Supermarket tax exemption threatens to spark legal showdown with food wholesalers

Britain’s principal food wholesalers have issued a stark warning of potential legal action should Chancellor Rachel Reeves press ahead with plans to grant business rates exemptions to large supermarkets. The Federation of Wholesale Distributors is actively seeking legal counsel amid reports that the upcoming budget could spare major retailers from the steepest tier of business rates, a move wholesalers argue would distort competition and destabilise the food supply chain.

Chief Executive James Bielby stated that such an arrangement would create damaging cost imbalances, likely forcing wholesalers to increase prices for hospitality, the public sector, and independent convenience stores. He cautioned that the public sector, including schools and hospitals, may be unable to absorb these rises, potentially resulting in diminished quality and quantity of food provision. With wholesalers running on slim margins, he contends there is scant capacity to absorb further tax hikes without repercussions across the sector.

Speculation has mounted that Reeves may offer major retailers a reprieve from increased business rates, responding to claims from supermarket industry groups that higher property taxes could prompt widescale store closures and heighten consumer food prices. The Treasury has thus far declined to confirm or deny these reports.

Last year’s government proposals set out to raise business rates on properties valued over £500,000, with new funds intended to support smaller hospitality and retail operators. These measures, due to commence in April, have yet to be finalised, fuelling uncertainty in the market. The British Retail Consortium maintains that, without relief, businesses already grappling with elevated national insurance contributions and minimum wage thresholds could buckle under further pressure.

Food wholesalers like Bidfood, which supplies tens of thousands of pubs, schools, hospitals and other establishments, argue that any exemption extended to supermarkets must be made available to wholesalers as well. Bidfood’s Chief Executive, Andrew Selley, warned that the ability to transport food ‘from farm to fork’ could be impaired without fair treatment, posing risks to the entire UK food system. He described the current proposals as handing supermarkets an inherent cost advantage over those delivering to much of the hospitality and public sectors.

The government maintains that addressing food inflation remains a key priority, reiterating commitments to increase the national living wage and provide rate relief for smaller shops. The coming weeks are expected to prove decisive as the details of the new business rates system are clarified and industry stakeholders await certainty on future operating costs.