Blow for shoppers as ANOTHER major retailer issues price hike warning after Budget tax hit
ANOTHER major retailer has warned that prices will have to rise following Rachel Reeves’ Budget tax hikes.
The boss of Currys has said price rises will be “inevitable” as it prepares to face £32million in extra costs due to the Autumn Budget.
Alex Baldock, group chief executive of the electronics chain, also warned that policies announced by the Chancellor in October will “depress investment and hiring” plans.
It is the latest retail business to indicate that some shoppers will see a knock-on effect from increases to business National Insurance contributions and an increase in the National Living Wage.
Employers currently pay NICs for most workers earning more than £9,100 a year.
The sum they pay is the equivalent of 13.8% of the employee’s earnings above that threshold.
For an employee earning £30,000, for example, the employer would pay NICs of £2,884.20.
But in the Budget, the government announced it would increase the tax rate to 15% and reduce the threshold at which firms must pay to £5,000.
It’s estimated that the move will raise £25billion – the equivalent of around £800 per employee for each firm.
At the same time, the minimum wage will rise to £12.21 an hour next year, and the minimum wage for people aged 18-20 will rise to £10 an hour, an increase of £1.40.
Currys said it predicts £21million in extra costs linked to National Insurance and the minimum wage, a further £9million in costs passed through from partner businesses and an extra £2million in business rates costs.
Mr Baldock said the group still expects to grow profits this financial year “despite new and unwelcome headwinds from UK government policy”.
He added: “These will add cost quickly and materially, depress investment and hiring, boost automation and offshoring, and make some price rises inevitable.”
The electronics and white goods retailer revealed that group revenues increased by 1% to £3.92billion for the half-year to October 26, compared with the same period a year earlier.
Currys, which runs 715 stores, said “strong” sales in the UK helped to offset a modest decline in its Nordics business.
UK like-for-like revenues increased by 5%, with total revenues climbing to £2.34billion in the region.
The group also revealed that it reduced its pre-tax loss for the half-year to £10million, from a £44 million pre-tax loss a year earlier.
It has said trading is in line with expectations in the run up to Christmas amid strong demand for AI-related products.
Mr Baldock said: “We were well prepared for our peak trading period, with healthy stock and market-beating, best-ever deals that show our unmatched importance to suppliers.
“We’re trading in line with expectations. One highlight is rising demand for AI laptops, where we enjoy over 75% market share in the UK.”
How to compare prices to get the best deal
JUST because something is on offer, part of a sale or looks cheap doesn't mean it's always a good deal.
There are plenty of comparison websites out there that’ll check prices for you – so don’t be left paying more than you have to.
Most of them work by comparing the prices across hundreds of retailers.
Here are some that we recommend:
- Google Shopping is a tool that lets users search for and compare prices for products across the web. Simply type in keywords, or a product number, to bring up search results.
- Price Spy logs the history of how much something costs from over 3,000 different retailers, including Argos, Amazon, eBay and supermarkets. Once you select an individual product you can quickly compare which stores have the best price and which have it in stock.
- Idealo is another website that lets you compare prices between retailers. All shoppers need to do is search for the item they need and the website will rank them from the cheapest to the most expensive one.
- CamelCamelCamel only works on goods being sold on Amazon. To use it, type in the URL of the product you want to check the price of.
OTHER BUSINESSES TAKING A HIT
More than 70 businesses, including Tesco, Asda and Sainsbury’s, have told Rachel Reeves in an open letter that the changes announced in the Autumn Budget mean price hikes are a “certainty”.
The changes come into effect next April.
So far, retailers including Greggs, Toby Carvery owner Mitchells and Butler and Wetherspoon have all warned of price rises.
Here, we have listed all the retailers warning of price rises following Labour’s Budget tax raid.
Greggs
Roisin Currie, chief executive at Greggs, said the measures rolled out in the Autumn Statement would put pressure on prices, though is likely to be only “pennies”.
On average, Greggs customers spend £4 at its stores, and this is forecast to rise marginally.
It comes despite Currie promising there were “no plans” for further price increases this year after bumping the price of its sausage roll in July,
Over the summer, Greggs confirmed the price of its much-loved pastry snack and its vegan alternative had risen by 5p to £1.25.
She said the move was necessary at the time after experiencing a rise in costs from having to pay a higher national living wage for its 32,000-strong workforce.
Mitchells & Butlers (M&B)
All Bar One owner Mitchells & Butlers (M&B) told The Sun the price of pints could rise by between 10p and 15p.
The group, which also owns brands including Toby Carvery, said higher wage expenses are “by far the most significant increase” in its cost base following moves announced in the Autumn Budget.
Chief executive Phil Urban said M&B is facing around £23million a year in extra costs from the rise in national insurance contributions alone, with the increase in the minimum wage also sending its wage bill surging.
In total, its costs will rise by around 5%, or £100million, in 2024-25.
Mr Urban said the group’s prices would likely increase as part of efforts to mitigate the extra expenses.
Halfords
Halfords has warned that it may need to push up prices at its repair garages.
The retailer 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 reduce the impact of a one year cost increase of this size.
But Graham 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.”
Royal Mail
Royal Mail has warned that stamp prices could rise again after the Budget hit.
The boss of the postal service said hiking fees — just a month after the latest rise — was a possibility as it faces an enormous burden of extra costs.
Martin Seidenberg, chief exec of International Distribution Services, said: “We are looking at all measures including pricing, parcel cost efficiencies, investment plans, auto- mation and our parcel network.
“I cannot rule out [increasing stamp prices] but we will look at not just consumer letters but also business mail and parcels.”
The cost of a first class stamps went up by 30p to £1.65 last month, while second class stayed at 85p.
Wetherspoons
Wetherspoons boss Tim Martin has also warned of price rises.
The pub chairman said it would aim to stay competitive on customer costs but that all hospitality businesses faced the same pressures.
The chain’s tax bill is expected to rise by two-thirds next year after the Chancellor announced a hike in the national insurance for employers.
Martin said: “Cost inflation, which had surged to high levels in 2022, gradually diminished over the subsequent two years.
“However, it has now significantly increased again following the budget.
“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.”
Wetherspoons anticipates that tax and business costs will increase by approximately £60million over the next year, including an estimated 67% rise in national insurance contributions.
Sainsbury’s
Simon Roberts, chief executive of Sainsbury’s, said the National Insurance hike would cost it £140million and warned that shoppers will face higher food prices.
Mr Roberts said: “It will lead to inflation and it’s pretty clear it’s going to come pretty fast.
“Given the low margins of the industry, there isn’t the capacity to absorb this level of unexpected cost inflation.”
AO World
The boss of online electricals retailer AO World has warned about price rises to offset more than £8 million in extra wage costs.
AO World estimates its wage bill will go up by around £4million due to the increase in NICs and about another £4million with next April’s minimum wage rise.
Founder and chief executive John Roberts said the group is likely to have to raise prices and make savings to mitigate the impact.
He confirmed “some of it will go into prices” but said it is too early to say by how much.
He stressed that the group would also look to use growth and efficiencies to counter the blow.
“This whole Budget is extremely inflationary for retailers,” he said.
“Is anyone naive enough to think that will not follow into pricing?
“From our point of view, it’s not about cost savings and taking headcount out; it’s about how we drive efficiencies and grow as a business.”