Retail sector concerned with government’s tax raid

UK Labour government’s relationship with the retail industry is at a “critical point” in the wake of the Budget due to the “cumulative effect” of several damaging measures being forced on retailers, the head of the British Retail Consortium (BRC) has said.

Helen Dickenson warned the government risked “unintended consequences” if it moved too quickly with plans to raise employer national insurance contributions and the minimum wage, while introducing a packaging tax.

“The answer (to whether our relationship with government has changed in the last few months) will come down to where we go from here and whether we can navigate our way through to find a better outcome or not,” Dickenson said. “I remain hopeful that we can, but we are at quite a critical point in order to try and achieve that right at this moment.” Dickenson’s comments came just a day after the bosses at 80 major retailers – including the likes Tesco, Boots and Next – wrote to the Chancellor to warn that the job cuts and price rises were “a certainty” unless she alleviated some of the pressures faced by their sector.

The signatories added that the minimum wage and national insurance changes, combined with the packaging levy set for introduction next October, equate to a £7bn annual hit for retailers.

“The letter highlights the strength of feeling from right across the industry,” Dickenson said. “Businesses large and small are aligned on the concern for the consequences of a load of policy changes that are all happening at the same time.” The retail chief’s warning stands in stark contrast to previous comments she has made about the government. In July Dickenson said early signs of the Starmer administration were “really positive”. The GMB’s Nadine Houghton branded the businesses’ claim as “utterly pathetic,” adding : “These companies’ fortunes are already subsidised by the taxpayer.” Turning to the months ahead, Dickenson said that price rises in supermarkets are not yet in the rearview mirror despite the recent interest rate cut. “Renewed inflationary pressures are lurking over the horizon,” she warned.

Dickenson also questioned the Bank of England’s (BoE) accuracy in forecasting retail inflation: “The Bank isn’t that great at forecasting what might happen to retail goods. I think the complexity of retail supply chain is not well built into the Bank of England’s models of how they forecast what the outlook for inflation is.” The Bank declined to comment.

The UK boss of a retail tech firm, Roy Horgan, said Chancellor Reeves’ Budget was a “land grab” that demonstrated “short term thinking and will hamper the already struggling retail sector.” Horgan, who is the UK chief executive of Euronext-listed Vusion Group, said rises to employer National Insurance contributions (NICs) would be inflationary and prevent them from giving as many staff quality jobs.

“Firstly, moving things like NICs up is inflationary, and (second) if the retailers bring more people into the tax bracket through PAYE, the exchequer does better anyway,” Horgan said. He branded the above inflation-hike to the living wage as “a stealth tax”.

Horgan’s comments add to the growing backlash from the business community at several of the key revenue raising measures unveiled in Reeves’ maiden Budget. The retail industry which Vusion supplies with digital shelf labels, has been a particularly loud voice in the retaliatory push due to its reliance on low paid and part-time staff, who the reforms to NICs and the living wage made considerably more expensive to hire.

The British Retail Consortium (BRS) recently sent a letter to the Chancellor signed by bosses at over 80 of the UK’s largest retailers, which warned that job losses and price hikes are “ a certainty” unless the government reconsidered the speed and cadence of her reforms.