Sainsbury’s CEO Simon Roberts highlights rising costs due to changes in National Insurance.
- Roberts anticipates significant price increases as a result of government adjustments.
- The company faces a £140m rise in costs, impacting their capacity to manage inflation.
- Employers’ National Insurance Contributions will grow to 15% for earnings over £175.
- Profits have increased, yet the company must navigate difficult financial decisions.
Sainsbury’s CEO Simon Roberts has issued a warning regarding impending price hikes following the government’s decision to raise National Insurance Contributions. These changes are expected to impose significant pressure on the supermarket’s financial framework. Roberts emphasised, “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.”
The increase in National Insurance Contributions, announced in Chancellor Rachel Reeves’ October Budget, involves a rise from 13.8% to 15% on earnings over £175, effective from April 2025. This translates to more than a 50% yearly increase in National Insurance costs for Sainsbury’s, prompting the company to ‘work through the implications’ with some challenging choices ahead.
Despite these cost pressures, Sainsbury’s reported an increase in profits in their recent half-year results, claiming the ‘biggest market share gains in industry’. Retail underlying operating profit reached £503m, marking a 3.7% growth driven by increased grocery volume. However, gains were modestly balanced by a downturn in contributions from Argos, their subsidiary.
While the company strives to mitigate the impact of these financial pressures, Roberts acknowledged the limits of what can be absorbed without affecting product prices. He stated, “The supermarket boss argued while it would do everything it could to mitigate the impact, it just didn’t have the capacity to absorb this level of unexpected cost inflation.”
The rise in National Insurance Contributions portends significant financial adjustments for Sainsbury’s, impacting future pricing strategies.
