Britain’s biggest retail group has warned that high street job losses are “inevitable”, prices will rise and stores will close as a result of tax and other cost increases in the Budget.
Tesco, Amazon, Greggs, Next and dozens of other chains are asking the Treasury to reconsider some of the measures.
In a letter to Chancellor Rachel Reeves, they said the “cumulative burden” of budget changes and other policies already underway would cost an additional £7bn next year.
A Treasury spokesperson said the government had to make “difficult choices to repair the country’s foundations”.
Measures included in the budget, particularly an increase in taxes that companies pay on employees’ wages, have faced a wave of criticism from businesses who say they will stifle economic growth.
But concerns are greatest among retail and hospitality industries, where many young people find their first jobs. Companies in these sectors also face rising costs due to next year’s minimum wage hike.
The government has defended the tax rises needed to avoid cuts to public services, and a rise in the minimum wage with a significant increase for young workers and apprentices has been welcomed by trade unions.
However, a letter from a group of businesses belonging to the British Retail Consortium (BRC) said: “The sheer scale and speed of new costs will create a cumulative burden, with inevitable job losses and price rises. It will be certain,” it says. ”
The division’s profit margins typically range from 3% to 5%, he said, adding that it would be “impossible to absorb such significant cost increases in such a short period of time.”
“The impact will be to accelerate inflation, slow wage growth, cause store closures and reduce employment, particularly at the entry level.”
The 79 signatories to the letter range from major UK retailers including Aldi, Asda, Boots, Currys, Lidl, Marks & Spencer, Primark and Sainsbury’s, to charity shop organization the British Heart Foundation and industry group A wide variety of stores including Associated Independent Stores.
From April next year, all large businesses will have to pay higher National Insurance Contributions (NICs) for all the staff they employ. Employer NICs will now start at a lower threshold (£5,000 instead of £9,100). And that rate will rise from 13.8% to 15%. The BRC estimates that this will cost UK retailers £2.33 billion a year.
The BRC letter said the minimum wage increase from April is expected to cost the sector an additional £2.73bn.
Additionally, a new packaging tax will come into force from October 2025.
The Extended Producer Responsibility (ERC) scheme introduced by the previous government shifts the cost of recycling from local authorities to the companies that use the packaging. Although small businesses will be exempt, the BRC estimates that the new levy will cost the retail industry an additional £2bn.
The letter calls on the government to phase in the introduction of the NI changes and delay the start of the ERC.
The BRC is also calling on the government to reduce corporate tax, a property tax that it says will cost retailers an additional £140m a year from April next year.
A Treasury spokesperson told the BBC that thanks to the exemption for small businesses, “more than half of employers will see their National Insurance contributions reduced or unchanged (and) the NHS will receive £22.6 billion.” It will be added,” he said.
Begbies Traynor’s business update on Monday gave some weight to the BRC’s warning. The consultancy predicted that both the NI changes and the rise in interest rates would lead to an increase in “insolvency and turnaround specialist assistance”.
