Independent retailers’ sales are up and their optimism is growing, according to new research by the Association of Convenience Stores (ACS).

However, retailers are cutting back staff hours as they come to terms with the introduction of the national living wage.

The convenience sector employs over 407,000 staff throughout the UK, more than three quarters of whom are over 25 and eligible for the new £7.20 National Living Wage rate introduced in April.

The ACS employment index, which measures retailers’ plans to hire or lay off staff, has fallen to its lowest level since May 2013. This is in contrast to ACS’ optimism index, which shows retailers to be bullish about future trading, with the third consecutive quarter of retailers reporting an improved outlook for their businesses.

Key results from the latest polling include:

• Almost one in four (24%) retailers have reduced the number of staff hours in their business over the last year, with just 8% reporting that they have increased staff hours;

• 21% of convenience retailers reported that their sales had increased compared with the same period last year, while over a third (34%) reported that their sales had fallen (this is an improvement on February 2016, when just 14% reported a sales increase); and

• 17% of stores are reporting that they plan to invest in their store over the coming year, falling from 20% in February 2016.

ACS chief executive James Lowman said: “The recovering sales performance and improving optimism of retailers are encouraging signs in what remains a challenging retail environment. However, store owners are still faced with the ongoing challenge of food price deflation, intense price competition and increased regulatory costs, all of which will have a detrimental impact on the profitability of their businesses.

“We warned that retailers would cut staff hours and delay investment plans to deal with the increased employment costs due to the introduction of the national living wage, and these figures suggest that this is already happening. Convenience stores are facing multiple wage hikes over the next year in addition to the costs associated with auto enrolment pensions, which will likely lead to store owners having to cut back even further.”