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Rachel Reeves has been urged not to raise taxes in her autumn budget, with Britain’s biggest retailers warning it could trigger higher shop prices and have a knock-on effect on both household incomes and the economy.
A report from the British Retail Consortium (BRC) found that as many as 56 per cent of retail finance chiefs – representing more than 9,000 stores – are “pessimistic” about trading conditions over the next 12 months.
It comes after a number of major retailers, including Iceland, Poundland and New Look, announced store closures amid the fallout from the chancellor’s decision to hike national insurance for employers in her first budget.
The BRC’s chief executive, Helen Dickinson, urged the chancellor not to “add further costs to retailers and high streets” at the upcoming budget, warning it will “be the British public who suffer from the knock-on impact on inflation”.
“Retail was squarely in the firing line of the last Budget, with the industry hit by £7bn in new costs and taxes”, she said.
“Retailers have done everything they can to shield their customers from higher costs, but given their slim margins and the rising cost of employing staff, price rises were inevitable.”
Ms Dickinson added: “The consequences are now being felt by households as many struggle to cope with the rising cost of their weekly shop.
“It is up to the chancellor to decide whether to fan the flames of inflation, or to support the everyday economy by backing the high street and the local jobs they provide.”
It comes amid growing questions over how the government will fill a black hole in the public finances after a series of U-turns and spending pledges, including a £5bn U-turn on welfare cuts.
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Ministers have already squeezed significant savings out of their departments in cuts that were unveiled at June’s spending review, meaning there is now a mounting expectation that the chancellor will be forced to raise taxes instead.
The BRC’s report warned of rising food inflation, predicting that it would hit 6 per cent by the end of the year – up from four per cent at present – in a “significant challenge” to household budgets in the run-up to Christmas.
Some 85 per cent of chief financial officers said their businesses had been forced to raise prices as a consequence of the last budget’s raising of employer national insurance and the national living wage, while two thirds (65 per cent) predicted further rises in the coming year.
Other than cost increases, 42 per cent of chief financial officers said they had frozen recruitment, while 38 per cent said they had reduced job numbers in-store.
This was reflected in the official job figures, with almost 100,000 fewer retail jobs in the first quarter of 2025 compared to the previous year, the BRC said.
More than a third of CFOs (38 per cent) said they had cut investment in local communities, while 15 per cent had already delayed opening new stores.
It comes after market research firm Worldpanel by Numerator, formerly Kantar, reported UK grocery prices had increased at their fastest pace for 18 months amid growing concern from shoppers about the rising cost of living.
Grocery price inflation accelerated to 5.2 per cent in the four weeks to July 13, up from 4.7 per cent a month earlier and the highest level since January 2024.
The data indicated that rising prices are set to add an average of £275 to shoppers’ annual grocery spending.
An HM Treasury Spokesperson said: “We are a pro-business government which has capped corporation tax and struck major trade deals with the EU, US, and India—cutting costs, protecting jobs, and fuelling growth.
“865,000 employers do not pay employers National Insurance because we increased the Employment Allowance, and as set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.”
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