Retail leaders have delivered a sobering assessment of yesterday’s Autumn Budget, warning of prolonged food inflation, strained shopper confidence and mounting cost pressures for stores of all sizes.
IGD chief economist James Walton said the chancellor’s tax-raising Budget marked “a tough” moment for households and food businesses alike, with government policy expected to drive a significant share of future price pressures.
Walton forecast that food inflation would persist into 2027, running ahead of overall inflation and making groceries “relatively more expensive”. With shoppers already trading down and staying cautious, he warned the next few years would be defined by “weak volume growth and tight profits across retail and away from home”.
“There’s no immediate relief on the horizon for consumers or businesses,” Walton added, arguing that higher taxation would depress volumes and limit the investment needed to strengthen the food system. Yet he urged the government to pursue targeted reforms — particularly in horticulture and poultry, that could unlock £5bn of investment and create 60,000 jobs.
Small business groups: ‘Mixed emotions’ as tax burden rises
Reactions from small business organisations highlighted the tension between support measures and new cost burdens.
The Federation of Small Businesses described the Budget as evidence of a “continuing economic doom loop”, with policy chair Tina McKenzie warning that hikes to dividend tax will make investing in your own business “one of the least tax-friendly things you can do with your money.”
She termed pension-related employer charges “a bad idea” and added that business rates measures would “not help small firms and high streets nearly enough.”
“While the chancellor has taken important steps on SME training and the new jobs guarantee scheme, ministers must now bring forward pro-business, pro-growth policies. Otherwise, we’ll be back at square one, stuck in the same rut we were in last year,” she said, calling for immediate action to sort out the Employment Rights Bill, fix the broken small business energy market and back more people to start new businesses.
Small Business Britain was more upbeat, welcoming free apprenticeship training for under-25s in SMEs, enhanced capital allowances and permanent business rates reductions for retail, hospitality and leisure firms. CEO Michelle Ovens said these moves should support confidence heading into 2026 amid hopes for stabilising economic conditions.
“The UK’s 5.6 million small businesses play an indispensable role in driving Britain’s economy forward and creating jobs, and it was positive to hear this message reiterated at the opening of the Chancellor’s speech today,” Ovens said.
However, Simply Business CEO Julie Fisher cautioned that wage increases – 6.7 per cent last year and 4.1 per cent this year – combined with persistent inflation and elevated energy costs were pushing many small operators to breaking point.
“We support and encourage fair wages for workers but without corresponding measures to help businesses manage the cumulative impact, the implications for the sector are serious,” Fisher warned.
More than half of small firms have held prices to avoid losing customers, according to Simply Business survey, and nearly one in five fear closure within a year if conditions do not improve.
“Small business resilience shouldn’t be underestimated. Given the ongoing cost pressures the sector faces, the measures announced today provide a foundation to build on - the question is whether small businesses will have the headroom to build on it,” Fisher said.
Business rates shake-up: winners and losers across grocery retail
The Budget’s tiered business rates reform drew strong reactions from across the retail sector.
Christie & Co’s Steve Rodell said the shift – reducing rates for smaller premises and raising them for larger ones – would benefit convenience retailers but hit supermarkets harder. However, he warned the wider fiscal picture, including capital gains changes and higher wage costs, would weigh heavily on many operators.
“One of the biggest impacts from this Budget will be the reduction in relief from 100 per cent to 50 per cent of any capital gain on the sale of a business. This will effectively penalise some entrepreneurs who have worked, quite often for much of their lives, to build up a business, creating opportunity for employees and contributing taxes to the economy,” Rodell noted.
EY’s retail lead Silvia Rindone agreed that smaller retailers would welcome relief, but cautioned that additional burdens on larger stores risked higher food prices and further pressure on consumer choice. Closing the import duty loophole for small parcels, she said, was a step towards fairer competition, though it could raise online shopping costs.
“While some measures will level the playing field for domestic retailers, the cumulative effect of tax changes and cost adjustments could temper spending, particularly in non-essential categories,” Rindone said.
KPMG’s Linda Ellett added that while some consumers may feel confident enough to resume spending, many remain wary due to economic uncertainty. Retailers will need the wider economy to show clearer signs of recovery to unlock demand.
“Retailers and hospitality businesses will be hoping that in the coming months the government evidence that the economy is growing and provide increased confidence to consumers about the UK’s economic health,” Ellett said.
BRC: Measures fall short of ‘bold action’ needed
The British Retail Consortium called the Budget a “mixed bag”, noting that although many shops received relief, new costs elsewhere reduced the overall benefit.
BRC CEO Helen Dickinson welcomed the permanent cut to retail business rates but criticised the decision to apply a new surtax to larger premises – stores that already shoulder a disproportionate share of retail’s tax burden. She also urged the government to scrap the de minimis import threshold more quickly, arguing that delaying action until 2029 left UK retailers at a competitive disadvantage.
Rising employment costs remain a major concern, Dickinson added, warning that higher under-21 wages and uncertainty over parts of the Employment Rights Bill could suppress job opportunities for young workers.
“All in all, we will see winners and losers across retail and the impact for consumers will unfold in the coming months, but this Budget does not go far enough to mitigate the inflationary pressures already bearing down on the industry,” Dickinson noted.