High street retailers are preparing for a difficult Christmas trading period, as higher taxes and mounting costs raise concerns over the viability of many businesses in town and city centres.

A recent report from advisory firm BDO revealed that in-store sales in October grew by only 1.7% compared to the previous year, highlighting the struggles facing retailers even before last week’s budget, which included a £25 billion tax increase on employers.

The combined retail sales, including online, rose by 4.1% year-on-year, but sectors such as fashion and homeware underperformed. BDO’s head of retail and wholesale, Sophie Michael, expressed concern over the weak start to the festive season, noting that sales volumes are “not back to 2022 levels.” Michael warned that if sales continue at this pace, the industry could face an “exceptionally tough festive period.”

The Chancellor’s budget added to these worries with a 1.2 percentage point rise in employers’ National Insurance to 15%, effective from April, alongside a lowered threshold for contributions. Retailers also face a 6.7% rise in the minimum wage next April, which could drive up employment costs by as much as 10% for some businesses.

BDO warns that these increased expenses will likely stymie high street investment, with retailers potentially forced to halt expansion or refurbishment plans. With the festive period crucial for the sector, the added costs and economic pressure could see more stores reconsider their presence on the high street, exacerbating challenges in town and city centres across the UK.