The UK's largest retailers have written to the Chancellor calling for an urgent meeting, warning significant hikes in employment costs cannot be absorbed with only five months' notice.
The April 2025 hike in national insurance and national living wage increases will lead to job cuts and will curb investment, the British Retail Consortium warned.
The impact of measures announced in the Budget is set to cost the retail sector £5.06bn a year from April 2025, with employers national insurance estimated to cost £2.33bn pa, while the rise in the national living wage will add a further £2bn to the overall wage bill.
Over 80 retail leaders, including the chief executives of Aldi, Asda, Boots, H&M, JD Sports, Next, Sainsburys, Specsavers and Tesco, are calling on the Chancellor to urgently review her plans to slap a 1.2% increase on employer NI, and lower the payment threshold to £5,000, which will result in thousands more employees being dragged into the employers' charge.
There is huge concern about the impact of the increased costs from the supermarket giants to some of the UK's best known brands for clothing, furnishings, DIY and garden centres to niche specialist chains.
'For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale. The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country,' stated the BRC.
'We are already starting to take difficult decisions in our businesses and this will be true across the whole industry and our supply chain.'
Retail is the largest private sector employer, with three million direct jobs and 2.7m more in the supply chain, contributing over £100bn pa to GDP. As a result, the sector will be hit hard by Labour's tax hikes.
'The impact of the Budget NIC threshold change is particularly acute given retail employs large numbers of people in entry-level and part-time roles,' the letter stated.
'Costs from the Budget sit alongside other incoming regulations, including implementation of new packaging levies.
'Taken together, the retail industry's costs could rise by up to £7bn a year. This will also affect our suppliers, increasing costs that retailers pay for goods and services.'
The retail chiefs have asked for a meeting with the Chancellor Rachel Reeves to discuss their concerns and 'work together on a solution'.
They have made a number of recommendations, including phasing in the introduction of the new lower earnings threshold, delay the packaging tax and bringing forward the timetable for the business rates review.
The retail chiefs also pointed to rises in business rates, which will affect bricks and mortar stores the most.
Peter Nichols
Tax Director BFN Accounts & Tax Limited