Tesco chief executive Ken Murphy has cautioned Rachel Reeves that businesses will find it difficult to shoulder additional costs as concerns mount over potential further tax increases in the upcoming Budget.
British retailers were struck by elevated labour costs following rises in the minimum wage and employer's national insurance contributions this April, after modifications introduced in last October's budget took effect.
Tesco, which has a workforce exceeding 330,000 across the º£½ÇÊÓƵ, faces an annual increase in national insurance payments of £235m, alongside a £90m yearly charge for the new Extended Producer Responsibility (EPR) packaging levy.
"In the last Budget, the sector incurred substantial additional operating costs and we're doing our best to deal with that but enough's enough," Murphy stated during a call with journalists.
"As a food retailer we operate in a very competitive, very tough environment, and I think our one ask is that you don't make it harder for the industry to deliver great value for customers," he continued, as reported by .
Despite the challenging conditions, Tesco raised its profit guidance for the current financial year this morning following a summer sales surge, with full year profit now anticipated to be between £2.9bn and £3.1bn, an uplift from the previous range of between £2.7bn and £3bn. .
Companies have been outspoken regarding the harm caused by alterations to the business rates framework next year, which will result in larger stores paying an increased tax rate to fund a reduction in smaller shops' charges. However, it appears that Reeves may exclude large retailers – including supermarkets – from the higher tax bracket due to "warnings that the increased burden will fuel higher food inflation", as reported by the FT.
John Webber, head of business rates at Colliers, has consistently criticised the proposed higher multiplier for larger retail stores and supermarkets.
"If this comes to pass, we applaud the U-turn on food stores being hit with a 20 per cent business rates premium, because the levy would have added to food inflation- but it rather begs the question why is the government not accepting that adding a 20 per cent supplement to any business is inflationary? ".
"It feels like those who shout loudest get listened to, rather than the government pursuing any considered strategy. Nothing appears to have been mentioned about doing something similar for the larger hospitality and leisure businesses, or any other large business," stated Webber.
If Reeves does not alter her course, business rates could potentially increase by an estimated 26 per cent across London, from £9bn to £11bn.
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