The British Retail Consortium (BRC) has warned Chancellor Rachel Reeves that tax increases in the autumn budget could lead to higher shop prices, further squeezing household incomes and damaging the economy. The warning comes as two-thirds of retail finance directors predict further price rises over the next year, even before any new tax measures are announced.
Major retailers including Iceland, Poundland and New Look have already closed stores and cut jobs amid concerns over the impact of tax rises in Reeves' first budget. A BRC survey found that 85% of finance directors had raised prices in response to policies introduced 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, leaving many households struggling.
“Retail was squarely in the firing line of the last budget, with the industry hit by £7bn in new costs and taxes,” Dickinson 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 rose to 3.6% in June, while food price inflation hit 4% this month, with the BRC forecasting it could accelerate to 6% by year-end.
Retailers have been squeezed by the government's £25bn increase in employer national insurance contributions and a 6.7% rise in the national living wage. Reeves is expected to seek ways to raise funds to cover a potential £20bn shortfall in public finances, possibly extending a freeze on income tax thresholds. The BRC survey also found 56% of finance directors are pessimistic about the year ahead, with 88% citing the tax and regulatory burden as their top concern. Additionally, 42% have imposed a recruitment freeze, and 38% have cut staff numbers.
