UK Supermarkets Warn New Tax Hikes Could Drive Up Food Prices Further

Supermarkets Issue Joint Warning Ahead of Autumn Budget

Major UK supermarket chains have issued a stark warning to Chancellor Rachel Reeves, cautioning that potential new tax increases could exacerbate the ongoing challenge of food inflation for British households. The warning comes in a joint letter, organised by the British Retail Consortium (BRC), ahead of the Chancellor's anticipated Autumn Budget statement next month.

Concerns Over Business Rates Surtax

The primary concern raised by the supermarkets centres on a proposed new business rates surtax. This surtax is expected to target larger retail properties with a rateable value exceeding £500,000. While the government's plan aims to provide reduced business rates for smaller high-street firms, supermarket bosses argue that including large stores in this surtax would disproportionately impact their operations and, ultimately, consumers. The BRC highlighted that large retail premises, despite being a small fraction of all stores, already account for approximately one-third of the retail sector's total business rates bill.

Industry Leaders Sign Letter to Chancellor

The letter, addressed to Rachel Reeves, has been signed by executives and directors from some of the UK's largest grocery retailers. These include Tesco, Sainsbury's, Asda, Aldi, Iceland, Lidl, Marks & Spencer, Morrisons, and Waitrose. They collectively stated that their 'ability to absorb additional costs is diminishing' and that if the industry faces higher taxes, 'it will be households who inevitably feel the impact'. The retailers also noted that high food inflation is likely to persist into 2026, partly due to existing costs such as increased employer National Insurance contributions and new packaging taxes, which the BRC estimates added over £7 billion in costs to retailers in 2025 alone.

Government Response and Economic Context

The Treasury has acknowledged the concerns, stating that tackling food inflation remains a 'priority'. A spokesperson indicated that the government is committed to boosting incomes through measures like increasing the National Living Wage and lowering business rates for smaller shops. They also affirmed that any tax changes would ensure the system 'continues to raise the same amount of revenue in real terms'. The Chancellor is widely expected to consider tax increases in the upcoming Budget to address economic forecasts and a shortfall in public finances, making the supermarkets' plea a significant point of contention in the pre-Budget discussions.