Millions of families face further rises in food prices if Rachel Reeves presses ahead with plans to hit big shops with higher business rates, industry experts warned today.
The British Retail Consortium (BRC) said the Chancellor ‘risks losing the battle against inflation‘ if she hikes taxes on about 4,000 shops – including supermarkets.
Overall inflation is stuck at 3.8 per cent – the highest in the G7 – according to the latest official figures, having more than doubled since Labour raised taxes in October.
And food inflation passed 5 per cent for the first time in 18 months, going from 4.9 per cent to 5.1 per cent, sparking warnings of ‘a serious cost of living problem’.
The BRC, which represents household names including Tesco and Asda, is now warning that food inflation will stay above 5 per cent ‘well into 2026’ if Ms Reeves presses ahead with plans to raise business rates on the country’s largest shops.
The Food and Drink Federation also warned that inflation in the sector could reach nearly 6 per cent this year as tax and regulation push up prices.
BRC chief executive Helen Dickinson on BBC Radio 4’s Today programme: ‘What we’ve seen is food inflation really tipping up over the course of the last year.’
She pointed out that it was 1.3 per cent as recently in August 2024 before rising to 5.1 per cent in the most recent Office for National Statistics figures for last month.
Last week, the Bank of England held off from an interest rate cut amid fears that rising food prices were putting upwards pressure on headline inflation.
And Ms Dickinson cited the Bank’s latest report on holding interest rates at 4 per cent amid concerns about inflation, which said the increase in National Insurance contributions had contributed to the rise in prices.
She continued: ‘So the Government really has a choice and that’s really the point we’re making today. Risk losing that battle against inflation as we look forward or actually use the Budget to bring inflation down.
‘I’m sure the Chancellor will want to protect households and enable retailers to continue to do everything they can to hold back prices.’
Labour has promised to ‘level the playing field’ between High Street stores and online retailers by reforming the hated business rates system which taxes commercial properties.
The Chancellor will lower rates paid by smaller shops by hitting larger premises with higher taxes – targeting warehouses used by internet titans such as Amazon.
But retailers say this will also hit flagship stores – ‘anchor tenants’ that attract shoppers into town centres.
British Retail Consortium chief executive Helen Dickinson (pictured) believes the Chancellor ‘risks losing the battle against inflation ‘ if she hikes taxes on about 4,000 shops
Ms Dickinson said: ‘The Treasury’s finalising their plans to support the high street, and this includes a much-needed reduction in business rates for retail, hospitality and leisure premises.
‘But the biggest risk to food prices in particular would be to include large shops, including supermarkets, in this new surtax on large properties that is being introduced to fund it.
‘What the plans actually do is look at all large properties, so what we’re not talking about here is just retail, hospitality and leisure. And right across the economy for all other sectors, business rates isn’t such a big factor as it is in retail, hospitality and leisure.
‘It isn’t having the same impact on our high streets leading to empty shops and having that knock-on effect on higher prices.
‘And those larger shops, they actually employ a third of the people who work in retail and pay about a third of the business rates bill of the whole industry. So it’s a big impact, and that’s an opportunity for the Budget coming up.’
Economists have been sounding the alarm over the impact of stubborn inflation on living standards.
Ms Reeves’s acknowledgement last week that ‘families are finding it tough’ was echoed by the BRC’s findings that people are worried about the rising cost of living.
An Opinium survey of 2,000 people commissioned by the British Retail Consortium asked the question: ‘Thinking about the year ahead, which of the following concern you?’
An Opinium survey of 2,000 people commissioned by the BRC found the greatest concern was ‘prices rising faster than wages’, with 57 per cent of respondents agreeing.
Retailers are nervous after being hit with £7billion in cost increases in last year’s Budget.
Ms Reeves slapped firms with increases to National Insurance contributions, wages and higher packaging taxes.
Firms are also braced for Labour’s workers’ rights bill that threatens to push up costs.
And there are worries that the timing of the Budget on November 26 will hit consumer spending in the run-up to Christmas.
Several supermarket bosses have publicly urged the Chancellor not to damage the sector with more costs.
Aldi UK boss Giles Hurley last week warned that higher taxes ‘should be considered very carefully’.
