Major retailers in the UK are raising concerns ahead of the upcoming autumn Budget, calling on the government to reconsider potential tax hikes. Over 60 companies, including well-known brands such as Tesco, Sainsbury’s, and Boots, have signed a letter highlighting the challenges they face. The British Retail Consortium (BRC) has warned that tax increases could lead to higher prices for consumers and job cuts.
These pressures follow years of rising costs, particularly in labour, packaging, and inflation. According to the Manchester Evening News, these retailers stress the importance of maintaining stable prices and sustainable employment in the sector.
The Impact of Rising Labour Costs
One of the key concerns raised by retailers is the growing cost of labour. Following an increase in employer national insurance contributions last year, businesses have faced a significant rise in their staffing expenses. Retailers have had to either pass these higher costs onto customers through price hikes or absorb the impact within their own profit margins. However, the BRC asserts that as inflation continues to persist, absorbing these costs is becoming increasingly unsustainable.
Additionally, the minimum wage was increased in April, adding further pressure to the financial burden on businesses. The letter signed by more than 60 chief executives states:
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.
Along with the rise in staffing costs, the new taxes on plastic packaging have added an extra £7 billion in overheads for businesses. These cumulative pressures have made it difficult for companies to maintain prices, and some have been forced to freeze hiring or reduce staff numbers, further contributing to job insecurity.
Inflationary Pressures on Consumer Goods
Food and drink inflation in the UK has been a particularly pressing issue for retailers. In July, the annual rate of food inflation reached 4.9%, with everyday items such as coffee, chocolate, meat, and juices becoming more expensive. As a result, retailers are under pressure to balance rising costs while trying to maintain competitive prices.
The BRC has forecast that inflation could reach 6% later this year, exacerbating the strain on household budgets just as winter energy costs begin to rise.
Retailers are keenly aware of the potential impact of these price hikes on consumer behaviour. With household spending already under pressure from inflation, further increases in retail prices could lead to a reduction in consumer confidence, which may ultimately hurt sales and job prospects within the retail sector.
As the BRC notes, these higher costs will directly contribute to
Driving up household bills just as winter energy costs start to kick in
further tightening the financial strain on families.
The Call for Tax Relief and Stability
The British Retail Consortium is urging the government to introduce significant reductions in business rates for retailers, hospitality, and leisure sectors. These industries have been hit particularly hard by rising costs and the ongoing pressures of the economic recovery post-pandemic.
The BRC’s letter stresses that stable pricing, continued investment, and sustainable employment need to be the focus of the Budget in order to ensure the UK’s long-term economic growth.
The letter 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.
Without a shift in policy, the UK’s major retailers fear that they may be forced to make difficult decisions, such as cutting jobs or raising prices even further. They argue that such measures would go against the government’s promise of higher living standards and a strong economy, potentially harming both businesses and consumers alike. As the letter concludes:
For this to be possible, the conditions for stable prices, continued investment and sustainable employment must be at the heart of this year’s Budget.
