Major Retailers Warn of Job Losses and Price Increases Amid Tax Hikes
A group of major UK retailers, including Tesco, Amazon, Greggs, and Next, have issued a stark warning to Chancellor Rachel Reeves about the inevitable job losses and price rises that will result from recent tax increases announced in the Budget. These retailers have raised concerns about the impact of the rise in their National Insurance contributions, set to take effect in April 2025.
While National Insurance contributions paid by employees will not increase, contributions paid by businesses on every employee’s salary will go up by 1.2%, bringing the rate to 15%. Additionally, the threshold at which businesses start paying NI contributions will decrease from £9,100 to £5,000, leading to significantly higher bills for businesses across the country.
The rise in the National Living Wage from £11.44 to £12.21 an hour, scheduled for April 2025, aims to provide a more substantial income for workers. However, major retailers estimate that this increase will cost the industry an additional £2.73 billion. With profit margins in the sector typically ranging between 3% and 5%, absorbing such significant cost hikes in a short timeframe is deemed unfeasible.
In a letter to the Chancellor, the British Retail Consortium (BRC), representing major names like Aldi, Boots, Primark, and Sainsbury’s, highlighted the cumulative burden of the Budget changes. They anticipate an additional £7 billion in costs next year when combined with existing policies. The consortium warned that the rapid introduction of these new costs would inevitably lead to job losses and higher prices for consumers.
The group of retailers is urging the government to consider phasing in the NI changes and postponing the introduction of the Extended Producer Responsibility (EPR) scheme, which shifts recycling costs from councils to companies. They are also calling for a reduction in business rates, a property-related tax that is projected to cost retailers an extra £140 million annually after April.
In response, the Treasury defended the tax rises as necessary to prevent cuts to public services, with Chancellor Rachel Reeves stating that these measures would generate an additional £25 billion per year. Nevertheless, the BRC maintains that the industry, with its thin profit margins, cannot sustain such abrupt cost escalations without serious repercussions on employment and pricing.
Prime Minister Sir Keir Starmer has stood by the Budget decisions, emphasizing the need to stabilize the economy and protect workers’ income. Despite mounting criticism from businesses and protests over inheritance tax changes, the government remains firm on its fiscal policies.
The ongoing dialogue between retailers and the government underscores the delicate balancing act of managing economic growth while safeguarding jobs and affordability for consumers. As the retail sector braces for impending challenges, collaboration between industry stakeholders and policymakers will be crucial in navigating the complex landscape of post-pandemic recovery and financial stability.