A MAJOR supermarket chain has said food prices will have to rise over the next six months following the Government’s Autumn Budget.
In recently published accounts, Iceland blamed Rachel Reeves‘s tax raid for hiking its suppliers’ costs.
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The Chancellor bumped up employer National Insurance contributions and the national minimum wage in April, with some suppliers passing these added cost onto supermarkets.
It comes after Iceland‘s boss Richard Walker told the Telegraph in January companies should stop “wallowing” and complaining about the measures announced in the Budget.
Iceland said it was “doing our utmost” to offset rising costs caused by suppliers, but would “inevitably have to pass some of these on to consumers, where we can do so without weakening our own price position in the marketplace”.
It added: “In consequence, we expect UK food price inflation to peak at some 4-5% in the next six months.”
The warning comes after the Bank of England (BoE) estimated food prices will rise to around 5.5% by the end of the year.
The central bank said food inflation was surging due to increased business labour costs and obligations on retailers to reduce packaging waste.
Swathes of retailers and chains have increased the price of products or warned of future hikes after the Government’s Autumn Budget.
Employer National Insurance contributions were bumped up from 13.8% to 15% and the threshold at which they are paid lowered from £9,100 to £5,000 in April.
The national minimum wage was also increased to £12.21.
But the hikes have piled pressure on retailers, with some saying they have to pass the added costs onto customers.
The British Retail Consortium (BRC), which represents retailers, cautioned in July prices will keep rising.
Helen Dickinson, its boss, exclusively told The Sun last month: “Retailers are doing everything they can to shield consumers from the worst of the inflationary pressures.
“However, with £7billion in additional costs from the last Budget still filtering through, rising inflation is becoming inevitable.”
She warned that if the Government loaded more costs onto the retail sector at this year’s Autumn Budget, food inflation could rise even more with “hardworking families” having to pay higher prices at the tills.
Two-thirds of 52 leading retailers surveyed by the BRC in January said they were considering raising prices due to the Government’s tax raid.
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The boss of M&S said the supermarket would have to pass on extra costs due to the National Insurance and minimum wage hikes.
Stuart Machin said any price rises would be “small and behind the market” but did not say how much they would go up by.
Meanwhile, Sainsbury’s warned the Budget would cost it an extra £140million.
Its CEO Simon Roberts warned that the chain would need to work with its suppliers to minimise the impact on customers.
Next also warned its costs would increase by £67million, some of which would need to be passed on to shoppers.
It warned that sales growth would pull back sharply until the end of 2025, “as employer tax increases, and their potential impact on prices and employment, begin to filter through in the economy”.
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The Centre for Retail Research (CRR) has warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
It comes after almost 170,000 retail workers lost their jobs in 2024.
End-of-year figures compiled by the Centre for Retail Research showed the number of job losses spiked amid the collapse of major chains such as Homebase and Ted Baker.
It said its latest analysis showed that a total of 169,395 retail jobs were lost in the 2024 calendar year to date.
This was up 49,990 – an increase of 41.9% – compared with 2023.
It is the highest annual reading since more than 200,000 jobs were lost in 2020 in the aftermath of the COVID-19 pandemic, which forced retailers to shut their stores during lockdowns.
The centre said 38 major retailers went into administration in 2024, including household names such as Lloyds Pharmacy, Homebase, The Body Shop, Carpetright and Ted Baker.
Around a third of all retail job losses in 2024, 33% or 55,914 in total, resulted from administrations.
Experts have said small high street shops could face a particularly challenging 2025 because of Budget tax and wage changes.
Professor Bamfield has warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”
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