Supermarket giants including Tesco, Sainsbury’s, Aldi, and Morrisons are calling on the government to rethink plans for a new business rates surtax. In a joint letter to Chancellor Rachel Reeves, they caution that the proposed measure may directly lead to higher food prices for households across the UK.
The intervention comes ahead of the Autumn Budget, where the Chancellor is expected to confirm details of the tax, targeting large commercial properties with rateable values above £500,000. Retailers argue the sector already shoulders a disproportionate tax load and warn that passing on further costs to customers is becoming unavoidable.
Supermarkets Sound Alarm Over Rising Costs and Inflation Risks
Nine of the UK’s largest supermarket chains have jointly urged the Chancellor to reconsider a new surtax that could increase business rates for large retail premises. The warning, coordinated by the British Retail Consortium (BRC), stresses that grocers are increasingly unable to absorb additional costs without affecting prices on shelves.
“Given the costs currently falling on the industry, including from the last budget, high food inflation is likely to persist into 2026,” the letter states, according to multiple reports. It was signed by senior executives from Tesco, Asda, Aldi, Sainsbury’s, Morrisons, Iceland, Lidl, Marks & Spencer, and Waitrose.
While smaller high street businesses may benefit from rate relief under the new scheme, the grocers point out that large-format stores already account for roughly a third of retail’s total business rates bill, despite being a “tiny proportion” of all premises.
According to Helen Dickinson, chief executive of the BRC, supermarkets face over £7 billion in additional costs next year alone. These include higher national insurance contributions, packaging taxes, and minimum wage increases. “Supermarkets are doing everything possible to keep food prices affordable,” she said, “but it’s an uphill battle.”
Treasury Policy Under Scrutiny as Retailers Push Back on Surtax Plans
The proposed surtax would apply to commercial properties with a rateable value exceeding £500,000, a move designed to fund rate discounts for smaller retailers. The Treasury has argued that such adjustments ensure the system reflects property values more fairly and generates consistent revenue in real terms.
But industry leaders warn the blanket inclusion of large supermarkets and distribution centres could have unintended consequences. “If the industry faces higher taxes in the coming Budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging,” the letter explains, “and it will be households who inevitably feel the impact.”
Retailers have also criticised the policy’s timing, pointing to recent global harvest failures, supply chain disruptions, and rising energy and ingredient costs as other major inflationary pressures. Ken Murphy, chief executive of Tesco, has publicly stated that “enough is enough” on tax increases, underscoring industry frustration.
