The new Budget by Chancellor Rachel Reeves is set to impact retailers significantly.
- A rise in National Insurance and minimum wage means increased operating costs for retailers.
- Business rates reform may provide some relief, but changes are not immediate.
- New measures aim to tackle shoplifting, with additional police funding announced.
- Tax hikes on tobacco and vaping liquid are part of broader health initiatives.
Retailers are bracing for a sharp rise in operational expenses due to the new Budget introduced by Chancellor Rachel Reeves. The first Budget in 14 years by a Labour government features increases in both National Insurance and minimum wage. Employers will see their contribution to National Insurance go up, resulting in an additional £2.3 billion in expenses from April next year. Retail leaders have voiced concerns, describing these changes as a burdensome tax on both workers and businesses.
The British Retail Consortium (BRC) has criticised the tax increase, expressing that it would hamper investment in retail outlets and job creation. With retail employing three million people directly and an additional 2.7 million in supply chains, any increase in costs could impact prices at checkout counters, consequently affecting consumer spending.
Minimum wage rates are set for a significant rise, with the National Minimum Wage increasing by 6.7% and the National Living Wage by 6%. According to the BRC, this will add £367 million to retail wage bills. Clive Black from Shore Capital highlights that while the wage increases may boost household spending, it hinges on inflation remaining controlled.
On a positive note, business rates reforms are expected, though not immediately. Chancellor Reeves has announced an overhaul aimed at permanently reducing rates for high street retail, hospitality, and leisure properties. These benefits, set to start from 2026-27, will be funded by higher multipliers on high-value properties, including major distribution centres. However, questions remain about how this shift will affect larger retailers, who significantly contribute to footfall in city centres.
The Budget also addresses the rising issue of retail crime, specifically shoplifting. New measures include removing the immunity for low-value shoplifting. Additional funding will be provided to enhance police training and crackdown on organised crime rings. Retailers, in collaboration with the police and government, are committed to tackling these challenges and ensuring a safer environment for both workers and consumers.
Finally, the Budget outlines increases in taxes on vaping and smoking products, with a 2% rise in tobacco duty and more for hand-rolled tobacco. A flat-rate duty on vaping liquids is also proposed. The Soft Drinks Industry Levy will see adjustments to encourage manufacturers to lower sugar content. Public health advocates have welcomed these measures, advocating for broader policies targeting salt and sugar in foods.
The Budget introduces significant changes to the retail landscape, emphasising cost increase with upcoming potential relief in business rates and sector-specific initiatives.
