Bosses of Britain’s biggest supermarket chains have warned that food prices could rise again if Chancellor Rachel Reeves increases taxes on retailers in her upcoming budget.
In a joint letter to the Treasury, executives from Tesco, Sainsbury’s, Asda, Morrisons, Aldi, Lidl, Waitrose, M&S and Iceland warned that households would “inevitably feel the impact” of any increase in business rates or other charges on the industry.
“Given the costs currently falling on the industry, including from the last budget, high food inflation is likely to continue until 2026,” the letter said. “We don’t want this to be extended by any measure in the budget.”
The supermarkets’ intervention comes amid speculation that Reeves will unveil new tax measures to help plug a £22bn deficit in the public finances after the Office for Budget Responsibility downgraded growth forecasts.
Retailers are particularly concerned about the government’s plans to introduce a “trade tax surcharge” on large commercial properties – a move that is expected to hit supermarkets and distribution centers hardest.
Under the proposed changes, smaller shops and hospitality establishments under £500,000 will benefit from lower rates, while large premises above this threshold – including large retail stores and warehouses – will face higher bills.
The British Retail Consortium (BRC), which represents the country’s largest grocers, said large stores make up only a small proportion of retail locations but contribute around a third of the sector’s total sales.
BRC chief executive Helen Dickinson said: “Retailers are doing everything they can to keep food prices affordable, but it’s an uphill battle with more than £7 billion in additional costs expected in 2025 alone. The easiest way to help is to ensure prices for businesses don’t rise further.”
Reeves faces one of the toughest budget tests of her term ahead of the release of the fall budget on November 26. After last year’s £40bn tax package, which included an increase in employers’ national insurance contributions, she promised “not to ask for any further tax rises”.
But analysts at the Institute for Fiscal Studies (IFS) warn that weaker growth, rising borrowing costs and unfunded spending commitments will almost certainly require further tax increases.
The Chancellor has suggested that “those with the broadest shoulders should pay their fair share”, but economists question whether targeted taxes on professional associations or the wealthy can raise sufficient funds without broader measures.
Food inflation, which peaked at over 19 percent in 2023, has eased but is still well above pre-pandemic levels. The Office for National Statistics (ONS) reports that prices for staple foods such as butter, milk, chocolate and coffee have risen by 12 to 19 percent compared to last year.
Retailers argue that additional fiscal pressure could extend high prices into 2026, especially as the sector grapples with global supply shocks, poor harvests and rising labor costs.
Tesco chief executive Ken Murphy recently said “enough is enough” on company taxation and revealed higher national insurance contributions had already cost the company £235m this year.
Despite these pressures, Tesco expects a full-year profit of up to £3.1 billion, while Lidl reported its pre-tax profit more than tripled in the year to February, rising to £156.8 million.
A Treasury spokesman said tackling inflation “remains a priority”, pointing to recent measures to cut business rates for smaller retailers, including butchers, bakers and high street stores.
They added: “Corporate tax rates are adjusted to reflect changes in property values so that the system continues to generate the same real income. Even if the value of a property increases, its bill may still fall if the tax rate is reduced.”
