Tesco, Sainsbury’s and John Lewis, along with other UK retail heavyweights, have issued a direct warning to chancellor Rachel Reeves, arguing that her government’s tax policies could undermine its key promise to raise living standards.
The retailers claim they are being forced to raise prices in the face of mounting costs, and that additional taxes will accelerate food price inflation, which is already climbing.
In a letter to the chancellor, the companies, represented by the British Retail Consortum (BRC), state that government-imposed costs have already added £7bn to their businesses this year, the Times first reported.
They warn that food prices, which had begun to ease, are now “once again climbing”, with the BRC forecasting food inflation to hit six per cent later in the year, just as winter energy bills arrive.
Rising costs and a business rates battle
The retailers’ primary concern is a proposed reform to business rates that would increase taxes on large stores to fund a permanent discount for smaller shops.
The letter argues that this plan will unfairly burden the retail sector and could lead to reduced investment and job losses.
This intervention follows a recent report from the Office for National Statistics showing that overall UK inflation jumped 3.8 per cent in July, driven partly by a 4.9 per cent increase in grocery prices.
The Food and Drink Federation (FDF) has also noted that a combination of tax hikes, poor harvests from extreme weather, and a carbon dioxide shortage have contributed to rising costs for manufacturers.
According to Worldpanel data, grocery inflation is outpacing real wage growth, forcing consumers to adjust their spending habits.
Visits to casual restaurants, for example, have declined by six per cent over the past three months.
