Food prices are set to rise, as a U-turn by Rachel Reeves will hit supermarkets with a higher business rates bill.
The country’s biggest retailers, including Tesco and Sainsbury’s, have been calling on the Chancellor to exempt grocers from her plans to raise taxes on about 4,000 shops.
But their pleas appear to have fallen on deaf ears as the Financial Times reported that the Treasury has now told supermarkets they will be subject to higher rates as initially set out in last year’s Budget.
The British Retail Consortium (BRC) warned that the Government risks losing the battle against inflation if Ms Reeves presses ahead with her plans.
Alarmingly, food inflation was 4.9 per cent in the 12 months to October, up from 4.5 per cent in September, reigniting concerns over a cost of living crisis.
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 affect ‘big box’ supermarkets – which also act as ‘anchor tenants’ by attracting shoppers into town centres to visit smaller businesses.
Supermarkets have warned that they are coming under increased pressure to keep prices down after grappling with £7billion in extra annual costs from the previous Budget.
Food prices are set to rise, as a U-turn by Rachel Reeves will hit supermarkets with a higher business rates bill. Pictured: British Chancellor of the Exchequer, Rachel Reeves, looks on as she speaks with staff at a Primark store in London, England, November 24, 2025
Helen Dickinson, chief executive of the BRC, said: ‘The Chancellor promised that these reforms would rebalance business rates across the economy to support our high streets.
‘If she chooses to land large retailers with an even bigger burden, now and in the future, it will be our high streets that suffer, with fewer jobs, less investment, and higher prices for customers.’
Household names, including Tesco and Asda, wrote to the Chancellor last month to warn that their ‘ability to absorb additional costs is diminishing’ and that it ‘will be households who inevitably feel the impact’ of higher rates.
The letter was also signed by bosses at, Sainsbury’s, Aldi, Iceland, Lidl, Marks & Spencer, Morrisons and Waitrose.
A U-turn is likely to trigger a wave of anger among some of Britain’s biggest businesses, which had been ‘really convinced’ the Government had listened to them on the issue, one retail source said.
It comes as Ms Reeves has been accused of taking an ‘anti-business’ approach to her handling of the economy.
‘This was not just speculation – this had been communicated. The fact they are changing things at the last minute after months of leading us up the garden path really shows the mess of their miscommunication around this Budget,’ the FT quoted an industry source as saying.
Meanwhile John Roberts, founder and chief executive of online electricals seller AO World, said Labour ‘couldn’t run a bath, let alone a business’.
He blasted the party for ‘a lack of conviction, a lack of courage and a lack of capability’, revealing that his company has moved 100 roles to South Africa over the past year due to Ms Reeves hiking up wages and National Insurance contributions.
