On Monday (18 November), over 80 UK retailers communicated their concerns in a letter, coordinated by the British Retail Consortium, to Chancellor Rachel Reeves over rising costs primarily resulting from the impact of changes to National Insurance, the National Living Wage, and the ongoing packaging levy.
They also expressed their concerns regarding the potential effects of the budget on retail operations and the broader economic implications, including inflation, job stability, and investment.
The retail sector is integral to communities across the UK, being the largest private sector employer with three million direct jobs and an additional 2.7 million in the supply chain. It contributes over £100bn annually to GDP.
Additional costs projected for the retail industry in 2025
The shift in National Insurance contributions (NIC) thresholds, in particular, will hit retail hard, as the sector employs many individuals in entry-level and part-time positions.
- A 15% increase in the Employers' NIC rate, is set to cost £570m.
- A change in the NIC threshold will add £1.76bn in costs.
- An increase in the National Living Wage is expected to result in an additional £2.73bn in costs.
- The introduction of a Packaging Levy in October 2025, which will add £2bn.
In total, these new costs could amount to £7.06bn annually for the retail sector.
Regarding Business Rates, current projections indicate an increase in retailers’ bills by £140m in April 2025 due to inflationary adjustments and a reduction in available retail discounts.
Furthermore, a discussion paper released on 30 October acknowledged the need to alleviate burdens for the retail and hospitality sectors. However, concerns remain that the proposed changes may only shift financial responsibilities within the industry rather than providing meaningful reductions in rates for all retail properties.
Economic consequences
The letter highlights that retail is already among the most heavily taxed business sectors alongside hospitality, contributing 55% of profits towards business taxes. Despite this high tax burden, retailers maintain competitiveness with profit margins of around 3-5%.
For retailers of all sizes, absorbing such substantial cost increases within a short timeframe is unfeasible. The resulting consequences include heightened inflation, stagnated wage growth, store closures, and job reductions, particularly affecting entry-level positions. This scenario threatens high streets and consumers nationwide.
Proposed actions moving forward:
Retailers invite discussions with government representatives to address these issues collaboratively and seek solutions. Suggested adjustments include:
- Phasing in changes to National Insurance contributions with regard to the lower earnings threshold.
- Delaying implementation timelines for packaging levies.
- Revisiting business rate proposals from the budget to allow for earlier realization of benefits.
In response to the concerns, GMB Union national officer Nadine Houghton said: “Multi billion-pound businesses pleading poverty because they’re being made to pay more to support public services is utterly pathetic. Most of these companies’ fortunes are already subsidised by the taxpayer - they pay very low wages which then have to be topped up by in-work benefits. It’s only right that they should now contribute a bit more to rebuilding our country.”
