Shoppers could face higher prices as a growing number of big British firms warn about the cost of the National Insurance (NI) tax rises on employers announced in last week’s Budget.
Sainsbury’s, Marks & Spencer and BT have all hinted at price rises, while pub chain Wetherspoons said “all hospitality business” will increase prices as a result of the tax changes.
Meanwhile, Primark’s owner said on Tuesday it may invest more overseas due to the “weight of tax rises”.
Chancellor Rachel Reeves told the BBC on Sunday the NI changes were needed “to put our public finances on a firm footing”.
From next April, employers will have to pay NI at 15% on salaries above £5,000, instead of 13.8% on salaries above £9,100 currently.
The change is set to raise £20bn a year, making it one of the biggest single tax-raising measures in history.
Sainsbury’s chief executive Simon Roberts said on Thursday the NI changes would cost the business around £140m, a sum which does not include the increases to minimum wage.
“I don’t think you can shy away from the fact that, because of the changes in everyone’s cost base, it is going to feed through into higher inflation,” he said.
“We will do everything we can to mitigate the impact, like you’ve seen over the last four years, to really improve our pricing position.
“But this barrage of costs coming at us is significant and we’re an industry, a very efficient industry and intensely competitive, and there just isn’t capacity to absorb all of this.”
Meanwhile, BT said on Thursday the Budget would have a £100m impact on the business, with the “vast majority” of that coming from the NI changes.
“We intend to offset all of it using the multiple levers we always do when hit with surprises like that… of course, we’ll be looking at the price of products and services,” said chief executive Alison Kirkby.
BT said it had also cut 2,000 jobs in the year to 30 September, reducing headcount by 4% to 118,000, as part of an already announced plan to slash 55,000 jobs by 2030 to save costs.
Sainsbury’s and BT’s comments come after Marks & Spencer chief executive Stuart Machin said on Wednesday the supermarket could not rule out price rises following the Budget.
Mr Machin said he “didn’t quite see the double whammy coming up”, referring to both the NI rise for employers and the reduction of the threshold for it applying.
Asked directly if this would mean higher prices, he said: “I can’t rule out anything because it’s still early days in our planning.”
He estimated that the NI change and the increases to minimum wage would cost the business £120m.
Also on Wednesday, Wetherspoons said that following the Budget taxes and business costs were “expected to increase by approximately £60m… including an estimated 67% increase in national insurance contributions”.
Chairman Tim Martin added: “All hospitality businesses, we believe, plan to increase prices, as a result. Wetherspoon will, as always, make every attempt to stay as competitive as possible.”
Earlier in the week, Primark’s owner Associated British Foods said it may invest beyond the UK because of the “weight of tax rises”.
“We’re an international business as well, we have choices about where we will invest,” said chief executive George Weston.
At the weekend, the chancellor was asked whether there was any chance she would rethink the NI rise for employers.
“I’m not immune to their criticism,” Reeves told the Sunday with Laura Kuenssberg programme, “but we’ve got to raise the money to put our public finances on a firm footing.”
Reeves has been criticised for her repeated claim that the Budget would not include tax rises on “working people”.
The Office for Budget Responsibility has calculated that three quarters of the impact of the NI changes will be felt by employees as bosses hold back on pay rises and hiring in the face of higher wage bills.
During a select committee hearing on Tuesday. the OBR’s Prof David Miles said it was “very plausible” this would disproportionately affect lower-paid workers.
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