High street firms face ‘terrible choices’ after Budget tax rises
Hospitality and retail businesses have said they have “terrible choices to make” about potential cuts to investment and their workforces due to Budget tax rises.
It came amid reports that Tesco is the latest high street giant to face a huge increase in its national insurance bill, with industry bosses calling for the Chancellor to water down her budget plans.
Rachel Reeves revealed a £25.7 billion change to employers’ national insurance contributions in last month’s Budget, which would increase the rate of the tax and the threshold at which firms must pay.
Retailers
Last week, a raft of major retailers, including Sainsbury’s, Asda and Marks & Spencer, warned they will face a major hit to their bottom line as a result, indicating this could also result in some pressure on shoppers.
The Sunday Times reported that Tesco is expected to face a £250 million impact each year due to the national insurance changes.
The figures, which are based on analysis by Morgan Stanley and have not been disputed by the company, would amount to a roughly £1 billion hit over the length of the current Parliament.
‘Tough choices’
Hospitality veteran Luke Johnson, currently an investor and director in bakery chain Gail’s, told BBC Radio 4’s Today programme that companies will now face “really tough choices”.
The former Pizza Express chairman said: “I think it’s a mistake because it’s a tax on jobs, a tax on work, it’s a regressive tax because it will hit low earners, and for labour-intensive businesses like hospitality or retail it’s enormously discouraging.
“It’s millions of pounds, and we have some terrible choices to make about whether we cut back on growth or we employ fewer people or we change shifts or other impacts.
“Gail’s is pretty successful, but I’m involved with other businesses that are still recovering from the devastations of lockdowns and energy inflation and they’re going to face some really tough choices.”
Elsewhere, restaurant group Various Eateries, which runs to Coppa Club chain, said it will also be affected by the changes.
The group said the national insurance changes and a 6.7% increase in the minimum wage “will substantially increase the costs and administrative burden of employing young people”.
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Small and medium local businesses will face the “terrible choices” as they are in the vulnerable competitive position. The big retailers and hospitality chains will just jack up prices and feed inflation. Reeves knows that but couldn’t give a toss.
Play the violins for Tesco and all the pwr dabs in business facing huge hardships after the budget. This drama is wearing very thin now and nearly played out. Big business will never suffer if they are hit by taxes etc., they just pass it on to the mugs…. the customers by hiking prices. This is just an act by them to go along with Rachel Reeves and pretend times are hard. It’s a set-up to make us believe that the rich are in for a hard time!! Only someone who sits on their brain would believe this farce. The… Read more »
On 14 of April this year Tesco announced profit of £2.83 billion for the year. Profit must be maintained, so the public will pay for the extra cost. I am not against profit, but when is it enough, to be able to absorb the extra costs, when the article states that it is expected to cost Tesco £250 million a year.
This was on turnover of £68bn and the £2.83bn was before tax. So a profit of about 3%
I bet your local coffee shop or plumber doesn’t work off a 3% margin?