New research has warned that if the cost of employment continues to rise, many stores will no longer be viable as businesses.

The study, published by the University of Stirling and the Scottish Grocers’ Federation (SGF), comes as the UK National Living Wage rises to £11.44 per hour, a 9.8% increase on 2023/24. However, the research estimates that once statutory costs, such as National Insurance and Holiday Pay, as well as additional employment expenses such as uniforms and administration costs are taken into account, the true cost for retail employers will be as much as £15.39 per hour, a jump of £1.39 on the previous year and the highest increase for at least the past eight years.

The SGF warns that additional staff costs will inevitably be passed onto customers, many of whom are also struggling to manage their household budgets.

A recent survey of SGF members found that more than 90% of respondents were less likely to hire more staff due to the wage increases, and that three-quarters of owners or managers reported working over 65 hours per week, just to keep costs down.

Professor Leigh Sparks, of the University of Stirling, said: “Convenience and independent retailers find it harder to cope with large increases in the National Living Wage, despite their recognition of the need to reward staff for the jobs they do. This is the ninth year that we have looked at the true cost of employment and again we see the pressures on the sector.”

Professor Sparks added that there is a risk that some stores may become unviable.

“There does come a point when the cost and management of labour, plus the extreme challenges of actually operating local convenience stores ceases to be viable as a commercial or a lifestyle proposition. If we value the ‘glue’ that local convenience stores provide to communities then we need to show this value to them.”

SGF chief executive Dr Pete Cheema warned that the government needed to start supporting convenience stores that are under pressure.

“Convenience stores are at the very heart of their communities. Providing valuable local employment, with flexible hours, but the significant increase to wages year on year means that some stores will need to cut staff hours. Impacting local jobs and overall harming the economy,” he said. “The pressure of absorbing all the additional costs, both external factors and those implemented by government, is putting businesses at risk. Many simply can’t cope.

“Government must start to recognise that local stores are economic drivers and provide many benefits for their communities. Without doing more to alleviate the growing pressure on our sector, and accounting for the total cost of employment on top of new regulation, Government are damaging the viability of these essential local business.”