Retail group warns against tax hikes amid inflation

The UK’s largest retail business group has cautioned the Treasury that further tax increases on businesses could result in prolonged high shop prices. This warning follows data indicating that food inflation in September remained at its highest since the onset of the cost-of-living crisis.

The British Retail Consortium (BRC) chief executive, Helen Dickinson, stated that if the Chancellor targets businesses with additional tax hikes in the forthcoming Budget, it will ultimately be British households who face the consequences. “While retailers strive to absorb higher costs and provide value to customers, any further tax increases in the upcoming Budget would keep shop prices elevated for longer,” she added.

Dickinson issued this warning alongside the BRC’s monthly shop price monitor, which revealed that annual food inflation was maintained at a high of 4.2% in September. This continues a concerning trend in the grocery sector, with prices having risen by an average of 4.1% annually over the past three months.

According to data from the Bank of England, food inflation could potentially reach 5.5% by the year’s end. Officials attribute part of the upward pressure on prices to the government’s £25bn levy on employers’ national insurance. The BRC’s findings indicate that food inflation is at its highest level since the 2022 global energy crisis, which saw grocery price increases peak at 15%.

The September data also highlighted a significant rise in non-food inflation, which, although still negative, increased from -0.6% in August to -0.1% this month. This shift contributed to an overall shop inflation rate of 1.4% year-on-year. Prices in DIY and gardening sectors rose sharply in September, while some ‘back-to-school’ categories experienced reductions due to retailer promotions.

The warnings from Dickinson echo concerns from other industry leaders, who fear that additional tax increases could have severe repercussions for many businesses. At the British Chambers of Commerce’s annual summit, director general Shevaun Haviland urged the government to refrain from further tax hikes on UK businesses, emphasising that companies are already facing significant cost pressures. “If there is one message I want the government to take away, it is this: there must be no further tax increases at the autumn Budget,” she stated.