Co-op CEO links job cuts to Labour’s national insurance increase

Group warns of costs impact as it accelerates investment in automation

Co-op has cut its workforce this year in response to the additional financial burden imposed by Labour’s national insurance hike, with its chief executive revealing that the tax increase has prompted the retailer to accelerate its investment in automation.

The group, which operates life insurance and funeral businesses alongside its grocery division, announced on Wednesday that it is reducing headcount as part of a broader plan to save £200m following a cyber-attack last year.

Kate Allum, Co-op’s interim chief executive, told

City AM that the government’s increase to employer national insurance contributions (NICs) at the 2024 Budget came as a “surprise” to the retail sector.

The tax rise pushed the group’s national insurance bill from £100m to £150m per year, landing the firm with a “significant” new financial burden.

“We then immediately fast-tracked things like electronic shelf-edge labels. So now we’ve got electronic shelf-edge labels rolled out to all 2,300 stores. That reduces the burden on staff time and that has been able to be absorbed through natural staff turnover,” she said, as reported by City AM.

“So has it reduced our overall level of employment in certain areas? Yes, but not in a stark way, in a natural way. But that is the reality check of the cost of employment going up over the last three years for all of the retail industry.”

Allum declined to disclose the precise number of roles to be cut from Co-op’s 54,000-strong workforce. “We’re always looking at our processes and how we can execute our business more effectively,” she said.

Retail bosses have warned that the rise in NICs — alongside Labour’s forthcoming clampdown on flexible working — is undermining their capacity to take on staff at a time when youth unemployment is already a pressing concern.

The British Retail Consortium (BRC) — which represents major names including Tesco, Sainsbury’s and Marks and Spencer — has called on Chancellor John Healey to address “soaring employment costs” ahead of next month’s Budget.

Retailers have also pressed the government to overhaul the business rates system, which they argue creates an uneven playing field between traditional high street shops and e-commerce behemoths such as Amazon and Shein.

Allum cautioned the government against introducing tax rises at the Budget that could have “unintended consequences”. Labour should instead foster a “strong economic environment” for the retail sector, she argued.

“For a lot of the rural communities that we support, we are lifeline stores, and we always want to be able to do that. But we do need the support from [the] government to create that certainty and confidence for us to invest in the future,” she added.

Co-op is pursuing a recovery following a cyber-attack last year that dealt a £206m blow to revenue and dented its profit by £80m.

The firm saw its operating loss deepen by £11m to £45m in the six months to July, driven by increased investment in discounting and store improvements.