Retail and hospitality have the highest effective tax rates of any sector in the UK, leading to fewer jobs for young people, foregone investment, and higher prices for customers, according to new analysis from the British Retail Consortium (BRC).
The study compared the taxes and profits paid in 11 main sectors of the economy. It found the two sectors paid a combined £62bn in taxes in 2025/26 through business rates, employer National Insurance Contributions (NICs), VAT, and other government taxes.
Job losses and tax burden
Retail and hospitality are two of the nation's largest employers, providing millions of jobs across every postcode. They are the largest source of entry-level and flexible jobs, and a gateway to employment and training for those without qualifications or previous experience. However, the 2024 Budget added billions to their employment costs. As a result, retail lost 122,000 jobs in just two years, while employment in hospitality fell by 93,000 people.
For every £1 of pre-tax profit made by the sector, retailers paid the equivalent of 72p in business taxes, while for hospitality businesses this figure was 82p in the pound: these are the highest rates for any sector, well above the 50p average effective tax rate of all eleven main sectors of the economy, including the 40.5p tax rate of the banking industry. Hospitality and retail's effective tax rates rose further in 2026/27.
Impact on high streets
High streets are particularly exposed to the impact of rising business taxes. The presence of retail and hospitality businesses are what keep high streets vibrant and job opportunities available. Yet they pay a disproportionate level of business rates relative to other industries and together cover almost a third of the total raised by the tax. The consequence is 1 in 7 high street properties across the country lie empty.
Higher taxes leave high street businesses with less money to invest in jobs and local communities and put further upward pressure on prices for shoppers. With inflation currently at 3.1%, well above the Bank of England's 2% target, further tax rises risk adding to the cost-of-living pressures facing households.
Call for Budget action
Ahead of the Budget, the BRC and UKHospitality are calling on the chancellor to put local communities first and reduce the cost burden on these two sectors, including removing high street retail and hospitality businesses from the government's business rates high-value multiplier. Doing so, said BRC, will help protect the millions of people working there and support those who would be hit by higher prices if these warnings are ignored.
Helen Dickinson, chief executive at the British Retail Consortium, said: "The chancellor faces a choice: to continue to pile taxes onto our high streets and the millions of households that rely on them, or to give these businesses the breathing space needed to create jobs, deliver growth, and hold down prices. Millions of people rely on retail jobs across the country, but the overwhelming tax burden puts those people at risk, with over 100,000 jobs lost in the last two years.
"For every £1 of pre-tax profit made by retail, the equivalent of 72p is now paid in business taxes. This punishing tax burden has clear consequences: job losses, shuttered shops, and a missed opportunity to drive growth in every postcode.
"For the benefit of high streets, young people and shoppers everywhere, the chancellor should use the Budget to deliver a clear path to reducing the rates burden, now and in the future."
