Rachel Reeves has been warned by Britain’s biggest retailers that tax rises in her autumn budget could trigger higher shop prices, hitting household incomes and the economy.
With high street chains closing stores and cutting jobs, the British Retail Consortium (BRC) said two-thirds of finance directors predicted there would be further price increases over the next year, even before any rise in tax in the autumn budget.
Iceland, Poundland and New Look were among major retailers to announce store closures in recent months, amid business warnings over the impact of tax rises in the chancellor’s first budget.
A survey of retail industry finance directors by the BRC, which represents more than 9,000 stores that employ 300,000 workers, found that 85% had raised prices in response to measures brought in since Labour came to power in 2024.
Helen Dickinson, chief executive of the BRC, said a fresh round of tax increases would force retailers to push up prices further and leave many households struggling to cope.
“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.”
The UK’s headline inflation rate jumped to 3.6% in June, according to official figures, while a BRC-NielsenIQ monitor of food price inflation increased to 4% this month.
The BRC said its own forecasts showed that food inflation would accelerate to 6% by the end of the year.
Retailers suffered a squeeze in April from the government’s £25bn rise in employer national insurance contributions (NICs) and 6.7% increase in the “national living wage”, while global uncertainty and rising unemployment have encouraged households to increase their savings.
Reeves is expected to seek ways to raise funds in the autumn to cover a shortfall in the public finances which some analysts estimate could be as large as £20bn.
The chancellor is rumoured to be considering extending a freeze on income tax thresholds to close the spending gap, but businesses fear they could be in line for further tax rises.
According to the BRC survey, 56% of finance directors are pessimistic about the year ahead, and only 11% were optimistic.
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The industry lobby group said jobs were also at risk following a recruitment freeze by 42% of respondents. More than a third (38%) said they had cut staff numbers.
As many as 88% said the “tax and regulatory burden” was their top concern.
“This was up over 20 percentage points from January, when 62% of finance directors had it in their top three concerns,” the BRC said.
“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,” Dickinson added.