HIGH street and supermarket giants including Tesco and Boots have issued a warning over price hikes ahead of tax raids.
Big wigs behind some of county’s biggest chains have signed a letter to the Chancellor sent by trade body British Retail Consortium (BRC).
Retail bossss have called[/caption]
The letter, signed by more than 60 businesses, reads: “Labour’s manifesto made a clear and welcome promise to deliver good jobs and higher living standards but if future policy decisions lead to rising prices and fewer jobs, then those commitments are at risk.”
“As retailers, we have done everything we can to shield our customers from the worst inflationary pressures but as they persist, it is becoming more and more challenging for us to absorb the cost pressures we face.”
It warns that further tax rises on businesses could result in the Labour Government breaking its manifesto pledge to provide “high living standards”.
Many businesses have seen their labour costs rise thanks to the rate of employer national insurance being increased in last year’s Budget.
Employer National Insurance contributions were bumped up from 13.8% to 15% and the threshold at which they are paid lowered from £9,100 to £5,000 in April.
Some retailers have blamed the tax hike for the decision to raise prices in shops, which they say has allowed them to partly mitigate the impact.
Others have resorted to cutting staff or freezing hiring, while some businesses said they were absorbing the higher costs into their profits.
The national minimum wage also increased in April to £12.21.
Businesses say the overall jump in staff costs, coupled with new taxes on plastic packaging, have added £7billion in costs.
The BRC also cited rising food and drink inflation, which hit 4.9% last month, with items like coffee, chocolate, meat and juice becoming more expensive.
The BRC is calling for a significant reduction in business rates on retail, hospitality and leisure firms, and assurances that no shops will pay more tax than they currently do.
The Sun has contacted The Treasury for comment.
Retailers warn of price hikes
It comes after Iceland blamed Rachel Reeves‘ tax raid for hiking its suppliers’ costs.
In accounts published last month, the chain said it was “doing our utmost” to offset rising costs caused by suppliers, but would “inevitably have to pass some of these on to consumers, where we can do so without weakening our own price position in the marketplace”.
It added: “In consequence, we expect UK food price inflation to peak at some 4-5% in the next six months.”
Elsewhere, the boss of M&S said the supermarket would have to pass on extra costs due to the National Insurance and minimum wage hikes.
Stuart Machin said any price rises would be “small and behind the market” but did not say how much they would go up by.
At the start of the year, Sainsbury’s also warned the Budget would cost it an extra £140million.
Its CEO Simon Roberts warned that the chain would need to work with its suppliers to minimise the impact on customers.
More retail pain
The warnings come amid a challenging time for retail with many chains battling low consumer spending alongside rising costs.
River Island will close up to 33 stores in January as part of a restructuring plan to help write off the fashion brand’s debts.
Locations in major UK cities including Edinburgh, Leeds, Oxford, Brighton and Perth are all expected to close.
Poundland is also waiting for high court approval for a dramatic restructuring plan which includes the closure of 68 stores.
Elsewhere, New Look warned it would close nearly 100 stores ahead of National Insurance hikes which came into place in April.
Approximately a quarter of the retailer’s 364 stores are at risk when their leases expire.
The chain has closed a number of this stores this year, including sites in London and Scotland.
In February, New Look also exited the Republic of Ireland which resulted in the closure of 26 stores.
At the time, the company said: “New Look’s Irish operation has struggled for some years, impacted by a range of factors including supply-chain and in-market costs, and squeezed consumer spending”.
RETAIL PAIN IN 2025
The British Retail Consortium has predicted that the Treasury’s hike to employer NICs will cost the retail sector £2.3billion.
Research by the British Chambers of Commerce shows that more than half of companies plan to raise prices by early April.
A survey of more than 4,800 firms found that 55% expect prices to increase in the next three months, up from 39% in a similar poll conducted in the latter half of 2024.
Three-quarters of companies cited the cost of employing people as their primary financial pressure.
The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”