The Labour government’s 2025 Budget has set out a sweeping package of cost-of-living interventions that the chancellor claims will put more money in consumers’ pockets – offering some cautious optimism for convenience retailers who have spent recent years grappling with reduced footfall, rising prices and shoppers trading down.
Unveiled today (26 November), the Budget focuses heavily on easing household pressures after the prolonged cost-of-living crisis, which has reshaped grocery shopping habits and driven many consumers towards discounters and cheaper alternatives.
Among the most notable measures is the removal of levies from energy bills, delivering average savings of £150 next year and up to £300 for lower-income households. Chancellor Rachel Reeves said the move “keeps our promise to get energy bills down and cut the cost of living,” adding: “Money off bills, and in the pockets of working people. That is my choice.”
Retailers will also be watching closely as the National Living Wage and National Minimum Wage rise again. Full-time workers on the National Living Wage will see a £900 annual uplift, while those aged 18–20 on the NMW will benefit from a £1,500 increase. While the changes boost spending power for millions of customers, they will also add to payroll pressures for independents already wrestling with rising operating costs.
The Budget also confirms continued support for pensioners – including an extra £575 a year for those on the full State Pension from April 2026 – and freezes prescription charges for another year, keeping costs below £10.
Meanwhile, changes to Universal Credit mean single adults over 25 will receive around £295 more a year, £110 above a standard inflation uplift, while eligible couples will receive an extra £465.
OBR: Measures will drive down inflation and stabilise the economy
The government argues the combined package will ease inflation further, with the OBR forecasting that Budget measures – including energy bill cuts and a freeze on rail fares – will reduce CPI inflation by 0.4 percentage points next year.
With five interest-rate cuts already delivered by the Bank of England, the OBR says these steps increase the likelihood of further reductions, offering potential relief on borrowing costs for retailers.
The fiscal watchdog also upgraded UK economic growth for 2025 from 1 per cent to 1.5 per cent, and predicted the chancellor’s plans would more than double fiscal headroom to £21.7bn, enabling “more money to be spent on vital public services rather than debt interest”.
With inflation still above pre-crisis norms and shoppers displaying persistent caution, retailers will likely view the Budget as a welcome but limited relief – helpful in easing household pressures, but not a full solution to the challenges reshaping UK grocery retail.