Retail Sector Faces Turbulent Year Amid Tax Hikes and Inflation Pressures

Shares in British retailers like Marks & Spencer fell as weak consumer confidence and economic issues overshadowed successful Christmas sales. Retailers brace for rising costs due to tax hikes and minimum wage increases. Inflation is expected to rise, posing further challenges to the sector.

Shares of British retailers, notably Marks & Spencer, declined on Thursday, erasing £2 billion from the sector's value. Concerns about weakening consumer confidence and economic frailty overshadowed strong Christmas trading results.

Amid already dampened consumer sentiment, retailers are preparing for higher costs come April, with hikes in employer taxes and the minimum wage on the horizon. Britain's growing government borrowing costs have darkened the economic outlook, leading analysts to warn of potential further tax increases.

Inflation is also set to rise, making for a challenging year ahead. Despite robust food sales growth, M&S shares fell by 6.5%, while Tesco's sales increase did little to uplift its stock. Greggs and B&M also saw declines, indicating a tough environment for the retail sector in 2025.

(With inputs from agencies.)