Business Rates Hike Set To Add To Food Inflation As Retailers Warn Of Price Surge

The Chancellor, Rachel Reeves, is facing fresh pressure from industry leaders as forecasts indicate a planned business rates increase for large retailers could drive food prices even higher in the run up to Christmas. Helen Dickinson, chief executive of the British Retail Consortium (BRC), cautioned that the proposed rise will come at the “worst possible moment” for both businesses and consumers, warning that the costs are likely to be compounded by April’s £25 billion employer national insurance hike.

Retailers have already been grappling with a series of economic headwinds, including rising supply chain costs, weak harvests and the knock-on effects of tax rises. Despite absorbing much of these pressures, two thirds of chief executives polled by the BRC now say they expect to increase prices to cope with higher national insurance contributions. Pressure on household budgets has increased, with UK inflation rising to 3.6 per cent in the 12 months to June—driven mostly by fuel and food. Food inflation alone sits at 4.5 per cent, the highest seen in fifteen months.

Plans announced by Reeves’s Treasury will see business rates for stores and supermarkets with a rateable value above £500,000 rise substantially from April 2026, with analysts predicting an extra £600 million tax bill for the UK’s largest retailers. The government maintains this will ease the burden for smaller high street shops, but industry figures claim the move will have the opposite effect by inflating costs for stores that account for the majority of UK food and clothing sales. The BRC is arguing that bigger stores, already squeezed by rising costs and challenging trading conditions, can only absorb so much before those costs are inevitably passed on to consumers.

This comes amid wider economic worries for Reeves, as annual pay growth slows and unemployment has climbed to 4.7 per cent, its highest rate in four years. Meanwhile, the chancellor’s fiscal position has become more precarious following the reversal of winter fuel cuts and the decision to abandon key welfare reforms, leaving a predicted £5 billion gap in the public finances. Filling this black hole is expected to require further tax increases or spending reductions—both unpopular prospects for households and business alike.

Dickinson is urging government to reconsider the business rates increase and instead reduce the levy for all retailers. She cautioned ministers against introducing any new taxes on an already strained sector, arguing such moves risk impeding growth and deterring investment. Large retailers, she said, not only keep food affordable for millions, but also anchor high streets, support jobs and drive footfall for neighbouring businesses. “Retailers are doing everything they can to shield customers from these mounting pressures, but there is only so much they can absorb before costs start feeding through to prices,” Dickinson said. “If the chancellor presses ahead, many shops will be forced to raise prices, heaping further pressure on families at a time of already acute inflation.”