Chancellor Rachel Reeves’ budget introduces significant cost increases for retailers, primarily due to National Insurance and wage hikes.
- Retailers are expected to face an additional £2.3 billion cost in National Insurance due to increased employer contributions starting next April.
- M&S CEO Stuart Machin criticizes the tax hikes, arguing they are detrimental to both large employers and smaller suppliers.
- The British Retail Consortium warns that these financial burdens might deter investments in retail jobs and infrastructure.
- Potential reforms in business rates could offer relief, but changes are not expected before 2026-27.
Retailers anticipate a substantial rise in operational costs following the unveiling of Chancellor Rachel Reeves’ budget. The increase in National Insurance contributions is set to add £2.3 billion to expenses, impacting employers heavily from April next year. Industry leaders are voicing their concerns, with M&S CEO Stuart Machin describing these plans as an unjust tax that particularly affects larger employers and their smaller partners.
Helen Dickinson of the British Retail Consortium highlights the detrimental impact of these changes on an already burdened sector. She stresses that the additional financial pressure hinders investment into jobs and retail outlets, ultimately threatening economic growth. Retailers employ millions across the country, and such cost increases risk raising consumer prices at checkout if margins are tightened further.
The budget also includes a 6.7% increase in the National Minimum Wage and a 6% rise in the National Living Wage, compounding the financial strain on retail employers by an estimated £367 million. Some analysts like Clive Black from Shore Capital suggest these wage increases might boost household spending if inflation remains stable, potentially improving living standards.
On the horizon is a proposed reform of business rates. Chancellor Reeves has announced plans for a permanent reduction in rates multipliers for high street retail and hospitality, set to commence in 2026-27. This initiative responds to longstanding industry lobbying but will be offset by higher rates for more valuable properties, which could affect major distribution centers and large retail spaces.
Additionally, the government plans to tackle the rising issue of shoplifting with increased funding to address retail crime. Reeves aims to remove immunity for low-value shoplifting, supported by additional police training and resources. Retail groups welcome this move, citing it as crucial in combating organized retail crime and protecting employees.
In a move to influence public health, the budget specifies tax hikes on smoking and vaping products, alongside adjustments to the Soft Drinks Industry Levy. This includes a 2% increase on tobacco taxes and new duties on vaping liquids, aimed at reducing unhealthy consumption habits. Public health advocates call for even broader fiscal measures to enhance the impact on national health outcomes.
Navigating these budget changes will require strategic adjustments from retailers, balancing cost management with potential reforms in business rates.
