Primark owner George Weston warns of substantial cost increases due to changes in national insurance contributions, affecting the high street.
- The UK government’s decision to raise national insurance contributions from 13.8% to 15% will be implemented in April 2025.
- Employers will face additional pressure as the earnings threshold for contributions decreases from £9,100 to £5,000.
- These financial changes are expected to disproportionately affect high street retailers like Primark.
- Despite recent profit growth, Primark anticipates financial strain from these policy changes.
George Weston, CEO of Associated British Foods, the parent company of Primark, has flagged significant cost challenges ahead. In response to the UK government’s decision to increase employer national insurance contributions, Weston anticipates a substantial rise in business expenses. This policy change, as reported by The Times, is expected to hike Primark’s costs by ‘tens of millions’.
The Chancellor’s recent Autumn Budget unveiled a decision to elevate national insurance contributions from 13.8% to 15%, effective April 2025. Additionally, the earnings threshold that triggers these contributions will drop drastically from £9,100 to £5,000. Weston expressed particular concern for high street businesses, indicating the financial burden will be heavier on these establishments, regardless of their sector.
Weston highlighted that the impact of the national insurance hikes would be particularly acute for high street and city center businesses. He stated, ‘I think it falls disproportionately on high street players’. This suggests a challenging economic environment for retailers who rely heavily on physical store presences to drive sales and customer engagement.
Despite these looming challenges, Primark has recently reported strong financial performance, with a 51% increase in adjusted operating profit, reaching £1.1 billion. This growth has been driven by sales that surged by 6%, a testament to the brand’s appeal through its value-driven clothing and unique in-store experiences. Primark attributed part of its success to enhanced digital engagement, which has become increasingly critical in the current retail landscape.
The juxtaposition of robust recent results with anticipated upcoming financial pressures paints a complex picture for Primark. While the company has demonstrated resilience and adaptability, these new fiscal policies represent a significant hurdle that will require careful navigation in the near future.
With looming fiscal changes, Primark must strategically adapt to ensure sustained growth amidst increasing operational costs.
