The Entertainer toy chain has announced a halt to its planned store expansion in the UK.
- The decision is a direct response to the newly announced increase in National Insurance rates.
- These tax changes are prompting concerns among businesses about rising operational costs.
- Other major retailers are also signalling potential price increases due to increased employer taxes.
- The Treasury defends the tax hike as necessary for stabilizing public finances.
The Entertainer has scrapped its plans for two new stores in the UK due to the rise in National Insurance (NI) costs introduced in the recent Budget. The rise in employer taxes is causing businesses to re-evaluate their investments in the UK.
CEO Andrew Murphy explained that the tax changes have also led to a hiring freeze at the company’s head office. The new policy raises the NI rate for employers from 13.8% to 15% starting next April, with the tax threshold reduced from £9,100 to £5,000. This adjustment aims to generate around £25 billion annually to support public finances.
Andrew Murphy stated in an interview with BBC Radio 4’s Today programme that there is no dispute with the government’s overall goals, but the approach taken has shifted financial projections. The completed viability assessments for the new locations were negatively impacted by the increased NI rates, resulting in the store closure decision.
Major companies such as Sainsbury’s and Marks & Spencer have indicated that the increased NI rates may lead to higher consumer prices as they attempt to manage their growing costs. Sainsbury’s CEO, Simon Roberts, pointed out that the supermarket chain faces an additional £140 million in expenses, which is likely to contribute to rising inflation.
Chancellor Rachel Reeves argued that the tax hike is essential for restoring economic stability, emphasising that the funds are crucial to ensuring a robust financial framework. Some businesses are even contemplating expanding operations outside the UK in reaction to these escalating costs.
Arnab Basu, CEO of Kromek, mentioned that planned cuts to US corporation tax under President-elect Donald Trump, in addition to lower energy costs, make the US a more appealing destination for investment. Similarly, Associated British Foods, which owns Primark, suggested it might focus on growth outside the UK due to the tax changes. George Weston, CEO, expressed that being an international business allows them flexibility in their investment locations.
The Treasury insists that the NI changes are vital for economic recovery, stating their commitment to fostering growth through increased investment and restoring Britain’s economic standing. Consequently, The Entertainer’s strategy adjustment underscores a broader movement among UK businesses reassessing their domestic investments amidst these evolving fiscal challenges.
The Entertainer’s halt on UK expansion plans highlights the impact of rising operational costs due to government tax changes.
