For London’s shops in 2025, the cost squeeze has tightened further. The past three months have brought fresh pressures from wages, rates and broader economic trends. Retailers are feeling the pinch as costs rise ahead of sales.
Wages continue to climb
Employers must plan for another rise in the National Living Wage. From April 2026 it will go up by 4.1 per cent to £12.71 per hour for over-21s. This builds on the earlier increase to £12.21 in April 2025. The government argues this supports workers, but for shops with many part-time or entry-level roles it adds a consistent cost burden at a time when margins are tight.
On top of statutory rates, voluntary real Living Wage rates have also risen. In London the real Living Wage is now £14.80 an hour. More businesses adopting this benchmark puts upward pressure on local labour markets generally.
Business rates reforms move slowly
Retailers have been calling for relief from business rates for months. The government has introduced legislation to permanently cut rates for high street properties and expand reliefs, but these changes will only take effect from 2026. Until then, many stores must cope with existing high bills that account for a large share of fixed costs.
Rates remain a worry for many. Central London businesses are braced for rateable value increases that push annual bills higher, particularly for larger premises. These bills do not change with sales volumes, so an economic slowdown hits hard.
Consumer demand is uncertain
Retailers are watching customer spending closely. Some recent figures show inflation easing in the wider economy, and the Bank of England is signalling potential interest rate cuts to support growth. But sentiment among households is mixed, and shop-floor demand is not returning strongly enough to offset cost pressures.
Across the UK, the latest Autumn Budget provoked relief in some sectors, though others report ongoing strain from rising input and staff costs.
What does this mean on the ground
Staffing remains costly
Wage increases and competitive labour markets make budgeting for staff harder. Many retailers are reviewing rotas and pay structures to protect cash flow.
Costs rise before relief arrives
Business rates relief is planned, but the transition is slow. Until 2026, retailers carry existing rate burdens.
Prices may edge up
Rising wage floors and costs for supplies, utilities or logistics make passing some costs on to customers likely, even as many shoppers stay cautious.
Footfall matters more than ever London footfall has seen small seasonal increases, but this varies by area and day of the week. Strong evenings or weekend trade help, but weekday sales often lag expectations.
Your takeaway
London retail in late 2025 is not easy. Costs remain on the rise, and relief is gradual. Many shop owners are trying short-term tactics like tighter staffing schedules and smarter stock buys. Others are investing in services that make daily operations smoother and cheaper.
If your shop feels the cost squeeze too, you’re part of a broader trend. The most resilient retailers are those who constantly cheque their costs and adjust their strategy quickly when conditions change.
