Supermarkets Forced to Pass On Costs to Shoppers
British households are facing another blow to their budgets as major supermarkets confirm they will have to increase food prices following a significant policy reversal by Chancellor Rachel Reeves.
The Treasury has informed leading grocery chains including Tesco, Sainsbury's, Aldi and Morrisons that they will not be exempt from planned increases to business rates, despite intensive lobbying from the retail sector.
Retailers' Pleas Ignored as Inflation Fears Grow
According to reports from the Financial Times, the government has decided to proceed with taxing approximately 4,000 larger retail premises as originally outlined in last year's Budget. This represents a complete U-turn from earlier indications that supermarkets might receive relief.
The British Retail Consortium has issued a stark warning that this decision threatens to undermine the government's battle against inflation. Recent figures show food inflation climbed to 4.9 per cent in the 12 months to October, up from 4.5 per cent in September, reigniting concerns about the ongoing cost of living crisis.
Helen Dickinson, chief executive of the BRC, expressed deep concern about the impact: 'The Chancellor promised that these reforms would rebalance business rates across the economy to support our high streets. If she chooses to land large retailers with an even bigger burden, now and in the future, it will be our high streets that suffer.'
Supermarkets Already Under Immense Pressure
Retail giants had collectively written to the Chancellor last month, warning that their 'ability to absorb additional costs is diminishing' and that households would 'inevitably feel the impact' of higher rates.
The letter, signed by bosses from Tesco, Asda, Sainsbury's, Aldi, Iceland, Lidl, Marks & Spencer, Morrisons and Waitrose, highlighted that supermarkets are already grappling with £7 billion in extra annual costs from the previous Budget.
Industry sources expressed frustration at the last-minute change, with one telling the Financial Times: 'This was not just speculation – this had been communicated. The fact they are changing things at the last minute after months of leading us up the garden path really shows the mess of their miscommunication around this Budget.'
The new system aims to support smaller shops by shifting more of the tax burden onto larger premises, including warehouses used by online giants like Amazon. However, retailers argue this will also hit 'big box' supermarkets that serve as anchor tenants attracting shoppers to town centres where smaller businesses benefit from increased footfall.
John Roberts, founder of AO World, delivered a scathing assessment of the government's approach, stating Labour 'couldn't run a bath, let alone a business,' and revealing his company has moved 100 roles to South Africa due to increased wage and National Insurance costs.
With supermarkets warning they have little capacity to absorb further financial pressures, British consumers appear set to bear the brunt of this policy decision through higher prices at the checkout.
