Shoppers are expected to face higher prices as retailers grapple with increased costs resulting from recent budget measures, the British Retail Consortium (BRC) has warned.
Additional expenses from national insurance contributions, a rise in the minimum wage, and a new packaging levy are set to drive up inflation, according to industry leaders.
Helen Dickinson, chief executive of the BRC, stated: “With significant price pressures on the horizon, November’s figures may signal the end of falling inflation. The industry faces £7 billion of additional costs next year because of changes to employers’ national insurance contributions, business rates, an increase to the minimum wage, and a new packaging levy.”
Dickinson called on Chancellor Rachel Reeves to reform the business rates system and reconsider the current timelines for the packaging levy to alleviate the financial burden on retailers.
Data from the BRC and research consultancy NielsenIQ showed that over the year to November, shop prices decreased by 0.6%, a slight slowdown from the 0.8% reduction in the previous 12 months to October. On a monthly basis, shop prices edged up by 0.2% after a 0.1% increase in October. Food inflation fell to 1.8% annually—the lowest rate since November 2021—down from 1.9% in October. Non-food prices declined by 1.8% over the year, a smaller drop compared to the 2.1% contraction in the prior month.
The BRC’s shop price index, released ahead of the official inflation figures, is a key indicator used by analysts. The official inflation rate rose to 2.3% in October from 1.7% in September.
Last week, over 70 of the UK’s largest retailers—including Tesco, Marks & Spencer, Sainsbury’s, Asda, and Next—wrote to the Chancellor warning that tax increases from the budget could lead to store closures, job losses, and higher prices for consumers.
Simon Roberts, chief executive of Sainsbury’s, highlighted that the increase in national insurance is expected to cost the supermarket an additional £140 million in the next financial year. He noted that while the company aims to mitigate the impact, the industry’s thin margins make it challenging to absorb such significant cost increases.
Marks & Spencer, which employs around 65,000 people, anticipates a £60 million impact from the national insurance hike and an additional £60 million due to the minimum wage increase. Leeds-based Asda expects approximately £100 million in extra costs from higher employers’ national insurance contributions and warned that these measures would likely contribute to inflation.
A survey from Asda’s monthly income tracker, produced with the Centre for Economics and Business Research, found that British households’ disposable income declined by £1.98 in October, leaving the average household with £247 per week.
The BRC’s warning coincides with research by accountancy firm Price Bailey, indicating that more than one in ten restaurants are at “imminent risk” of closure. The hospitality sector has been struggling with rising costs in recent years, and the latest budget measures have added further pressure through increased labour costs.
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Retailers warn of inevitable price rises due to budget measures