Retailers face £5.6bn in costs as Budget price hikes loom

Retailers are bracing for a surge in operating costs amounting to £5.56bn, with a significant portion expected to be passed on to consumers through higher prices, according to new research from Retail Economics.

The increased financial burden stems from changes introduced in Chancellor Rachel Reeves’s October Budget, including National Insurance increases taking effect from April 6, a higher minimum wage from April 1, and a £720m rise in business rates.

As a result, retailers are forecasted to absorb a £1.76bn hit to profits, while approximately £1.72bn of the additional costs is set to be passed on to shoppers through price increases. The remaining gap will be covered by internal cost-cutting measures.

Retail Economics chief executive warned that businesses are facing immense financial strain. He told the Telegraph: “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.”

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Next chief executive Lord Wolfson echoed these concerns to the outlet, warning that higher business costs would inevitably impact consumers.

He stated: “Policymakers should not allow themselves to believe that burdening ‘big’ business does not impact the lives of millions of ‘ordinary’ people because it does.”

Further exacerbating concerns, tax software company Ryan reported that Britain’s overall business rates bill will rise by £1.5bn from April 1. The end of business rate discounts for 252,414 high street properties will see retail, leisure, and hospitality businesses shouldering an additional £1.03bn in taxes.

Alex Probyn from Ryan warned that these changes will disproportionately affect small and independent businesses, saying: “Medium to large-sized businesses across all sectors of the economy tell us the standard rate of tax is now a disincentive to invest and is anti-growth.”

Retailers are also facing concerns over inflation, with price hikes potentially exacerbated by new tariffs expected to be announced by former US President Donald Trump later this week.

Meanwhile, the Office for Budget Responsibility recently halved its growth forecast for 2025 to just 1%, citing higher interest rates and declining business and consumer confidence.

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