How will rising UK labour costs affect watch retailers?

In January the Employment Rights Act 2025 was made law. 

It’s the most significant overhaul of legislation since 1996, with the aim of modernising worker protections, expanding rights at work and strengthening enforcement of things like fair wages and unfair dismissal. It’ll be implemented gradually over 2026 and 2027. 

But the legislative changes appear to be causing further anxieties amidst an uncertain economic backdrop. The British Retail Consortium’s (BRC) latest survey of Chief Financial Officers indicates a rise in pessimism about the economy, with rising labour costs at the forefront of their worries: 84% said that labour and employment costs were in their top three concerns, a dramatic rise from 21% in 2025. 

Since then, retail employment costs have risen by £5 billion due to a higher National Living Wage and employer National Insurance contributions — the BRC calculated that the cost of employing a full-time entry-level worker rose by 10%, while for a part-time worker it rose by over 13%.

And the consequences of these high costs are bleak for the retail industry as a whole. The BRC survey paints a difficult picture for staff, reporting that over half (52%) of CFOs plan to reduce the number of hours and overtime, with almost a third (32%) opting for a recruitment freeze. 

Jobs, too, are likely at risk, with almost half of CFOs (48%) planning to reduce head office headcount and almost a third (32%) to reduce numbers in store. Meanwhile, the smaller workforce will have to work harder than ever, with 68% of retailers planning on driving higher productivity. Others (61%)  are hoping to lean more into AI with more investment in automation.

“Done well, the reforms [of the Employment Rights Act] can raise standards while supporting flexible and entry-level roles that are vital for people whose lives don’t fit a fixed 9-5 pattern,” said Helen Dickinson, Chief Executive at the BRC. 

However, “If the Government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needs them most.”

As well as reducing staff head count, one way watch retailers might respond to higher labour expenses is by passing costs on to customers, meaning buyers may be confronted with higher prices for their next timepiece — potentially softening sales. Lower staff numbers might also lead to less personal attention for shoppers, resulting in a markedly different retail experience.

Watch retailers certainly face a challenging landscape going into 2026. Those most at risk from the rising cost of employment include small, independent or specialty boutiques, and stores with low foot traffic.

Businesses that may be most cushioned include large retail groups and multi-brand dealers who are able to share labour costs across teams and sales channels. Direct-to-consumer and online-only models, too, often have fewer staffing overheads. This might mean that, as an industry, we start seeing a greater focus on digital sales and innovation in the form of virtual appointments and try-ons.