Store closures alert: Shoe Zone to shut down locations due to Rachel Reeves's National Insurance tax raid

A large retailer has announced that it will be shutting down some of its stores in response to Chancellor Rachel Reeves's recent decision to implement a tax increase on businesses as part of her Autumn Budget.

Shoe Zone, which has 297 stores and employs about 2,250 people, has revealed that several of its locations will have to close due to the increase in National Insurance. This would make the retailer the first to directly associate its store closures with the measures introduced in the Chancellor's Budget.

In the past few years, the shops on British high streets have suffered greatly, with almost 10,500 businesses shutting down permanently in 2023, as reported by the Centre for Retail Research. Locations reported to be closing include Burnham-on-Sea in Somerset, Boscombe in Dorset, and Burgess Hill in Sussex.

In her financial report issued in October, Reeves announced that starting in April next year, the employer contribution rate will rise from 13.8 percent to 15 percent.

Major high street retailers and supermarkets have criticized this move as a "job tax," urging Labour to quickly reconsider its decision.

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Shoe Zone has announced that it will shut down its stores as a result of the National Insurance increase implemented by Reeves.

Earlier today, Shoe Zone released a profit alert and acknowledged that the company has faced "extremely difficult market conditions" since the announcement of the Autumn Budget.

The shoe retailer reported that sales and profits were feeling the strain because consumer confidence has declined after the Autumn Budget, all while the cost of living crisis continues.

Additionally, Shoe Zone mentioned that the rainy weather in the weeks prior to the Chancellor's speech probably contributed to a decrease in customer traffic at its high street stores.

The company specifically targeted Reeves's decision to increase National Insurance contributions for employers while also raising the National Living Wage, essentially delivering a double blow to businesses.

Recently, Britain’s shopping streets have faced a surge of shop closures.

Shoe Zone announced that consumer confidence has declined even more after the government's budget release in October 2024. They also mentioned that the budget would lead to considerable added expenses for the company due to rising National Living Wage and National Insurance costs.

These extra expenses have led to the decision to shut down several stores that can no longer operate profitably. Altogether, these factors will greatly affect our overall results for the year.

Consequently, the high street footwear retailer anticipates its earnings for the year ending September 27, 2025, to be "at least" £5 million. This figure is half of the earlier forecast of £10 million.

Shoe Zone is comprised of 112 shops located on busy streets and 185 larger stores as part of its extensive retail offerings. The company offers popular brands like Skechers, Hush Puppies, Rieker, and Lilly & Skinner.

Reeves has made it clear before that the party's promise in its manifesto not to increase National Insurance Contributions (NICs) applies only to the contributions made by employees.

He said, "Rachel Reeves' budget on October 30 included major adjustments to employer National Insurance, set to begin on April 6, 2025. The most notable change for employers is that the secondary threshold will drop from £9,100 to £5,000."

To grasp how this affects employers, consider a worker with a salary of £9,100. Based on existing regulations, the employer doesn’t owe any National Insurance contributions for that worker. However, with the upcoming changes, the employer will need to pay £1,600 annually for that same employee.

Consequently, the pressure on employers is significant. It acts as a tax on hiring and discourages them from bringing on new staff. That said, there are certain types of employees for whom this extra National Insurance Contribution (NIC) won't apply, but this detail seems to be largely overlooked.

GB News has reached out to Shoe Zone and the Treasury for their responses.