Co-op group has slashed its headcount this year to handle the added costs of Labour’s national insurance raid, its chief executive has revealed, saying the tax hikes had pushed the retailer to invest in more automation.

The group, which runs life insurance and funeral businesses as well as its grocery arm, said on Wednesday that it is cutting jobs as part of its plan to save £200m in the wake of a cyber-attack last year. 

Kate Allum, Co-op’s interim chief executive, told City AM that the government’s hike to employer national insurance contributions (NICs) at the 2024 Budget was a “surprise” to the retail industry. 

The tax raid pushed up the group’s national insurance bill from £100m to £150m per year, creating a “significant” new cost for the firm. 

“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.

“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 has refused to say how many jobs will 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.

Retailers need a ‘strong economy’

Retail bosses have said the hike to NICs – and Labour’s incoming crackdown on flexible working – is harming their ability to hire workers amid a youth unemployment crisis.

The British Retail Consortium (BRC) – which represents Tesco, Sainsbury’s and Marks and Spencer, among other top retailers – has urged Chancellor John Healey to tackle “soaring employment costs” at the Budget next month.

Retailers have also called on the government to reform the business rates system, which they say creates an unfair playing field between high street shops and e-commerce giants like Amazon and Shein.

Allum warned the government against tax hikes at the Budget which would have “unintended consequences”. Labour should create a “strong economic environment” for retailers, she said. 

“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 seeking a turnaround after a cyber-attack last year caused a £206m hit to revenue and dented its profit by £80m. 

The company saw its operating loss widen by £11m to £45m in the six months to July as a result of more investment in discounting and store improvements.