Retail body warns against tax hikes amid ‘nightmare’ inflation
Britain’s largest retail business group has warned the Treasury that further tax hikes on businesses will keep shop prices “higher for longer”, after data showed food inflation in September remained at its highest levels since the height of the cost-of-living crisis.
British Retail Consortium (BRC) chief executive Helen Dickinson said even if the Chancellor chooses to target businesses with another round of tax hikes at the upcoming Budget, it will be “British households who will bear the consequences… of the Chancellor’s decisions”.
“While retailers continue to absorb higher costs as much as possible and deliver value to customers, any further tax rises in the upcoming Budget would keep shop prices higher for longer,” she added.
Dickinson unleashed the warning alongside the BRC’s monthly shop price monitor, which found annual food inflation stayed at an elevated 4.2 per cent in September. The finding extended a worrying run of price readings in the grocery category, which has seen prices rise by an annual average of 4.1 per cent over the last three months.
Recent inflation has been ‘nightmare’ for retailers
Bank of England data suggests food inflation could reach as high as 5.5 per cent before the end of the year, with officials holding the government’s £25bn raid on employers’ national insurance responsible for at least part of the upward pressure on prices.
The BRC data means food inflation remains at its highest level since the 2022 global energy crisis drove the rate of annual grocery price rises up to as high as 15 per cent.
The September finding was compounded by a considerable jump in non-food inflation, which remained in negative territory but rose from -0.6 per cent in August to -0.1 per cent this month. This carried overall shop inflation up to 1.4 per cent year on year.
Prices in DIY and gardening rose sharply in September, while some ‘back-to-school’ categories continued to see reductions as retailers offered promotions before the new academic year got underway.
Dan Coatsworth, an investment analyst at AJ Bell, branded the economic outlook a “retailer’s worst nightmare”, adding: “The situation could crumble if taxes go up in the Budget in November. Some people might be rushing to do their Christmas shopping early, in case prices go up and their personal finances deteriorate.”
Dickinson and Coatsworth’s warnings echo similar demands from other industry chiefs, who fear many of their members would not be able to stomach another round of tax hikes without setting off a round of damaging consequences.
Speaking at the British Chambers of Commerce’s annual summit, director general Shevaun Haviland urged the government to rule out more tax rises on UK plc, saying firms were already battling “huge cost pressures”.
“If there is one message I want government to take away, it is this: there must be no further tax increases at the autumn Budget,” she said.