Retail bosses warn of £7bn cost burden after Budget
UK retail bosses have written to the Chancellor to warn of the wide-ranging damage from the Autumn Budget on their sector, including “inevitable” job losses and price rises.
In a letter coordinated by the British Retail Consortium (BRC), 79 signatories, including bluechip retailers Tesco, Next, and Greggs, said they had “significant concerns” about the impact of the Budget on the retail industry and its knock-on effect “for inflation, employment and investment”.
The BRC estimated that the retail sector will pay an extra £7bn in costs next year, with an additional £2.73bn spent on the minimum wage increase, £2bn on the packaging levy, and £2.33 on higher NICs.
The retailers join hospitality bosses and farmers in warning that cost hikes in the Budget – including the minimum wage, inheritance tax and employer’s national insurance contributions (NICs) – will decimate family businesses and labour-intensive sectors.
“We appreciate government’s focus on improving the fiscal situation and investing in public services; we also recognise the role businesses have in supporting this,” the letter said. “But, the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”
The wage threshold at which employers must start paying the tax has been lowered from £9,100 to £5,000, while the overall tax rate has risen 1.2 per cent to 15 per cent.
Peel Hunt has estimated that retail firms in their coverage will see pretax profit fall by an average of 7.5 per cent as a result of the tax increase, although some will be hit much worse than others.
“Headcount costs significantly impact how retailers operate their businesses,” analysts at the brokerage wrote. “The idea that this is simply an additional cost that retailers must wear is not really how this will land”.
“While mitigation efforts will be prioritised, some stores may become unviable, projects may be shelved, and prices may rise.”
The BRC’s letter also took aim at the government’s plans for business rates, which were the subject of an intense campaigning effort in the run-up to the Budget.
Chancellor Rachel Reeves announced plans to raise the amount the top one per cent of business properties pay in business rates in order to enable a cut for smaller firms, in a move that staved off some of the warnings from bricks and mortar stores and businesses.
But signatories, which also included the chief executives of Asda, JD Sports and Next, said the changes will “merely distribute rates within the industry” as opposed to bringing the overall burden down.
The BRC recommended delaying the introduction of a lower earnings threshold for national insurance, as well as delayed implementation of packaging levies and faster reform to business rates.
An HM Treasury spokesperson said: “With our public services crumbling and an inherited £22bn fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive.
“By doing this, more than half of employers will either see a cut or no change in their national insurance bills, there will be £22.6bn more for the NHS and workers’ payslips will be protected from higher tax. This government is committed to delivering economic growth by boosting investment and rebuilding Britain.”