Retailers face £5.6bn rise in costs as Budget comes into play
The rising bills will reportedly cost shoppers £1.7bn over the next year as costs are passed onto consumers
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New research by Retail Economics, along with frontline specialist Yoobic, has found that retailers face a £5.56bn rise in costs from this week as changes from the Budget are enacted, The Telegraph has reported.
The rising bills will reportedly cost shoppers £1.7bn over the next year as costs are passed onto consumers.
It comes as National Insurance increases begin on 6 April, and the higher minimum wage is enacted from today (1 April), whilst retailers also face a £720m bill from business rate changes.
Retailers are expected to take a £1.76bn hit to profits following the changes, but around £1.72bn of the higher costs is set to be passed on to customers through price rises. The remainder will be covered by cutting costs, The Telegraph said.
Richard Lim, CEO of Retail Economics, said: “Retailers are staring down the barrel of a £5.6bn wave of additional costs that will squeeze margins and threaten jobs across the industry.
“With operating costs rising sharply, many retailers have little choice but to absorb some of the financial pain while cautiously passing costs on to consumers already facing their own pressures.”
As part of her Spring Statement last week, chancellor Rachel Reeves resisted calls from businesses for relief ahead of the upcoming tax changes this month.
UK businesses had been hopeful the chancellor would raise the relief rate for retail, hospitality, and leisure after cutting it to 40% in the October budget, where increases in the national living wage and employer NI contributions were also announced.
From today, employers’ NI contributions are set to rise by 1.2%, from 13.8% to 15%, while the threshold at which businesses start paying National Insurance on a worker’s earnings will be lowered from £9,100 to £5,000.
National Living Wage is also set to rise by 6.7% to £12.21 an hour up from the current pay of £11.44, raising costs for many businesses across the country.
The OBR also halved its growth forecasts for this year to 1%, in light of higher interest rates and falling business and consumer confidence.
