UK retailers have issued a stern warning to Chancellor Rachel Reeves, stating that her Budget decision to increase employers’ National Insurance contributions will lead to unavoidable job losses and price hikes. This assertion was made clear in a letter endorsed by over 70 companies, including leading names such as Tesco, Sainsbury’s, Asda, and Morrisons.
The recently announced Budget changes mean that, from April 2025, employers will see their National Insurance contributions rise from 13.8% to 15% on earnings above £175 a week. This, combined with an increase in the national minimum wage and new packaging levies, could result in a £7bn surge in annual costs for the retail industry, according to The Times. Key signatories of this warning include not only supermarkets such as Aldi, Lidl, Ocado, and M&S but also diverse retailers like Amazon, Boots, and JD Sports. The letter, coordinated by the British Retail Consortium (BRC), criticises the rapid implementation of these measures, arguing that no retailer, irrespective of size, can absorb such substantial increases in such a short time frame.
The letter communicated a straightforward message: “For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale. The effect will be to increase inflation, slow pay growth, cause shop closures and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country.” Retail leaders are now grappling with the potential repercussions, indicating that these changes will necessitate difficult operational decisions across the industry and its supply chains.
Furthermore, Sainsbury’s CEO Simon Roberts has emphasised that the additional £140m burden will lead to “some difficult decisions,” as the financial capacity to shoulder these costs simply doesn’t exist. Asda’s chairman, Lord Stuart Rose, echoed this sentiment, stating that absorbing a £100m increase is not feasible.
The BRC is actively seeking a dialogue with Chancellor Reeves to collaboratively find a resolution to this looming financial burden. A Treasury spokesperson defended the government’s move, highlighting its necessity to rectify a £22bn fiscal shortfall and bolster essential public services. They emphasised that the adjustments would ultimately result in more than half of employers witnessing either a reduction or no change in their National Insurance costs, alongside a promise of additional funds for the NHS and protection of workers’ payslips.
The warning from UK retailers underscores the profound challenges facing the industry as it braces for legislative changes that promise to escalate operating costs significantly. As the sector navigates this turbulent financial landscape, the call for cooperation between the government and retailers grows more urgent. The path forward will require careful negotiation to balance fiscal responsibility with economic viability for businesses across the country.
