Nearly three-quarters of UK retail finance chiefs are pessimistic about trading conditions over the next 12 months as labour costs, inflation and weakening demand continue to weigh on the sector.
The latest British Retail Consortium (BRC) Retail Outlook found that 74% of CFOs are pessimistic about the year ahead, while just 7% are optimistic. Labour market costs emerged as the industry’s biggest concern, with 60% of respondents citing employment costs among their top challenges, alongside inflation and falling demand.
In response, the report stated that retailers are increasingly looking to improve productivity, invest in automation and reduce recruitment in an effort to offset mounting cost pressures. The BRC said heightened employment-related regulatory burdens were also influencing business decisions.
The outlook for grocery is more positive. The BRC forecasts food sales growth of 2.9% in 2026 and 3.4% in 2027, significantly ahead of non-food sales, which are expected to grow by just 0.6% and 1.0% respectively. Overall retail sales growth is forecast at 1.6% in 2026.
However, the organisation warned that much of the growth in food sales will be inflation-driven rather than volume-led. Food volumes are expected to continue falling even as sales values rise, with higher energy, freight and commodity costs feeding through supply chains. Despite this, food is expected to remain retail’s most resilient category, capturing a greater share of essential household spending
