion clothing retailer, River Island.
River Island is said to be planning to close 33 of its shops in the UK, putting hundreds of jobs at risk. The leading UK high street clothing retailer has blamed increased employment costs and more people shopping online for its dramatic restructure.
The Centre for Retail Research predicts there will be 7,000 retail site closures this year, and it has estimated there were 170,000 retail jobs lost in 2024. River Island is just one of the latest high-profile examples, a large retailer in trouble losing 33 shops from Britain’s high streets.
Other struggling retailers include Poundland and The Original Factory Shop which are also closing outlets as part of restructuring exercises to address these challenges. The famous UK discount retailer Poundland was ironically sold for £1 to a US private equity investment firm, Gordon Brothers, that’s according to BBC News and Consultancy.uk.
The deal will involve a restructuring plan for the Poundland business aimed at meeting the company's financial challenges. The deal with Gordon involves the closure of 68 stores and two warehouses and will affect over 1,000 jobs.
The company said that the sale of Poundland would not bring any profits for investors as Poundland would probably not make a profit in the last financial year. This says a lot when even cut-price retailers like Poundland are finding trading tough. Consumers are watching their spending. Growing competition from supermarkets like Aldi, Lidl and Tesco, as well as expanding thrift outlets like Savers, The Range and Home Bargains, are taking their toll.
Many retailers are learning to be nimbler. They’re closing unprofitable stores in locations where profits are sparse, while sometimes opening other outlets in promising strategic locations. The Original Factory Shop, which has been struggling in recent years, has said it will have to close some of its loss-making stores as part of a restructuring plan. The next two locations it will close are its branches in Pershore and Normanton. Both will close on June 28.
Iceland, Morrisons, New Look, WH Smith, Homebase, Hobbycraft, Quiz, Millets, The Coop, Shoe Zone, Monki and a host of high street bank branches are closing their doors in selective locations, or due to close branches soon.
An eye watering increase in employer NI contributions in last October’s Budget, along with a 77p increase to the National Living Wage (NLW), could add around £2,400 a year to the cost of employing a full-time member of staff.
This will hit high street retailers (large and small) hard, especially as the starting point for NICs has been lowered - the secondary threshold (the point at which employers start paying NICs on employee earnings) was reduced to £96 per week (£417 per month or £5,000 per year) in April. This is a significant reduction from the 2024/25 threshold of £175 per week (£758 per month or £9,100 per year).
Approximately one-third of retail staff work between 17-30 hrs per week with almost one-fifth (20%) working under 17 hours per week and many on or near the National Living Wage - thousands of additional employees will need employer NI contributions to be paid.
Business rates are a tax on commercial premises. They have a significant impact on bricks and mortar high street retailers, whereas online retails avoid much of their impact.
These rates influence the prices retailers must charge to remain profitable, they affect the viability of many businesses, despite rates relief in some cases, and they particularly affect smaller retailers and those needing a high street location.
The current system is seen by some as unfairly favouring online retailers and potentially hindering the competitiveness of traditional bricks-and-mortar stores, though many retailers are developing a hybrid in-store / online system.
Business rates are a major operating expense for all bricks and mortar retailers, adding to their overhead costs that can lead to them having to charge higher prices against the online competition which often also offers the convenience of home deliveries.
While business reliefs and discounts are available in some cases, such as in retail, hospitality, and leisure, which can mitigate the impact, there have been ongoing efforts to reform the business rates system. The scheduled 2026 revaluation, it is anticipated, will bring changes to the system aimed at improving the overall health of the high street.
The phenomenon of shifted consumer behaviour due to the convenience, efficiency and often cost savings of online sales are making it difficult for high street stores to compete on these variables.
Couple this with the asymmetry of the business rates burden when local stores are paying millions more as a percentage of sales than online retailers are, and you have a recipe for continuing high street decline.
Currently, the business rates system is based on the value of the retail premises, and property values will always be higher on multiple high street stores when compared to a few large industrial units used by the likes of Amazon.
Consequently, there’s been a growing push for business rates reform for many years now without a great deal of movement by the government, apart from temporary reliefs for smaller businesses.
To level up the playing field between online and physical retailers will take a major rethink on how taxes are applied to retail business overall, perhaps by a reduction in the level of business rates for high street businesses, either by using a lower multiplier or increasing reliefs on a permanent basis.
One solution, which has had serious consideration by the government, would be a sales tax that would be applied across the board: online and high street sales. The government has also come up with several schemes to regenerate high streets, but in many cases it looks like fighting a losing battle.
Local authorities and developers can invest in revitalising the high street, creating attractive and vibrant spaces where sales and leisure activities mix, but unless the demand is there, much of this investment can be wasted.
Shop closures leave holes in the high street affecting property values and rent levels for those remaining. When rent reviews come around the direction of travel is therefore down, lowering rents in those areas of retail decline.
When retail chains are struggling, they use the fact they are struggling to meet their lease obligations to get landlords to accept lower rents, or they use CVAs (Company Voluntary Arrangements) to restructure their debts and rent obligations, often leading to large scale rent reductions, store closures or both.
Landlords are often in an invidious position here: either they accept a lower rent, or they foreclose and risk a long void period where all the costs – business rates, insurance, security, repairs, fall back onto the landlord.
Head of money and markets for Hargreaves Lansdown, Susannah Streeter, has said
that it’s "not really surprising" that River Island is closing stores, given the pressures it is working under. She said that the recent changes to employer National Insurance Contributions (NICs) meant that retailer’s costs with many stores and staff have risen considerably.
There is now intense competition particularly in fashion retail. This comes not only from online and the supermarkets; the likes of Boohoo and several newcomers including the Chinese giants like Shein and Temu have brought serious competition. These new retailers who have mastered the trends in retail fashion, at a time when people’s purses are stretched to the limit. No wonder the structural change on the high street continues unabated.
Here's a full list of UK high street closures confirmed in 2025
[Main image source: River Island at castlepoint by Dorsetdude - own work on Wikipedia]
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