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Retailers warn Reeves: tax rises in autumn budget risk pushing up shop prices

Amidst tumbling energy costs and a fierce price war among supermarkets, food price inflation in the UK has reached its lowest level in almost two years, offering a respite to households grappling with stretched budgets.

Britain’s leading retailers have issued a stark warning to Chancellor Rachel Reeves, saying that further tax rises in the autumn budget would almost certainly lead to higher shop prices, adding pressure to struggling households and worsening inflation.

In a survey of retail industry finance directors published by the British Retail Consortium (BRC), two-thirds of respondents said they already expect to raise prices over the next 12 months—even before any new tax measures are introduced. The industry group said 85% of retailers had already increased prices in response to policies introduced in Reeves’s first budget.

The BRC, which represents over 9,000 stores employing 300,000 people, said the retail sector was bearing the brunt of government tax hikes. Helen Dickinson, chief executive of the BRC, said: “Retail was squarely in the firing line of the last budget, with the industry hit by £7 billion in new costs and taxes. 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.”

The warning comes amid rising inflation, with official figures showing the UK’s headline inflation rate rose to 3.6% in June. Food price inflation, as measured by the BRC-NielsenIQ monitor, increased to 4% this month, with forecasts suggesting it could rise to 6% by year-end.

Retailers have also been grappling with the effects of the government’s £25 billion increase in employer National Insurance contributions and a 6.7% rise in the National Living Wage in April. These pressures have contributed to a wave of store closures across the UK, including from chains such as Iceland, Poundland and New Look.

The BRC said the financial burden on businesses, coupled with weak consumer demand and rising unemployment, has forced many companies to freeze hiring or cut jobs. According to its survey, 42% of retailers have halted recruitment, while 38% have already reduced headcount. Nearly nine in ten (88%) said the “tax and regulatory burden” was now their top concern, a significant jump from 62% in January.

Reeves is expected to use her autumn statement to address a projected £20 billion fiscal gap. Among the options reportedly under consideration is an extension of the freeze on income tax thresholds. However, the retail sector fears that businesses could again be targeted to help fill the hole.

Helen Dickinson urged the chancellor to consider the risks of compounding inflationary pressures. “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,” she said.

Business sentiment remains fragile, with only 11% of finance directors feeling optimistic about the year ahead. The BRC’s findings underline growing concern that without targeted support—or at the very least, a reprieve from further tax increases—retailers will have no choice but to pass additional costs on to consumers, threatening both household budgets and wider economic recovery.

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Retailers warn Reeves: tax rises in autumn budget risk pushing up shop prices

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