The recent increase in National Insurance contributions has sparked warnings from major UK retailers.
- Businesses like Tesco and Amazon predict job losses and store closures due to heightened costs.
- The government’s fiscal measures could add £70bn annually to retail sector expenses.
- Retailers warn these costs will contribute to increased inflation and slow pay growth.
- Treasury responses highlight tough choices made to stabilise the economy.
The UK’s major retailers have issued a stark warning following the government’s decision to raise National Insurance. The change, announced by Chancellor Rachel Reeves, increases employers’ National Insurance rate by 1.2% to 15% starting in April and lowers the salary threshold for contributions from £9,100 to £5,000 annually. More than 70 businesses, including prominent names such as Tesco, Sainsbury’s, Next, Amazon, and Boots, have united in expressing concerns about the fiscal impact.
In a letter arranged by the British Retail Consortium (BRC), these retailers emphasised the “inevitable” job losses, store closures, and price hikes that will follow due to these increased financial burdens. The letter outlined that the collective measures, which include the National Insurance hike, an uplift in national minimum wage, and new packaging levies, could elevate costs by up to £70bn yearly for the retail sector.
The letter stresses that no retailer, regardless of size, can manage to absorb such immense cost hikes in a brief period. “The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level,” it warns, noting the widespread effect on high streets and consumers across the UK. Businesses are already initiating tough decisions, a situation mirrored throughout the industry and its supply chains.
The government, focusing on improving fiscal conditions and public service investments, has been defended by a Treasury spokesperson. The spokesperson declared that while addressing a £22bn fiscal deficit inherited from previous administrations, the measures were necessary to restore the economic foundation, ensuring that more than half of the employers would see a reduction or no change in their National Insurance contributions.
Despite assurances from the Treasury, the retail sector remains under pressure. The impending rise in operational costs has already been felt, with Tesco facing an estimated £1bn increase to its National Insurance bill just this month. Similarly, Lord Stuart Rose, Chair of Asda, indicated a £100m blow to their financial obligations. This situation underscores the challenges retail businesses are grappling with as they brace for these economic adjustments.
The hike in National Insurance risks significant disruption in the retail sector, foreseeing inevitable job cuts and increased consumer costs.
