Leading UK retailers, including Tesco, Sainsbury's, Boots, and John Lewis, have warned the government that a proposed ul7 billion tax increase could threaten employment and push prices higher, especially after recent rises in labor costs due to increased employer national insurance.

These retailers, along with the British Retail Consortium (BRC), have expressed concern that further tax hikes may lead to higher consumer prices and job losses, which could undermine the government’s promises on employment and living standards.

Recent inflation data shows the UK’s inflation rate at 3.8%, with grocery prices rising by 4.9%, outpacing real wage growth and prompting shifts in consumer spending, such as a 6% decline in casual dining over three months.

Retailers emphasize their vital role in local communities and are calling for policies that encourage investment, employment, and economic resilience amid rising costs.

While retailers are willing to support the government’s economic goals, they are urging for significant relief on business rates, including excluding shops from the new higher multiplier, to help absorb rising costs.

Helen Dickinson, CEO of the BRC, highlighted the urgent need for a reduction in retail rates to help retailers cope with increased expenses and continue supporting consumers.

Over the past year, around 100,000 retail jobs have been lost due to reduced investment, staffing cuts, and squeezed profit margins caused by rising costs.

The Treasury counters that the government has created 380,000 jobs since the start of the current Parliament, signed major trade deals, reformed business rates, and capped corporation tax at 25%, emphasizing their pro-business stance.

The retail industry’s letter stresses that no store should face higher taxes, advocating for stable prices, continued investment, and sustainable employment as key priorities for the upcoming budget.

The Food and Drink Federation cites tax hikes, extreme weather affecting crop yields, and a CO2 shortage as factors driving up manufacturing costs, with food inflation reaching 4.9% last month and expected to hit 6% later this year.

Retailers warn that ongoing cost pressures are unsustainable, and consumers cannot be shielded from rising costs indefinitely, especially as food inflation is projected to reach 6% by year's end, further increasing household expenses.

These retailers report that the ul7 billion in government-mandated expenses this year is forcing price increases, contributing to grocery inflation and supply chain pressures.