Primark and Kingsmill Owner Warns Against Budget Moves as Food Inflation Set to Ease

The head of Associated British Foods, the conglomerate behind Kingsmill and Primark, has urged Chancellor Rachel Reeves not to further damage consumer confidence in the forthcoming budget announcements. Speaking out just as food price inflation appeared to be levelling off, CEO George Weston argued that prior labour cost increases, prompted by the Chancellor’s first budget, had already been passed onto customers, driving recent inflation at supermarket tills.

Labour cost hikes were absorbed by many employers, but with those now priced in, food inflation is forecast to gradually subside. Commodity costs have remained relatively stable, giving the sector some much-needed breathing space. According to Worldpanel data, grocery inflation hit 5 per cent in August and broader inflation reached 3.8 per cent in July, figures which contributed to thinner consumer wallets and investor caution.

Primark, the high street fashion chain owned by ABF, managed to hold clothing prices steady for the last year. The retailer leveraged technology such as self-service tills, and benefitted from falling freight and cotton prices to offset wage increases. Weston noted that Primark’s typical shoppers had reined in discretionary spending in response to rising grocery bills. UK and Ireland sales ticked up by 1 per cent in the six months up to 13 September, largely thanks to new store openings. Yet shares in ABF fell more than 13 per cent after weaker than hoped performance at Primark branches in mainland Europe and a warning over lower than expected sugar profits.

The group forecast a £40 million loss at its sugar division, which includes the soon-to-close Vivergo ethanol facility. ABF expects group sales in established Primark stores to fall by 2 per cent for the six months to September, with sluggish figures in the UK and declines evident in Germany, France and Italy. Weston cited political instability in France and ongoing consumer uncertainty caused by the Ukraine conflict and persistent inflation as key drags in Europe. In spite of these hurdles, Primark has grown its market share in the tough UK retail landscape, even as online rival Shein continues to squeeze margins.

Retailers remain wary of possible further tax rises for business set to be announced in the November budget. Weston advocated for action to address the so-called de minimis loophole, a tax break that lets companies like Shein import low-value items into the UK without customs duties, costing the Treasury significant revenue. He also called for plans to hike business rates for large high street retailers to be reconsidered, warning that such moves risked compounding already fragile consumer sentiment and dampening investment returns.