Primark anticipates a substantial increase in business expenses due to the upcoming rise in National Insurance employer contributions.
- CEO of Associated British Foods warns the increment could cost ‘tens of millions’, impacting high street stores significantly.
- The Chancellor’s budget increases employer NI contributions from 13.8% to 15% starting April 2025.
- The threshold for NI contributions will drop from £9,100 to £5,000, affecting more businesses.
- Primark’s recent profit rise attributes to strong sales, yet looming NI changes pose challenges.
Primark is facing a notable financial challenge with the new government policy to raise National Insurance employer contributions. Chief Executive George Weston has highlighted the severity of this impact, estimating the additional costs to amount to ‘tens of millions’. His concerns point specifically towards high street businesses, which he believes will bear the brunt of this financial adjustment due to their urban locations and high employee numbers.
The recent Autumn Budget announcement by Chancellor Rachel Reeves outlined that, effective from April 2025, the percentage of National Insurance contributions paid by employers will rise from 13.8% to 15%. Additionally, the earnings threshold for which National Insurance becomes applicable will decrease from £9,100 to £5,000, broadening the scope of affected businesses.
Weston has expressed that these changes will have a disproportionate impact on high street retailers like Primark compared to other sectors. The decrease in the threshold combined with the rate increase means larger labour costs, a situation that is particularly challenging for businesses that operate on tight margins and depend heavily on a large workforce.
Despite this impending fiscal pressure, Primark has recently reported a significant growth in its operating profit, which increased by 51% to reach £1.1 billion. This success was driven by a 6% rise in sales, attributed to their effective pricing strategy and enhanced customer engagement through digital platforms. However, the looming National Insurance changes threaten to offset these gains.
The rise in National Insurance contributions presents a significant challenge to Primark’s financial stability amidst its recent successes.
