Blow for drivers as major retailer issues price hike warning after Budget tax hit

A MAJOR retailer has warned that it may need to push up prices at its repair garages after Labour’s tax raid in the Budget last month.

The chain said that the cost implications of next April’s increase in national insurance contributions (NICs) and the minimum wage increase were “particularly acute”.

Halfords has more than 12,000 employees so the Budget changes will send its wage bill soaring by around £23million.

It said only around £9million of the extra costs were already included in its plans for 2025-26 and mitigated.

As a result it may need to “pass through” the higher cost of wages to customers across its garages.

The group said it would be difficult to fully mitigate a single-year cost increase of this size.

This will be particularly evident in its retail business, where many of its products and categories are add-ons or may be big ticket and substantial cost has already been removed in recent years.

The group added: “We anticipate being able to pass through wage inflation more easily in the Autocentres business, where a greater proportion of revenue relates to services.”

But Greg Stapleton, chief executive of Halfords, said that the retailer will “work hard to mitigate these costs”.

He added: “The cost implications from the recent UK Budget are particularly acute for a specialist retailer that provides expert advice and assistance to customers, face to face.”

The news comes as half-year results out today showed the company’s pre-tax profits fell 23.3% to £17.8million in the six months to September 27.

Revenues also dropped by 0.1%, with more difficult retail trading offsetting growth in its Autocentres arm.

Meanwhile, profits slumped by 1.4% on an underlying basis, to £21 million.

Halfords is calling on the Government to help soften the financial blow by overhauling the Apprenticeship Levy.

This levy is charged at 0.5% and is paid by large employers with a pay bill of more than £3million.

Stapleton said: “We urge the Government to consider alternative ways of supporting businesses like ours, including the acceleration of Apprenticeship Levy reform, which would help us to upskill existing colleagues and offset some of the new headwinds.”

Other retailers warning of rising costs

Halfords’ announcement follows price increases from many other retailers and hospitality groups.

Yesterday Greggs’ boss Roisin Currie warned that prices could rise after the Budget tax changes.

She said the measures rolled out by Chancellor Rachel Reeves would put pressure on prices, but it was likely to be only “pennies”.

Meanwhile, last week Lidl chief Ryan McDonnell told The Sun that the tax raid had left the major supermarket with “tens of millions of pounds” in additional costs.

Bosses of major retailers including Asda, Primark, Sainsbury’s and M&S have also issued similar price warnings.

Asda chairman Stuart Rose said the increase would cost the supermarket £100million, which would inevitably lead to price increases.

He explained: “You cannot absorb £100milion of cost. We don’t have a magic money tree in Leeds.”

His warning followed comments by Sainsbury’s chief executive Simon Roberts, who said the supermarket “didn’t have the capacity” to absorb this level of unexpected cost inflation.

He said the National Insurance hike would cost the business £140million.

Meanwhile, Sainsbury’s is already looking to close Argos sites to save money.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories