More than 30 retailers warn of price hikes in blow to shoppers amid Budget tax raid fallout
TWO-THIRDS of leading retailers have warned that they will be forced to push up prices to cope with the increase to National Insurance costs announced in the Budget.
Around 35 of 52 chief financial officers (CFOs) surveyed by the British Retail Consortium said they would raise prices in response to the cost increase.
From April 6, 2025, Employer National Insurance rates will rise by 1.2% to 15%.
At the same time, the threshold at which employers must pay National Insurance will be reduced from £9,100 a year to £5,000.
Just over half of the CFOs surveyed said they would be reducing their paid number of hours and overtime.
Meanwhile, around 24 said they would reduce headcount in stores.
Some 70% of respondents said they were “pessimistic” or “very pessimistic” about trading conditions over the next 12 months.
The news comes after 81 retail chief executives wrote to the Chancellor to voice their concerns about the economic consequences of the Budget.
They claimed the announcements could raise the industry’s costs by more than £7billion in 2025.
In the Budget Chancellor Rachel Reeves announced a raft of measures that will hit businesses in the pocket from April.
Among them is an increase to the National Living Wage.
Employers will now be forced to pay staff £12.21 an hour, an increase of 77p.
Meanwhile, changes to the reformed packaging levy will transfer the cost of collecting and sorting packaging from local authorities to producers.
Previously employers paid a fee of 37% but this will rise to 100%.
Helen Dickinson, chief executive of the BRC, said the majority of retailers have “little choice” but to raise prices in response to these increased costs.
She added: “Retailers have worked hard to shield their customers from higher costs, but with slow market growth and margins already stretched thin, it is inevitable that consumers will bear some of the burden.”
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THE Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
It comes after almost 170,000 retail workers lost their jobs in 2024.
End-of-year figures compiled by the Centre for Retail Research showed the number of job losses spiked amid the collapse of major chains such as Homebase and Ted Baker.
It said its latest analysis showed that a total of 169,395 retail jobs were lost in the 2024 calendar year to date.
This was up 49,990 – an increase of 41.9% – compared with 2023.
It is the highest annual reading since more than 200,000 jobs were lost in 2020 in the aftermath of the COVID-19 pandemic, which forced retailers to shut their stores during lockdowns.
The centre said 38 major retailers went into administration in 2024, including household names such as Lloyds Pharmacy, Homebase, The Body Shop, Carpetright and Ted Baker.
Around a third of all retail job losses in 2024, 33% or 55,914 in total, resulted from administrations.
Experts have said small high street shops could face a particularly challenging 2025 because of Budget tax and wage changes.
Professor Bamfield has warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”
Which retailers have warned of price hikes?
The boss of M&S said the supermarket would have to pass on extra costs due to the National Insurance and minimum wage hikes.
Stuart Machin said that any price rises would be “small and behind the market” but did not say how much they would go up by.
Meanwhile, Sainsbury’s warned that the Budget would cost it an extra £140million.
Its CEO Simon Roberts last week warned that the chain would need to work with its suppliers to minimise the impact on customers.
He told The Grocer: “Suppliers have got costs coming at them as well, of course, given all of the changes in National Insurance coming.
“We’ll be working really closely to make sure that between us, we find the best answers we can and we continue to give customers the best value that we possibly can.”
Meanwhile, Tesco boss Ken Murphy promised to protect customers against the looming economic challenges.
High street fashion giant Next has also warned that its cost will increase by £67million, some of which it will be forced to pass on to shoppers.
The retailer said it will need to push through an “unwelcome” 1% rise in prices because of the increase in employer National Insurance contributions.
It warned that sales growth will pull back sharply over the year ahead “as employer tax increases, and their potential impact on prices and employment, begin to filter through in the economy”.
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