Co-op boss blames Labour's brutal tax raid for major job cuts

The Co-op has blamed Labour's disastrous hike of National Insurance employer contributions for creating a “significant” new cost for the firm as it announces job cuts and pre-tax losses of £92 million. The company confirmed job cuts amid a plan to save £200 million as it revealed widened losses following a tumultuous start to the year.

The mutual reported underlying pre-tax losses of £92 million for the six months to July 4 against losses of £75 million a year ago, when it was hit by a damaging cyber attack that sent it plunging into the red. On a statutory basis, first-half losses widened to £86 million from £50 million a year earlier, as it said the figures were impacted by weak consumer confidence and £78 million in extra costs, including increased labour taxes.

Interim chief executive Kate Allum told City AM Labour's hike to employer National Insurance Contributions (NICs) at the 2024 Budget was a “surprise” to the retail industry.

She told the publication the levy raid saw the National Insurance bill for the firm rocket from £100 to £150 million in a year. Ms Allum added: “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."

Speaking to the Press Association, Ms Allum refused to say how many jobs going across the 54,000-strong workforce, insisting it was “not just about jobs going but also being created”.

The figures come after a tough past year for the firm after it was sent reeling by a costly cyber attack last April and then more recently it was forced to defend itself from claims of a “toxic” environment at the business.

A management shake-up has followed, with former chief executive Shirine Khoury-Haq stepping down in March, followed by ex-chairwoman Debbie White in August, while managing director Matt Hood quit earlier in the summer.

The Co-op said its latest half-year saw sales rise 2.4% across the group, which runs more than 2,300 food stores and 800 funeral homes across the UK.

Sales at its food stores lifted 2.6%, but this is compared with a year earlier when the costly hack in April 2025 knocked first half revenues by £206 million and delivered an £80 million blow to profits.

The group said food sales growth was at least 2.6% into the second half and back to pre-cyber attack volumes thanks to recent revival efforts, such as investing in promotions including its Aldi price match.

Ms Allum, who took the reins at the end of March, said: “The first half was characterised by difficult markets and low consumer confidence, especially for food retail.

“Against those conditions, we made decisions to drive trade – investing in promotions and investing in our stores – while also mitigating rising costs.”

She said trading was turning around, with shoppers spending more and visiting its food stores more frequently, but said there was “more work to do”.

Ms Allum added: “Conditions remain challenging, but we see reasons for confidence across our portfolio, having delivered strong growth in areas such as online convenience shopping and funerals.

“We expect to see a stronger performance in the second half than the first, with sales growth and improvements in profitability.”

She said the group had also been focusing on its culture after reports earlier this year that senior managers had complained of a “toxic” environment at the retailer.

“We’ve been listening and doing and explaining and making sure we’re communicating in the best way possible,” Ms Allum said.

The group is also pressing ahead with a planned takeover of smaller rival Southern Co-op in what will add 330,000 members to its existing seven million, as well as about 300 food, funeral and Starbucks coffeehouse sites.

The Competition and Markets Authority is investigating the deal and has concerns over some local areas where it believes competition could be “substantially” lessened.

The firms had until September 22 to put forward measures to resolve any potential competition issues or face a full-scale Phase Two investigation.