Retailers To Pass £1.7bn Cost Hike To Shoppers

Retailers are set to pass on an estimated £1.7bn in additional costs to shoppers over the next year as they grapple with rising expenses triggered by Chancellor Rachel Reeves’s Budget changes.

According to research from Retail Economics, businesses will face a collective £5.56bn increase in costs starting this week. The surge stems from several policy changes, including National Insurance hikes taking effect on April 6, an increased minimum wage from April 1, and a £720m rise in business rates.

Retailers are expected to absorb £1.76bn of the additional costs through reduced profits, but consumers will bear much of the burden as companies raise prices to offset the financial strain. The remainder will be managed through cost-cutting measures.

Richard Lim, chief executive of Retail Economics, warned that the retail sector is facing significant financial pressure. “Retailers are staring down the barrel of a £5.6bn wave of additional costs that will squeeze margins and threaten jobs across the industry. With operating costs rising sharply, many retailers have little choice but to absorb some of the financial pain while cautiously passing costs on to consumers already facing their own pressures.”

Lord Wolfson, CEO of Next, echoed these concerns last week, cautioning that the rising cost burden on businesses would inevitably impact consumers. “Policymakers should not allow themselves to believe that burdening ‘big’ business does not impact the lives of millions of ‘ordinary’ people because it does,” he said.

The research findings are likely to stoke fears over inflation, particularly as new tariffs expected from Donald Trump this week could exacerbate price pressures.

A separate report from tax software firm Ryan revealed that the UK’s overall business rates bill is set to rise by £1.5bn from April 1, coinciding with the start of the new financial year. The reduction of business rate discounts for 252,414 high street properties will impose an additional £1.03bn tax burden on retail, leisure, and hospitality companies.

Alex Probyn from Ryan warned that the changes would hit small and independent businesses the hardest. “These increases will disproportionately affect sectors already struggling, while medium to large-sized businesses across all industries tell us that the standard rate of tax is now a disincentive to invest and is anti-growth,” he said.

The Office for Budget Responsibility (OBR) recently halved its growth forecast for 2025 to just 1%, citing high interest rates and declining business and consumer confidence.

Soaring tax bills have already prompted many companies to scale back hiring, with business leaders arguing that the National Insurance hike has made employment costs unsustainable. The UK’s tax burden is now at its highest level since World War II.

Despite growing concerns, Chancellor Reeves has refused to rule out further tax increases. Last week, she defended her position, stating: “I’m not going to write four years’ worth of Budgets.”