Two-thirds of UK retailers plan to raise prices due to tax increase and other costs, BRC survey reveals

Around 67% of leading retailers say they will raise prices in response to the government’s National Insurance contributions increase, while more than half say they plan to reduce workers’ hours and overtime, according to a British Retail Consortium (BRC) survey. Analysts predict the food industry will take a big hit when the changes come into effect on April 1.

BRC surveyed chief financial officers (CFOs) at 52 leading retailers who shared “significant concern” about trading conditions in 2025. The biggest worries for 60% of respondents were falling demand for goods and services, inflation for goods and services and increasing tax and regulatory burdens. Almost one-third said increased costs will lead to further automation.

The government’s October budget outlined three key changes for businesses, which the BRC estimates will add £7 billion (US$8.5 billion) in costs for UK retailers. These include a £2.33 billion (US$2.8 billion) hike to National Insurance contributions, National Living Wage increases of £2.73 billion (US$3.3 billion) and a £2 billion (US$2.4 billion) reformed packaging levy rise. 

Reduction in capital expenditure

As a direct result of increased costs, 46% of CFOs surveyed say they would “reduce capital expenditures,” and 25% say they would “delay new store openings.” Meanwhile, 44% expected reduced profits, which could limit the capacity for investment.

Maria Castroviejo, senior analyst at RaboResearch Food & Agribusiness, tells Food Ingredients First that the food service industry was more likely to be impacted than other parts of the sector.

 The foodservice industry is likely to be more impacted by the tax increases than other businesses.“If you are a fast food shop or a pub that has a lot of employees working very few hours and on low wages, then the impact is much bigger than for companies in other sectors [as they will now have to pay employees a higher minimum wage,]” she says. 

“That’s why we hear much more noise from the Greggs of this world and other food service operators because it will be harder for them than for businesses that work with people on higher annual salaries.”

 Castroviejo stresses that businesses will be forced to make tough decisions, including price increases or reviewing their whole cost structure. 

“But these decisions won’t be the same for everybody — they will be case-by-case for each business. And although the UK seems to be the most brutal right now, the outlook looks pretty similar across Europe,” she says. 

Big companies hit out

Large companies have spoken out about the impending changes and said they would increase prices due to the budget, including the UK’s biggest bakery chain, Greggs and retailer Marks and Spencer. The latter’s CEO Stuart Machin said National Insurance contribution increases would add around £60 billion (US$73 billion) to its costs.

Helen Dickinson, CEO at the BRC, agrees that many retailers are now facing difficult decisions about future investment, employment and pricing, especially as the sector is one of the biggest employers of part-time and seasonal workers. 

She argues that the government changes will have a “disproportionate effect” on both retailers and their supply chains, which together employ 5.7 million people across the country.

Food inflation in 2025 is expected to hit an average of 4.2% by the end of the year.“Government can still take steps to shore up retail investment and confidence. Business rates remain the biggest roadblock to new shops and jobs, with retailers paying over a fifth of the total rates bill. The government must confirm that the planned reforms will make a meaningful difference to retailers’ bills and that no shop will end up paying more,” she says. 

Business rate changes

Changes to UK business rates — taxes on most non-domestic properties like pubs or factories — were announced during the budget. Previously, businesses received a 75% reduction in their business rate bills, which the government introduced during COVID-19 as relief for struggling companies. 

This support was due to expire at the end of March this year; however, the government announced in October that the relief would stay in place but at a lower rate of 40% post-budget. It plans to overhaul the system in 2026-27.

A spokesperson for HM Treasury responded to the BRC findings, telling Food Ingredients First that it delivered a “once-in-a-Parliament budget” to provide stability for businesses. 

“By bringing back political and financial stability, we are creating the conditions for growth with business investment in October to November up 4.5% compared to this time last year,” they say.

 “Capping the rate of corporation tax, establishing a National Wealth Fund and creating pension megafunds is just the start of our Plan for Change which will get Britain building, unlock investment and support business so we can make all parts of the country better off.”

The pessimistic outlook of businesses for 2025 comes as food inflation is expected to hit an average of 4.2% by the end of the year (it was 2% in December 2024). It also follows a recent letter to the chancellor Rachel Reeves, signed by 81 retail CEOs, outlining their concerns about the budget’s economic consequences.