Supermarkets urge chancellor to drop new rates surtax

Nine of Britain’s biggest supermarket chains have called on chancellor Rachel Reeves to exclude large retail stores from the government’s proposed business rates surtax, warning it would add pressure to food prices.

The letter, organised by the British Retail Consortium (BRC), was signed by the heads of Aldi, Asda, Iceland, Lidl, Marks and Spencer, Morrisons, Sainsbury’s, Tesco and Waitrose.

According to BRC chief executive Helen Dickinson, the industry was “doing everything possible to keep food prices affordable”, but faced “an uphill battle” amid more than £7bn in additional costs next year.

Dickinson said: “Large retail stores sustain nearly one million British jobs and already contribute a third of all retail’s business rates, despite being a tiny proportion of all stores. Exempting shops from the new surtax would not only help tackle food inflation but would support jobs and investment across the country.”

She added that keeping business rates from rising further “would be one of the simplest ways” to help lower inflation, arguing that the change could be offset by higher charges on offices and industrial sites “for whom business rates are a smaller proportion of their costs”.

In the letter, the supermarket chiefs said inflationary pressures were being worsened by tax and regulatory costs introduced in the last Budget, including higher employer National Insurance contributions, a new packaging tax and a rise in the business rates multiplier.

They warned that including supermarkets in the new surtax for premises valued above £500k could prolong high food inflation into 2026, with costs “inevitably” passed on to consumers.

The signatories argued that excluding large stores from the measure could be done “at no cost to the Treasury”, while sending “a strong signal of support for the industry and of the government’s commitment to tackling food inflation”.