SUPERMARKETS have warned they will be forced to raise food prices further if they are slapped with tax hikes in the Budget.
Major retailers have said they will have to hike prices and close stores if they are hit with higher business rates.
Labour is planning a shake-up to business rates, which are a tax on properties like pubs, shops and offices, in the new year.
Businesses with large premises, including supermarkets, will be hit with a surtax under the plans.
The changes are expected to be confirmed in Chancellor Rachel Reeves‘ Budget on Wednesday, and would come into force from April.
But supermarkets are now warning that the move will cause misery for shoppers, as already sky-high food prices will rise even further.
British Retail Consortium (BRC) boss Helen Dickinson told the Sunday Times that new taxes will “simply push up the cost of food and other essentials”.
The BRC said around 400 stores could shut if they are hit with higher business rates.
In a last ditch plea by struggling supermarkets, the industry body called for them to be exempt from the surtax.
Food inflation rose to almost 5% last month, latest official figures revealed, despite overall inflation dipping to 3.6%.
And families are feeling the pressure at the till, with a basket of groceries that cost £100 a year ago now costing £104.90 – and prices continuing to go up.
Many supermarket essentials are soaring in price, including beef and veal which rose at a rate of 27% in the 12 months to October.
Chocolate, dairy staples like butter and milk, and coffee, are also rising rapidly.
Experts say that soaring food inflation is partly due to retailers being hit by a hike to employer National Insurance contributions in the last Budget.
“With retail facing £7 billion in additional costs since the last budget, it is little surprise food inflation is back up to almost 5 per cent,” Dickinson added.
Under the business rates shake-up, Labour is planning on introducing a higher rate of tax for business with properties with a rateable value of £500,000 or more.
Ministers want bigger businesses to pay more to subsidise small high street shops.
The BRC has said there are around 4,000 large stores with a rateable value above £500,000, and these shops are already struggling with high costs.
Last month, bosses of Britain’s biggest supermarkets wrote to the Chancellor urging her to keep tax lower for supermarkets to control food inflation.
The letter was signed by top UK bosses from Tesco, Sainsbury’s, Aldi, Asda, Iceland, Lidl, Marks & Spencer, Morrisons, and Waitrose.
The letter read: “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.”
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.
