Incoming tax increases will be “too much to bear” for British businesses, Chancellor Rachel Reeves has been warned, as the sector contends with cost rises announced in October’s Budget.
JD Sports chairman Andrew Higginson, who also chairs the British Retail Consortium, fears consumers will face “significant inflation” unless Ms Reeves agrees to phase in her planned £40 billion in tax hikes more gradually.
Among the key measures contributing to industry concerns is the planned 6.7% rise in the National Living Wage, which will see the hourly rate increase to £12.21 from April.
Mr Higginson argued this wage increase, which Ms Reeves has said is intended to benefit workers, will ultimately drive up prices as retailers struggle to absorb the additional costs.
Adding to the pressure, employers are also facing a £25 billion rise in National Insurance contributions, with rates set to increase from 13.8% to 15%. Together, these measures signal substantial additional costs that retail and other sectors will need to address.
Speaking on BBC Radio 4’s Today programme, Mr Higginson emphasised: “It’s the scale of all these increases hitting at once that’s so challenging.”
He pointed to the combined impact of National Insurance hikes, the minimum wage rise, and business rates adjustments that, despite government promises, are pushing up costs for the retail sector.
“Retail is looking at an additional £5 billion per year, and there are only two ways to respond: cutting back on investment, recruitment, and jobs, or raising prices.
“And that would mean inevitable inflation for retail prices due to these measures.”
Mr Higginson further noted: “Providing a 6.5% wage increase through the National Living Wage is all well and good, but if inflation skyrockets, it’s not a real gain for workers, is it?”
In closing, he issued a stark warning: “I guarantee that if these changes go ahead without any kind of phased approach, we will see significant price inflation. The cumulative impact of these measures is simply too much for the industry to bear while still being able to invest and grow.”
In her October Budget statement, Chancellor Rachel Reeves outlined a series of fiscal measures aimed at bolstering the UK economy and supporting workers amidst high inflation and cost-of-living pressures.
Central to her budget was the increase in the National Living Wage, which Ms Reeves claimed was essential to ensure fairer pay for the lowest earners and to help families keep up with escalating living costs.
She presented the increase as part of the government’s commitment to “building a fairer economy,” stating that by putting more income into workers’ pockets, consumer spending and demand will be bolstered, which in turn should provide a foundation for sustained economic growth.
Ms Reeves also unveiled her plans to boost employer National Insurance contributions, highlighting this measure as a step towards “responsibly funding” vital public services, which have been under strain, particularly in healthcare and education.
She suggested the tax rise was aimed at “those who can afford to contribute a little more” in order to safeguard these services without directly impacting individual income tax rates.
Despite concerns from businesses, Reeves has positioned these tax adjustments as necessary for achieving fiscal stability and addressing the growing budget deficit, while ensuring that the government can continue to invest in critical areas of public spending.
