Retail and Hospitality Face Highest Tax Burden Among UK Sectors, Triggering Job Losses and Price Pressures
The British Retail Consortium's analysis reveals that retail and hospitality sectors pay the highest effective tax rates in the UK economy at 72p and 82p per pound of pre-tax profit respectively, compared to a 50p average across all sectors. The increased tax burden, particularly from employer National Insurance Contributions following the 2024 Budget, has contributed to the loss of 122,000 retail jobs and 93,000 hospitality positions over two years. The BRC is calling on the government to reduce the cost burden on these sectors before the upcoming Budget to ease inflationary pressures on consumers and revitalize struggling high streets.
The analysis examined tax contributions across 11 major economic sectors, finding that retail and hospitality businesses collectively remitted £62 billion in various levies during 2025/26, including business rates, employer social contributions, and VAT. The disparity in effective tax rates is striking: while banking sector businesses retain approximately 60p from every pound of profit after tax obligations, retail retains only 28p and hospitality just 18p. Employment figures underscore the human cost—over 215,000 positions vanished from these two sectors within a 24-month period following the 2024 fiscal changes.
The high street's structural vulnerability is compounded by its reliance on smaller premises subject to business rates, with retail and hospitality establishments generating nearly one-third of all such revenue nationally. Approximately 14% of high street properties currently sit vacant, reflecting reduced commercial viability and investment capacity among operators facing compressed margins.
The findings suggest potential ripple effects across consumer spending and regional economies. Higher operating costs may translate to elevated prices for household goods and dining, potentially affecting lower-income households disproportionately. Declining employment opportunities in entry-level positions could reduce workforce pathways for inexperienced workers. However, the claimed causal link between taxation and inflation remains contested among economists, and alternative policy interpretations regarding sectoral support exist. Local communities reliant on these employers may experience reduced economic activity if the identified trends persist.