Leaders from nine of the UK’s biggest supermarkets have warned that the Chancellor risks stoking already soaring food inflation if higher taxes are imposed on the sector at the next Budget in November.
In a letter organised by the British Retail Consortium (BRC), the heads of Aldi UK, Asda, Iceland, Lidl GB, M&S Food, Morrisons, Sainsbury’s, Tesco, and Waitrose, urged Rachel Reeves to exclude their larger shops from the proposed business rates surtax, noting that further cost pressures would be passed onto consumers in the form of higher prices.
“The UK grocery market is highly competitive with narrow profit margins that are well below those found in most other industries,” they wrote in the joint letter.
“Consumers benefit from some of the lowest food prices in the developed world. And while we continuously seek efficiencies, our ability to absorb additional costs is diminishing. If the industry faces higher taxes in the coming Budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging, and it will be households who inevitably feel the impact.
“Given the costs currently falling on the industry, including from the last Budget, high food inflation is likely to persist into 2026. This is not something that we would want to see prolonged by any measure in the Budget. Large retail premises are a tiny proportion of all stores, yet account for a third of retail’s total business rates bill, meaning another significant rise could push food inflation even higher.”
Supermarkets have complained that they were hit hard at the last Budget, with over £7bn in additional costs from the hikes in employer national insurance contributions and the national living wage. The new EPR packaging tax and the rise in the business rates multiplier have added to these pressures.
The BRC has been campaigning for big shops to be excluded from the government’s new additional tax for properties with a rateable value of more than £500,000, highlighting their importance to the sector.
The trade body’s Chief Executive, Helen Dickinson, said: “Large retail stores sustain nearly one million British jobs and already contribute a third of all retail’s business rates, despite being a tiny proportion of all stores. This letter calls on the Chancellor to exempt shops from the new business rates surtax – levied on all large commercial premises. This would not only help to tackle food inflation but would support jobs and investment right across the country.
“The Chancellor has rightly made tackling inflation her top priority, and with food inflation stubbornly high, ensuring retail’s rates burden doesn’t rise further would be one of the simplest ways to help. This would not cost the taxpayer a penny, with large office blocks and industrial plants, for whom business rates is a smaller proportion of their costs, paying a little more.”
Official data shows that UK inflation was unchanged last month at 3.8%, with annual food price inflation easing from 5.1% in August to 4.5% in September. It was the first time this rate had slowed since March.
A Treasury spokesperson said: “Tackling food inflation is a priority, which is why we’re boosting incomes through increasing the national living wage, lowering business rates for butchers, bakers and other shops, and sticking to our fiscal rules to bring inflation down.”
NAM Implications:
- Consumer-voters are already demonstrating their reaction to the scale of food inflation…
- …in terms of shopping around for value and trading ‘down’ to own label equivalents.
- New shopping behaviours, which if not ‘permanent’…
- …will certainly prove expensive to reverse.
- With the government showing little apparent awareness of ’cause & effect’…
- …prolonged breath-holding is not recommended.
