Top stores could feel the pinch

THE prospect of a rise in National Insurance for both employers and their staff could take some of the heat out of the High Street spending boom. Consumers will be hit in the pocket while wage costs will rise for companies.

Experts reckon it will cost firms more than £4bn a year. The retail sector, which employs 2.6m people, will be one of the hardest hit. It is Britain's second biggest employer. Staff costs are typically 8% to 12% of turnover.

Paul Smiddy, at Credit Lyonnais, said: 'It hits retailers where it hurts. They are very labour intensive.' But retailers themselves were more sanguine. 'It could have been worse,' said Arcadia chief executive Stuart Rose. 'Brown is banking on strong economic growth which is good news for us.'

Most retailers see spending staying fairly buoyant. Higher NI does not take effect until next April. Nigel Wreford-Brown, at John Lewis, said it will add £6m to the £600m annual wage bill.

Photographic retailer Jessops, which has 2,000 staff, reckons it will add up to £400,000 to payroll costs. Chairman Tim Brookes warned: 'It might lead to companies like ours restricting their workforce.'