BOSSES at Britain’s biggest supermarkets are urging the Chancellor not to hit shops with a new business rates surtax, warning that shoppers will face higher prices if costs go up.
A letter organised by the British Retail Consortium (BRC) and sent to Rachel Reeves argues that keeping taxes low for supermarkets would help control food inflation.
It’s signed by top UK bosses from Tesco, Sainsbury’s, Aldi, Asda, Iceland, Lidl, Marks & Spencer, Morrisons, and Waitrose.
They say that if shops face extra charges, customers will end up paying more at the tills.
The BRC is especially concerned about a new tax for large stores, which are properties worth over £500,000.
The idea is for supermarkets to pay more so smaller high street shops can get a tax cut.
These changes are expected to be confirmed in the autumn Budget next month and could start from April.
However, the BRC points out that there are around 4,000 large stores with a rateable value above £500,000, and these shops are already struggling with high costs.
Over the past five years, 1,000 of them have closed.
In their letter to the Chancellor, supermarket bosses warn that their “ability to absorb additional costs is diminishing”.
It reads: “If the industry faces higher taxes in the coming Budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging and it will be households who inevitably feel the impact.
“Given the costs currently falling on the industry, including from the last budget, high food inflation is likely to persist into 2026.
“This is not something that we would want to see prolonged by any measure in the Budget.
“Large retail premises are a tiny proportion of all stores, yet account for a third of retail’s total business rates bill meaning another significant rise could push food inflation even higher.”
The letter concludes by asking Ms Reeves to “address retail’s disproportionate tax burden” which it said would “send a strong signal of support for the industry and of the Government’s commitment to tackling food inflation”.
Helen Dickinson, the BRC’s chief executive, said: “Supermarkets are doing everything possible to keep food prices affordable, but it’s an uphill battle, with over £7 billion in additional costs in 2025 alone.
“From higher national insurance contributions to new packaging taxes, the financial strain on the industry is immense.”
The Treasury has been contacted for comment.
What’s happening to food prices?
Office for National Statistics (ONS) figures reveal the price of food and non-alcoholic drinks are up 4.5% compared to last year – even though the UK’s overall inflation rate stayed at 3.8% in September.
That’s a slight improvement from last month’s food inflation rate of 5.1%, but a positive figure still means prices are climbing.
It means a basket of groceries that cost £100 a year ago now costs £104.50, leaving households feeling the strain at the checkout as everyday essentials become more expensive.
But not all supermarket staples are affected equally.
Some supermarket essentials are now up to 26% pricier than they were a year ago, while a handful of items have actually dropped in price.
The most dramatic increase is on beef and veal, which has surged by a whopping 26.9%, while chocolate has also seen its cost climb by 18.1%.
Dairy staples have become much more expensive, as the price of butter has jumped by 17.5% and whole milk is up 12%.
Even popular drinks and treats haven’t escaped the squeeze, with coffee prices up 13.4% and sweets rising by 10.8% over the past year.
Lamb, ready meals, bakery products and soft drinks have also seen increases of at least 6% compared to last year.
Industry bodies like the British Retail Consortium say rising prices are down to higher wages, increased national insurance contributions, and new packaging taxes, which have all added to the costs for retailers and suppliers.
The Food and Drink Federation also said food manufacturers were coming under pressure from greater business costs.
Will food prices continue to rise?
Economists think both CPI and food inflation will continue to remain at similar levels in the coming months.
Martin Sartorius, principal economist at the CBI, said: “Inflation came in lower than expected in September, bringing some relief to hard-pressed households, though it remains well above the Bank of England‘s 2% target.
“Price pressures should begin to slowly ease in the coming months, but we are unlikely to see a more substantial downshift in inflation until the first half of next year.”
However, it’s still difficult to say whether food prices will fall or keep rising until after the details of Rachel Reeves‘ Autumn Budget are revealed on November 26.
How to save money on your food shop
Chief Consumer Reporter James Flanders reveals how you can save hundreds of pounds a year:
Odd boxes – plenty of retailers offer slightly misshapen fruit and veg or surplus food at a discounted price.
Lidl sells five kilos of fruit and veg for just £1.50 through its Waste Not scheme while Aldi shoppers can get Too Good to Go bags which contain £10 worth of all kinds of products for £3.30.
Sainsbury’s also sells £2 “Taste Me, Don’t Waste Me” fruit and veg boxes to help shoppers reduced food waste and save cash.
Food waste apps – food waste apps work by helping shops, cafes, restaurants and other businesses shift stock that is due to go out of date and passing it on to members of the public.
Some of the most notable ones include Too Good to Go and Olio.
Too Good to Go’s app is free to sign up to and is used by millions of people across the UK, letting users buy food at a discount.
Olio works similarly, except users can collect both food and other household items for free from neighbours and businesses.
Yellow sticker bargains – yellow sticker bargains, sometimes orange and red in certain supermarkets, are a great way of getting food on the cheap.
But what time to head out to get the best deals varies depending on the retailer. You can see the best times for each supermarket here.
Super cheap bargains – sign up to bargain hunter Facebook groups like Extreme Couponing and Bargains UK where shoppers regularly post hauls they’ve found on the cheap, including food finds.
“Downshift” – you will almost always save money going for a supermarket’s own-brand economy lines rather than premium brands.
The move to lower-tier ranges, also known as “downshifting” and hailed by consumer expert Martin Lewis, could save you hundreds of pounds a year on your food shop.
