Job losses at department stores are “inevitable”, prices will rise and stores will close due to budget tax increases and other cost rises, a group of the country's biggest retailers warns United Kingdom.
Tesco, Amazon, Greggs, Next and dozens of other chains are urging the Treasury to reconsider some of these measures.
In a letter to Chancellor Rachel Reeves, they said the “cumulative burden” of budget changes and other policies already in the pipeline would amount to an extra £7 billion next year.
A Treasury spokesperson said the government had had to “make difficult choices to repair the foundations of the country”.
The budget's measures, particularly the increase in taxes that companies pay on their staff's salaries, have sparked a wave of criticism from businesses, who say it would dampen growth.
But concerns are greatest among retailers and hospitality companies, where many young people find their first jobs. Businesses in these sectors will also face higher costs due to the minimum wage increase expected next year.
The government has defended its tax rises as necessary to avoid cuts to public services, and the increase in the minimum wage, with a bigger boost for young workers and apprentices, has been welcomed by unions.
But the letter from the group of businesses belonging to the British Retail Consortium (BRC) said: “The sheer scale of the new costs and the speed with which they are occurring creates a cumulative burden that will make job losses and rising prices inevitable a certainty. “
He added that with profit margins generally between 3 and 5 per cent in the sector, it would “not be possible to absorb such significant cost increases in such a short period of time”.
“The effect will be to increase inflation, slow wage growth, cause store closures and reduce jobs, particularly at the entry level.”
The letter's 79 signatories range from major British retailers – such as Aldi, Asda, Boots, Currys, Lidl, Marks and Spencer, Primark and Sainsbury's – to charity shopping group the British Heart Foundation and trade group Associated Independent Stores.
From next April, all large businesses will have to pay higher National Insurance Contributions (NICs) for every member of staff they employ. Employer NICs will start at a lower threshold than currently, at £5,000 instead of £9,100. And the rate will increase from 13.8% to 15%. The BRC estimates this will cost UK retailers £2.33 billion a year.
The minimum wage increase from April is expected to cost the sector an additional £2.73 billion, the BRC letter said.
In addition, from October 2025, a new tax on packaging comes into force.
Introduced by the previous government, the extended producer responsibility (ERC) system shifts the cost of recycling from municipalities to the companies that use the packaging. Small businesses are exempt, but the new levy will cost the retail sector an additional £2 billion overall, the BRC estimates.
The letter calls on the government to phase in the NI changes and delay the start of the ERC.
It is also urging the Government to cut business tax rates, a property tax which the BRC estimates will cost retailers an extra £140m a year after next April.
A Treasury spokesperson told the BBC that, thanks to the exemptions for small businesses, “more than half of employers will see either a reduction or no change to their national insurance bills (and) there will be 22 £6 billion more for the NHS.
A trading update from Begbies Traynor on Monday gave some weight to the BRC's warnings, as the consultancy predicted an increase in “support from our insolvency and business recovery professionals” due to both the change in NI and rising interest rates.
