London (Parliament Politics Magazine) – UK retailers, including Tesco and Marks & Spencer, have warned Chancellor Rachel Reeves of a £7 billion cost increase from budget tax rises, leading to job reduction and higher prices. The British Retail Consortium (BRC) insisted the government address the financial impact before it gets worse.
Tesco, Boots, Marks & Spencer, and Next have informed Chancellor Rachel Reeves via letter that the £7 billion rise in costs from the recent budget would result in job losses and price hikes.
BRC Warns Chancellor of financial burden from NIC
The British Retail Consortium (BRC) with 79 retailers warns the Chancellor about the financial burden of upcoming increases in the national living wage and NICs costs.
According to the BRC, the higher costs will lead to increased prices for consumers, reduced pay rises, jobs, education and store closures.
The letter stated, “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”.
According to the letter, retailers are facing “difficult decisions” as the “sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty”.
Retailers facing difficult decisions
Andrew Bailey, governor of the Bank of England, confirmed on Tuesday during a Treasury committee meeting that retailers were justified in warning about the danger of jobs reduction due to changes in NICs.
Bailey warned that the job losses might be greater than the 50,000 figure projected by the Office for Budget Responsibility (OBR) after the budget announcement.
He stated, “I think they are right to say there is a risk of further job cuts”, adding, “Yes, that is a risk”.
GMB rejects job losses fear
The GMB union has dismissed warnings of job cuts from major retailers due to tax changes as “utterly pathetic”.
A national officer at the GMB, Nadine Houghton said, “Multibillion-pound businesses pleading poverty because they’re being made to pay more to support public services is utterly pathetic”.
She added, “Most of these companies’ fortunes are already subsidised by the taxpayer, they pay very low wages which then have to be topped up by in work benefits. It’s only right that they should now contribute a bit more to rebuilding our country”.
Impact on retailers and call for Treasury talks
Monsoon and Accessorize CEO Nick Stowe stated that retailers are caught between protecting jobs or halting investment plans.
The fashion retailer president told BBC Radio 4’s Today programme “We’re trying to protect that staff number and it’s about choices in how we protect it”.
He added, “For us it means passing on some of those cost increases in terms of increased prices. It also means we’re probably going to have to divert investment that we would have made in growing our store base into protecting the stores that we have and the employees that we have”.
Mulberry, the luxury handbag brand, announced job cuts on Tuesday, blaming the poor performance of the UK market, driven by low consumer confidence.
Retailers expect wage costs to rise by £2.73 billion from April while an additional £2 billion will be extended producer responsibility for packaging from October.
In the letter, retailers request a negotiation with the Treasury to address their concerns, suggesting a gradual introduction of the new lower NICs threshold and a delay on the packaging levy.
The leaders of over 200 UK restaurants, pubs and hotel firms including Whitbread and Mitchells & Butlers wrote a letter to Chancellor Rachel Reeves expressing warning about closures and job cuts linked to the NICs increase.