The Entertainer toy chain halts UK expansion plans due to increased National Insurance costs.
- The NI rate for employers will rise from 13.8% to 15%, making UK investments less attractive.
- The policy aims to raise £25 billion annually, impacting business financial strategies.
- Major companies like Sainsbury’s and M&S signal potential price increases to offset added costs.
- Businesses consider international expansion due to favourable conditions abroad.
The Entertainer toy chain has decided to pause its plans for establishing two new stores in the UK. This decision comes in response to the newly announced National Insurance (NI) increase, which adds significant financial pressure. The rise in NI rates shifts employer costs considerably, affecting investment decisions.
From next April, the NI rate for employers is set to increase from 13.8% to 15%, alongside a reduction in the tax threshold from £9,100 to £5,000. This move is part of a government strategy intended to stabilise public finances, aiming to raise an estimated £25 billion annually. The policy has led many businesses, including The Entertainer, to reconsider their financial strategies in light of the increased tax burden.
Chief Executive Andrew Murphy of The Entertainer highlighted the shift in financial outlook due to NI hikes. The company has halted store viability assessments as the rising costs make new ventures less feasible. Speaking on the policy, Murphy stated, “There’s no argument with the government’s ultimate goals… simply the balance with which they pursued them.”
The announcement has broader implications, with retail giants such as Sainsbury’s and Marks & Spencer warning that these cost increases might lead to higher consumer prices. Simon Roberts, CEO of Sainsbury’s, pointed out that the supermarket faces additional costs of £140 million, predicting that this will contribute to rising inflation.
Furthermore, businesses are not solely focused on domestic challenges. Many are looking beyond UK borders for growth opportunities. Arnab Basu, CEO of Kromek, remarked on the potential benefits of investing in the US, given the favourable tax and energy cost conditions. Similarly, George Weston of Associated British Foods, owner of Primark, noted that his company might prioritise investments overseas.
The government’s stance is that these NI changes are crucial for economic recovery. A Treasury spokesperson emphasised the commitment to fostering growth by boosting investment in Britain, although the practicality of such policies remains in contention among business leaders.
The Entertainer’s pause on expansion reflects a wider trend of UK businesses reassessing their investments due to rising costs.
