Key Summary
- Retailers warn business rates hike will push up food prices.
- BRC says many stores are already at breaking point.
- £600m tax hit could fuel inflation before Christmas.
Retailers have warned that any move by Chancellor Rachel Reeves to raise business rates for larger stores in the October Budget could fuel inflation and push up food prices during the critical Christmas trading period.
Helen Dickinson, chief executive of the British Retail Consortium (BRC), said the planned hike would come at “the worst possible moment”, just as families are looking for price relief and the Bank of England continues efforts to rein in inflation.
The increase would disproportionately hit supermarkets and stores with rateable values over £500,000, affecting an estimated 4,000 stores.
“Retailers are doing everything they can to shield customers from these mounting pressures, but there is only so much they can absorb before costs start feeding through to prices," The Times quoted Dickinson as saying.
“If the chancellor presses ahead with plans to raise business rates on thousands of high street shops, it will heap pressure on businesses that are already at breaking point.
“These stores are not only critical to keeping food affordable; they anchor high streets, support jobs and draw in footfall for neighbouring small businesses. Ministers must choose: support families and high streets by ensuring no shops are forced to pay even more in business rates, or add to inflation at the worst possible moment.”
Under current government proposals set to take effect from April 2026, the multiplier used to calculate business rates will increase for larger sites to reduce the tax burden on smaller high street retailers.
But analysts suggest this could amount to a £600 million hike for big retailers, many of whom already operate on tight margins.
The warning from the BRC comes amid fresh economic pressure, with UK inflation rising to 3.6 per cent in the 12 months to June, the highest since January, driven by motor fuel and a 4.5 per cent jump in food prices.
Retailers, already grappling with supply chain disruptions and poor harvests, are now also facing the knock-on effect of the £25 billion national insurance rise imposed on employers earlier this year.
A recent BRC survey found that two-thirds of retail CEOs planned to increase prices as a direct result of that hike, adding further weight to concerns that the coming months could see renewed inflationary pressures passed on to consumers.
Dickinson called on the Chancellor to rethink the planned business rate changes and instead pursue policies that support both consumers and retailers.
The Treasury argues the proposed rebalancing of business rates is intended to revive struggling high streets.
The BRC has urged the Chancellor to categorically rule out new taxes on retail, warning that such moves could stall investment and weaken a sector already under strain.