Supermarkets, already grappling with high food inflation and cost pressures, now face an additional burden. The new “surtax” on commercial properties valued at £500,000 or more could further squeeze their already slim margins. This has raised concerns that shoppers will bear the brunt of the increased costs, making already expensive grocery bills even higher.
The New Tax and Its Implications for Supermarkets
The UK government is introducing a new “surtax” on large commercial properties to help fund permanent tax relief for smaller retail, leisure, and hospitality businesses. This change will apply to commercial properties worth £500,000 or more, a category that includes many supermarket chains. The government argues that the move is designed to “rebalance” the business rates system, putting more of the tax burden on larger, more profitable companies, particularly those with large warehouses such as online retailers.
The move, however, has been met with significant backlash from the supermarket industry. Large retailers such as Marks & Spencer had earlier expected to be exempt from the surtax after concerns were raised over its impact on high street stores. The government’s decision to impose the surcharge on supermarkets, rather than exclude them, represents a significant shift in policy, according to reports.
Supermarkets have expressed worries that the surtax could worsen the financial pressures they are already under. With food inflation continuing to climb and other costs, such as wage increases and higher National Insurance, already putting a strain on their operations, the new property tax adds to a growing list of challenges. Experts predict that this could lead to higher prices for consumers as supermarkets struggle to absorb the additional cost.
EY retail expert Silvia Rindone warned that the surtax could change the retail landscape for years to come. “The additional burden placed on larger operators could lead to more expensive food bills for consumers,” she said, adding that this could challenge consumer choice and high street vitality.
Smaller Retailers Still Unconvinced by Tax Relief
While the government’s plan to offer permanent lower rates for smaller retailers has been hailed as a positive move for small shops, the relief has not been enough to satisfy all those affected. The Association of Convenience Stores (ACS) has called the changes a “major disappointment,” arguing that the reduction in business rates will not provide meaningful support.
The new multiplier for smaller businesses will be only 5p lower than the regular rate, a change that many small businesses feel will not offset the loss of 40% relief introduced during the pandemic. James Lowman, Chief Executive of ACS, criticised the decision, stating that small shops will see their rates bills rise in April, with many facing further increases as part of the regular property revaluation process.
Despite the challenges facing smaller shops, there is little doubt that the new tax scheme will further intensify pressures across the retail sector. While the government’s attempt to support smaller businesses is admirable, critics argue that the way forward should have taken into account the long-term effects on the broader economy and consumer behaviour.
