A coalition of the UK’s largest retailers has warned that tax hikes and rising costs outlined in the recent Budget will lead to inevitable job losses, store closures, and price increases. In a letter to Chancellor Rachel Reeves, major companies, including Tesco, Amazon, Greggs, Next, and dozens of others, urged the Treasury to reconsider certain measures they say will burden the retail sector with billions of pounds in additional costs.
The retailers, which also include brands such as Asda, Marks & Spencer, and John Lewis, said the cumulative impact of the tax changes and other forthcoming policies would hit an industry already operating on tight profit margins of just 3% to 5%. The letter warns that these new costs will not only lead to higher prices for consumers but also result in job cuts, particularly at the entry level, where many young people find their first employment.
“We are facing the sheer scale of new costs and the speed with which they occur, creating a burden that will make job losses inevitable, and higher prices a certainty,” the letter stated. It estimates the changes could add over £7bn a year to the retail sector’s costs, making it impossible for businesses to absorb such significant increases in a short time. The result, the retailers argue, will be higher inflation, slower wage growth, and a slowdown in economic growth.
The Budget’s controversial measures include a rise in National Insurance Contributions (NICs) that employers must pay on staff wages, which will increase from 13.8% to 15%. The threshold for this payment will also be lowered from £9,100 to £5,000, adding an estimated £2.33bn annually to the sector’s costs, according to the British Retail Consortium (BRC). In addition, the planned rise in the minimum wage from April will add another £2.73bn in costs to retailers. The BRC also highlighted a new packaging levy, due to come into force in 2025, which is expected to cost the sector £2bn annually.
Bank of England Governor Andrew Bailey, speaking before the Treasury Committee, acknowledged that the changes could result in job losses, particularly in retail and hospitality, sectors that employ many young people. “I think there is a risk here that the reduction in employment could be more,” Bailey said.
However, the government has defended the tax increases as necessary to maintain public services and support economic stability. The rise in the minimum wage, which includes a larger increase for younger workers and apprentices, has been welcomed by trade unions.
On the other hand, Nadine Houghton, national officer for the GMB Union, criticized the retailers for “pleading poverty,” pointing out that many large companies already benefit from taxpayer subsidies due to low wages that require in-work benefits.
Retail analyst Catherine Shuttleworth warned that the Budget changes would significantly reduce profits, potentially risking further job cuts if businesses cannot find ways to offset the additional costs.
