Sainsbury’s chief executive, Simon Roberts, has issued a stark warning in light of the government’s recent decision to increase National Insurance Contributions. This development is poised to have significant implications for prices within the supermarket sector.
Roberts highlighted that the retailer’s National Insurance bill is set to rise by over 50% year on year, equating to an additional £140 million. This substantial increase, he stated, necessitates difficult decisions, as the supermarket industry lacks the capacity to absorb such elevated costs without affecting prices.
He remarked, “When you think about the £140m in our business, I don’t think you can shy away from the fact that, because of the changes on everyone’s cost base, it is going to beat through into higher inflation.” This statement underscores the inevitable impact of increased operational costs on inflation within the sector.
The supermarket industry typically operates on minimal profit margins, a fact Roberts emphasised while discussing the limitations in absorbing increased costs. He confirmed, “We’ll do everything we can to mitigate that impact but there will be inflationary impacts, because our costs are going up.” Therefore, shoppers are likely to feel this pressure in the form of price increases.
Chancellor Rachel Reeves, in her first Budget, announced the changes, which will see employers’ National Insurance Contributions rise from 13.8% to 15% on a worker’s earnings above £175 starting April 2025. This legislative change is part of a broader fiscal strategy that also includes a permanent reduction in business rates for retail, hospitality, and leisure properties from 2026/27.
In response to these announcements, British Retail Consortium’s chief executive, Helen Dickinson, expressed concern over the additional tax burdens on an already strained industry, indicating that these increases could detract from future investments in retail and employment.
Meanwhile, Stuart Machin, CEO of M&S, expressed disappointment regarding the lack of clarity surrounding business rate reform. He remarked, “I was disappointed that it’s unclear what that will be and the impacts of that, and that’s been kicked into 2026,” reflecting concerns about the uncertainty of future regulatory changes.
The rising National Insurance rates present a significant challenge for the retail sector, with potential ramifications for both business operations and consumer prices. Industry leaders continue to stress the need for clear, supportive policies to navigate these economic shifts effectively.
