2024-11-19 07:12:00
High Street job losses are “inevitable”, prices will rise, and shops will close as the result of the tax increases in the Budget and other rising costs, a group of the biggest retailers in the UK is warning.
Tesco, Amazon, Greggs, Next, and dozens of other chains are urging the Treasury to reconsider some of the measures.
In a letter to Chancellor Rachel Reeves, they said the “cumulative burden” of the Budget changes, and other policies already in the pipeline, would amount to an additional £7bn in costs next year.
A Treasury spokesperson said the government had had to “make difficult choices to fix the foundations of the country”.
Measures in the Budget, in particular a rise in the tax that firms pay on their staff’s wages, have been met with a tide of criticism from business, who argue it will hold back growth.
But concerns have been loudest among retailers and hospitality businesses, where many young people find their first jobs. Firms in those sectors are also facing higher costs from next year’s rise in the minimum wage.
The government has defended its tax rises as necessary to avoid cuts to public services, and the rise in the minimum wage, with a bigger boost for younger workers and apprentices, has been welcomed by trades unions.
But the letter from the group of businesses belonging to the British Retail Consortium (BRC) said: “The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”
It added that with profit margins typically between 3% and 5% in the sector it would “not be possible to absorb such significant cost increases over such a short timescale”.
“The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level.”
The 79 signatories of the letter range from big British retailers – such as Aldi, Asda, Boots, Currys, Lidl, Marks and Spencer, Primark, and Sainsbury’s – to charity shop group the British Heart Foundation and trade group Associated Independent Stores.
From next April, all large businesses will have to pay higher National Insurance Contributions (NICs) for every member of staff they employ. Employer NICs will start at a lower threshold than now- at £5,000 instead of £9,100. And the rate will rise from 13.8% to 15%. The BRC calculates this will cost British retailers £2.33bn a year.
The rise in the minimum wage from April is set to cost the sector a further £2.73bn, the BRC letter said.
In addition, from October 2025 a new packaging levy comes into force.
Introduced by the previous government, the extended producer responsibility (ERC) scheme shifts the cost of recycling from local councils onto the companies that use the packaging. Smaller firms are exempt, but the new levy will cost the retail sector overall another £2bn, the BRC estimates.
The letter calls for the government to phase in the introduction of the NI changes and delay the start of the ERC.
It also urges the government to reduce business rates, a property-related tax which the BRC says will cost retailers an additional £140m a year after next April.
A Treasury spokesperson told the BBC that, thanks to exemptions for smaller businesses, “more than half of employers will either see a cut or no change in their national insurance bills [and] there will be £22.6bn more for the NHS”.
A business update from Begbies Traynor on Monday gave some weight to the BRC’s warnings, as the consultancy predicted a rise in “support from our insolvency and business recovery professionals” due to both the NI change and higher interest rates.
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How can the government and retailers work together to mitigate the economic impact of rising operational costs?
**Interview with Emma Thornton, Retail Analyst, on the Impact of Recent Tax Increases on UK Retailers**
**Interviewer:** Good morning, Emma. Thank you for joining us today. In light of the recent letter from major retailers warning about job losses and rising prices due to tax increases, can you give us your take on the situation?
**Emma Thornton:** Good morning! Absolutely, it’s a concerning time for the retail sector. The letter from the British Retail Consortium (BRC) highlights the cumulative burden that businesses will face, estimating an additional £7 billion in costs next year. This kind of financial strain is significant, especially for companies that already operate on narrow profit margins.
**Interviewer:** The letter specifically mentions that job losses are now “inevitable.” What do you think this means for the retail landscape, especially for entry-level positions that young people rely on?
**Emma Thornton:** It signals a tough future for many young workers entering the job market. Retail has historically been a key provider of entry-level positions, and with the expected higher costs of operating—thanks to increased National Insurance Contributions and the rise in the minimum wage—many retailers may have no choice but to scale back. This could lead to fewer job openings and possible cuts in staffing.
**Interviewer:** The government has defended the tax increases as a necessary move to protect public services. Do you think there’s a way for both the government and retailers to find a compromise that protects jobs while still meeting budgetary needs?
**Emma Thornton:** That’s a challenging balance to strike. On one hand, the government needs revenue to fund essential services; on the other, the retail sector plays a crucial economic role and is a major employer. A dialogue that includes considerations for business sustainability, especially in the wake of rising operational costs, is essential. Perhaps a phased approach to tax increases or targeted support for the hardest-hit sectors could provide some relief.
**Interviewer:** what should consumers expect in the coming months in terms of pricing and shop closures?
**Emma Thornton:** Consumers should brace themselves for higher prices across many retail categories due to the increased operational costs. This could lead to inflationary pressures as companies pass those costs onto consumers. Additionally, if retailers can’t sustain their business models under these new conditions, we may see more shop closures, particularly in high street areas that are already struggling.
**Interviewer:** Thank you, Emma, for your insights. It sounds like it’s going to be a pivotal year for the UK retail sector.
**Emma Thornton:** Thank you for having me! It’s definitely a critical period, and I hope we see constructive discussions that focus on finding viable solutions for everyone involved.
