Halfords has revealed plans to close a number of garages as it grapples with UK Chancellor Rachel Reeves’ tax hikes, writes Emily Hawkins.

The group said that after "increased labour costs introduced by last year’s Budget," it had decided to shut some underperforming sites.

It is the latest evidence of the damage to jobs being caused by the Chancellor’s £25bn raid on employer National Insurance, which came alongside a hike in the minimum wage.

Halfords had previously said the changes would add £23m to its wage bill. Its announcement yesterday came as it reported an 11% rise in profits to £38m for the year to March 28, but warned of a tough consumer outlook as households worry about their jobs.

Halfords did not say how many garages it would axe, but it has already announced the closure of sites in Berwick, Northumberland, and in Broughty Ferry in Scotland.

It said most staff would be redeployed nearby, but warned "further steps to optimise our garage estate" were to come. Halfords sells bicycles and car accessories at its 373 stores and has more than 540
garages providing car repairs and MOTs. Sales rose 2.5% to £1.72bn for the year

The autocentres business saw like-for-like growth of 3.7%, while retail sales were up 2.1%. Halfords said a warm spring and a late Easter helped it keep momentum into the start of the new financial year, with its cycling business performing "very strongly."

But chief executive Henry Birch, who took over in April, said he was "cautious" on the outlook given global uncertainty and how it is affecting "the way our customers feel about spending their money".

He added: "While inflation appears to be moderating and interest rates are falling, the negative outlook for employment and the impact of geopolitical instability continue to weigh on confidence."

Halfords said £33m of rising costs were offset by making savings worth around £35m. It improved profitability through improving buying operations and higher prices.

Russ Mould, investment director at AJ Bell, said that while Halfords was trying to shift further into motoring services, it was "still at the mercy of consumer confidence for a big chunk of its business."

The cautious outlook for consumer spending "means Halfords is going to be pedalling hard uphill to make further progress this year."