What: UK retail and hospitality wage growth slowed as employers cut hours and limited pay increases to offset higher payroll taxes and minimum wage hikes.

Why it is important: The narrowing gender pay gap and decline in low-paid jobs signal ongoing structural changes in the retail workforce, aligning with recent data on pay equity and diversity.

UK retail and hospitality sectors have experienced a notable slowdown in wage growth over the past year, with employers taking decisive action to manage rising labour costs triggered by increases in national insurance contributions and the minimum wage. While median weekly earnings for full-time retail employees rose by 3.8% and by 3.9% in accommodation and food services, these gains lagged behind the 5.3% average across all sectors. To offset these cost pressures, businesses not only reduced headcount but also cut weekly working hours—down 2% in retail and accommodation and 3.8% in food service—while limiting pay increases for higher-earning staff. Despite these constraints, the proportion of low-paid jobs in the UK has reached a record low, and the gender pay gap has continued to narrow, with the difference in median hourly pay between men and women falling to 6.9%. These shifts reflect both the immediate impact of fiscal policy and a longer-term trend toward greater pay equity and workforce diversity in retail.

IADS Notes: The recent slowdown in UK retail and hospitality wage growth, as employers respond to higher national insurance contributions and minimum wage hikes, is mirrored by sector-wide profitability pressures reported by John Lewis in September 2025 (Drapers), where increased National Insurance costs contributed to operating losses despite rising sales. This financial strain is further underscored by the £7 billion in additional regulatory costs facing retailers, as highlighted in June 2025 (Retail Week), prompting many to adopt cost-containment strategies such as reducing headcount and weekly hours. The surge in retail layoffs and restructuring, with job losses seven times higher than the previous year, was documented in March 2025 (Forbes), while Frasers Group’s targeted workforce reductions in March 2025 (Drapers) and the lowest projected holiday hiring since 2008 in September 2025 (Forbes) illustrate the sector’s shift toward leaner labor models. Amid these changes, the narrowing gender pay gap and the push for pay equity remain central, as discussed in April 2025 (ESG Dive) and July 2025 (ESG Dive), with flexible work arrangements increasingly recognised as essential for workforce retention and equality. Meanwhile, the broader trend of declining low-paid jobs is reflected in El Corte Inglés’s August 2025 (El Economista) salary increases and the October 2025 (LEADNetwork) report showing slow but steady progress in gender diversity at senior levels, even as underrepresentation persists.

Retail and hospitality wage growth hit as UK employers offset tax rise