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Two thirds of the nation’s top retailers have warned they will have to raise prices to cope with rising tax bills triggered by chancellor Rachel Reeves’s budget.
The British Retail Consortium, whose members include giants like Marks & Spencer and Boots, said 67 per cent of the 52 finance bosses they surveyed said they would raise prices in response to increases in employers’ National Insurance Contributions from April.
Just over half said they would be reducing their paid number of hours and overtime, while 46 percent said they will have to reduce staffing numbers in stores and 31 per cent said the increased costs would lead to further automation.
Businesses in general, and retailers in particular, claim they will be hard hit by the tax increase which aims to raise £20bn for the Treasury. Retailers often employ more staff than most companies, at relatively lower wages and often on tight margins.
This means the decision by Ms Reeves to lower the threshold at which the tax is paid from £9,100 to £5,000 hits them particularly hard, they say.
BRC chief executive Helen Dickinson said: “With the Budget adding over £7 billion to their bills in 2025, retailers are now facing into the difficult decisions about future investment, employment and pricing.
“As the largest private sector employer, employing many part-time and seasonal workers, the changes to the National Insurance threshold have a disproportionate effect on both retailers and their supply chains, who together employ 5.7 million people across the country.
“Retailers have worked hard to shield their customers from higher costs, but with slow market growth and margins already stretched thin, it is inevitable that consumers will bear some of the burden.
She said the majority of retailers had little choice but to raise prices in response to these increased costs, and that food inflation was expected to rise steadily over the year.
“Local communities may find themselves with sparser high streets and fewer retail jobs available,” Ms Dickinson said.
Louise Maclean, a director of Signature Group, which operates bars, restaurants and hotels, said on Tuesday hospitality firms like pubs and restaurants would take a “big gamble” when they pass on these costs.
She told BBC Radio 4’s Today programme: “Everything will have to go up by about 10 per cent if we want to remain in business.
“We are seeing a raft of hospitality closures. We are seeing people pulling back hours. You only have to walk round George Street in Edinburgh at this time of year and 50 per cent of the venues are shut on Mondays and Tuesdays.”
Rachel Reeves has defended her decision to raise taxes at the Budget, insisting her plan provided the stability needed to secure growth and fix the nation’s services.
Some 70 per cent of surveyed finance bosses said they were “pessimistic” or “very pessimistic” about trading conditions over the coming 12 months, while just 13 per cent said they were “optimistic” or “very optimistic”.
The biggest concerns, cited by more than 60 per cent of the chief financial officers, were falling demand for goods and services, inflation for goods and services, and the increasing tax and regulatory burden.
The survey follows 81 retail chief executives writing to the chancellor with their concerns about the economic consequences of the budget, claiming that the industry’s costs could rise by over £7 billion in 2025 as a result of changes to employers’ National Insurance contributions, National Living Wage increases and the reformed packaging levy.
The finance bosses also suggested that shop price inflation, currently at -1 per cent, will rise to an average of 2.2 per cent in the second half of 2025.
The BRC reported last week that they expected food inflation to reach an average of 4.2 per cent in the second half of this year.
Food inflation was at 2 per cent per year in November, according to the Office for National Statistics. Up from 1.9 per cent a month earlier.
The findings comes as Chancellor Rachel Reeves continues to face pressure amid market turmoil.
It comes after Sir Keir Starmer appeared to waver in his support for the Chancellor when he said he had confidence in her but refused to say she would keep her role until the next general election.
Downing Street clarified hours later that Ms Reeves would stay in post for “the whole of this Parliament”.