Supermarkets call on chancellor to help tackle inflation
In a letter organised by the British Retail Consortium, leaders from nine of Britain’s biggest supermarkets have written to chancellor Rachel Reeves to urge her to exclude shops from the proposed business rates surtax.
Speaking on the letter, Helen Dickinson, chief executive of the British Retail Consortium, said:
“Supermarkets are doing everything possible to keep food prices affordable, but it’s an uphill battle, with over £7bn in additional costs in 2025 alone. From higher National Insurance contributions to new packaging taxes, the financial strain on the industry is immense.
“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. This letter calls on the chancellor to exempt shops from the new business rates surtax – levied on all large commercial premises. This would not only help to tackle food inflation but would support jobs and investment right across the country.
“The chancellor has rightly made tackling inflation her top priority, and with food inflation stubbornly high, ensuring retail’s rates burden doesn’t rise further would be one of the simplest ways to help. This would not cost the taxpayer a penny, with large office blocks and industrial plants, for whom business rates is a smaller proportion of their costs, paying a little more.”
The letter was sent to the chancellor on Wednesday 22 October follows:
Dear Chancellor,
Food inflation and the Budget
As retail leaders at Britain’s largest supermarkets, we are acutely aware of our responsibility to deliver affordable, quality food to millions of households. We compete fiercely and work tirelessly to keep prices down and support communities everywhere through our significant investment in jobs and high streets. We exist at the centre of communities, supporting local suppliers and charities, driving footfall to surrounding businesses, and providing flexible jobs for people at all stages of their careers.
Yet the growing cost pressures on the retail industry mean that food inflation has been rising steadily over the last year and is expected to rise further, carrying headline inflation with it, and limiting the ability of the Bank of England to lower interest rates. The IMF estimates that the UK will have the highest inflation in the G7 in 2025 and 2026. This matters to millions of ordinary people who are struggling with the cost of living, and it will continue to matter until food inflation can be brought to heel.
The latest Asda-CEBR Income Tracker shows that 60% of UK households saw a drop in weekly disposable income, as rising costs for essentials like food and transport continues to outpace wage growth. This gap between income and everyday costs is widening, for lower-income households, who are least able to manage such costs.
According to the Bank of England, the current inflationary pressures are being exacerbated by the increased tax and cumulative regulatory burden faced by retailers and their supply chains. The last Budget introduced over £7bn in additional costs on retailers, from increases to employer National Insurance Contributions (NICs) and employment costs, to the new EPR packaging tax and rise in the business rates multiplier. Supermarkets, given our large labour force of almost a million colleagues, have been disproportionately affected.
The UK grocery market is highly competitive with narrow profit margins that are well below those found in most other industries. Consumers benefit from some of the lowest food prices in the developed world. And while we continuously seek efficiencies, our ability to absorb additional costs is diminishing. If the industry faces higher taxes in the coming Budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging and it will be households who inevitably feel the impact. Given the costs currently falling on the industry, including from the last Budget, high food inflation is likely to persist into 2026. This is not something that we would want to see prolonged by any measure in the Budget. Large retail premises are a tiny proportion of all stores, yet account for a third of retail’s total business rates bill meaning another significant rise could push food inflation even higher.
It is for these reasons that we would ask you to ensure that the proposed changes to business rates result in a significant reduction to the industry’s rates burden. While we are pleased the government is committed to supporting smaller retail properties – it is equally important that large shops are excluded from the proposed business rates surtax for premises with a rateable value of £500,000 or above. It is these premises that support hundreds of thousands of jobs, provide valuable services that may not be otherwise accessible to local communities and drive footfall to nearby smaller businesses. As we have previously outlined, this can be done at no cost to the Treasury and with only a marginal increase in the new higher rate for large non-retail properties, for whom rates is a much smaller proportion of their costs.
Starting to address retail’s disproportionate tax burden would send a strong signal of support for the industry and of the government’s commitment to tackling food inflation. Such a move would help provide the conditions to bolster the investment in our communities that we are so keen to help deliver and be warmly welcomed by the industry.
Yours sincerely,
Giles Hurley, Chief Executive Officer, Aldi UK and Ireland
Michael Gleeson, Chief Financial Officer, Asda
Tarsem Dhaliwal, Chief Executive Officer, Iceland
Ryan McDonnell, Chief Executive Officer, Lidl GB
Alex Freudmann, Food Managing Director, Marks & Spencer
Rami Baitieh, Chief Executive Officer, Morrisons
Simon Roberts, Chief Executive Officer, Sainsbury’s
Ken Murphy, Group Chief Executive Officer, Tesco
Tina Mitchell, Managing Director, Waitrose