Britain’s corner shops have shed thousands of jobs and cut investment this year as surging costs and fierce competition from supermarkets squeeze margins, according to a new industry report.

Figures from the Association of Convenience Stores (ACS) show that the UK’s 50,000 convenience stores collectively axed around 2,000 roles over the past 12 months, with total employment falling to 443,000. Projected annual sales have slipped to £48.8bn, down from £49.4bn a year earlier, while investment has dropped by £100m to £900m as retailers rein in spending.

James Lowman, chief executive of the ACS, said: “This has been an extremely challenging year for local shops as the cost of doing business has risen significantly while sales have stagnated due to fierce competition from discounters, supermarkets and other retailers. These figures should serve as a warning to government that we cannot continue taking the brunt of additional costs and other burdens without the impact being felt by the communities that these essential stores serve.”

The trade body said rising labour costs – including April’s national living wage increase, higher National Insurance contributions and reduced business rates relief – are expected to add £612m to retailers’ bills this year. The squeeze comes as discount chains Aldi and Lidl continue to take market share, forcing the UK’s major supermarket groups to cut prices and invest heavily in promotions, intensifying pressure on smaller stores.

While the total number of convenience stores rose slightly to 50,486, owners reported weaker footfall and growing difficulty competing with larger rivals’ buying power. Local shops remain a vital part of communities, the ACS stressed, providing not just groceries but postal services, cash machines and social hubs, particularly in rural areas.

Lowman added: “Despite the challenges, convenience stores are still right at the heart of communities, more relevant than ever to people’s daily lives, and making a positive difference not just through diversified products and services, but as job creators, investors and social hubs. Every community has different needs and our members’ greatest asset is being able to adapt their offer to meet those needs.”

The figures underline how smaller retailers are among the first to feel the impact of high inflation, increased taxes and softening consumer confidence. Analysts warned that without targeted support, some local stores could be forced to close, hollowing out high streets and villages.