In a significant fiscal development, the UK’s largest supermarkets are anticipated to incur an escalated £200 million in National Insurance contributions. This change comes as the Chancellor unveils a budget proposal today, outlining an increase in employer National Insurance contributions by two percentage points.
Tesco, Sainsbury’s, Asda, and Morrisons, the major supermarket chains in the UK, are expected to be substantially impacted by this tax adjustment. An analyst suggests that Tesco alone, with its approximately 300,000 UK employees, could see an increase of £75 million in its National Insurance expenses.
Expressing concern over these changes, Stuart Machin, M&S chief executive, has cautioned the government, describing the tax rise as a ‘short-term, easy fix’ that could hinder economic recovery. Machin highlighted that taxing businesses at higher rates would also affect UK consumers in the long run.
Machin articulated his worries, stating: ‘When I hear about plans to increase National Insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.’ He elaborated that past measures by the Chancellor to reduce National Insurance were apt, as increasing this tax imposes challenges on providing employment opportunities, particularly if combined with other taxes affecting retailers, such as business rates or fuel duty.
In tandem with rising National Insurance contributions, retailers will also encounter increased wage bills. Rachel Reeves confirmed that starting in April 2025, the minimum wage will rise by 6.7%, and the National Living Wage will increase by 6% from £11.44 to £12.21 per hour. For those aged 18 to 20, the minimum wage will see an increase of £1.40 per hour, bringing it to £10.
The general secretary of Usdaw, Paddy Lillis, expressed approval of these pay raises, noting that they represent a significant step forward for the lowest-paid workers. He praised Labour’s new directive for the Low Pay Commission as it progresses towards establishing a statutory real living wage and begins addressing the disparities in youth wages.
The proposed rise in National Insurance contributions coupled with an increase in minimum wages presents a challenging landscape for major supermarket chains in the UK. While the intention might be to bolster fiscal revenues and improve employees’ earnings, businesses foresee potential economic impediments. The balance between raising worker wages and managing increased fiscal pressures remains delicate, necessitating careful evaluation by all stakeholders involved.
