Supermarkets warn chancellors tax plans could drive UK food prices higher

Leading UK supermarket chains have issued a stark warning to Chancellor Rachel Reeves that plans to raise taxes on their sector could result in even higher food prices for households across the country. In a joint letter addressed to the chancellor, bosses from Tesco, Asda, Sainsbury’s, Morrisons, Aldi, Lidl, Marks & Spencer, Waitrose and Iceland cautioned that a proposed increase in a new surtax on business rates would inevitably be felt by consumers.

The supermarket executives emphasised the challenges already facing the industry following the last budget. Measures announced then—most notably a £25 billion rise in employer national insurance contributions and a 6.7% uplift in the national living wage, both implemented in April—have contributed significantly to rising costs. Retailers argue that subjecting large supermarkets to an additional surtax would erode their capacity to keep prices competitive at a time when many families are struggling with the cost of living crisis.

The British Retail Consortium joined this call for caution, with chief executive Helen Dickinson proposing that exempting supermarkets from the new tax would support food inflation control and ease pressure on grocery bills. She noted that this exemption would not disadvantage the public purse, as higher business rates could be targeted at office blocks and industrial properties instead—businesses for whom rates constitute a smaller portion of overall costs.

The government faces pressure to address a widening public finances gap in the upcoming 26 November budget, driving suggestions of increased taxation across several sectors. Treasury representatives insisted that tackling food inflation remains a top priority. Policy steps have already been taken such as raising the national living wage and lowering rates for smaller shops. They also highlighted that increases in property rateable values do not always translate to higher bills under the current system.

Recent official figures show UK inflation held steady at 3.8% last month, with the annual rate of food price inflation easing to 4.5% in September, down from 5.1% in August. However, supermarket leaders stressed that cumulative cost increases have left grocery bills markedly higher compared to only a few years ago. Many within the industry believe that addressing retail’s disproportionate tax burden would signal government intent to back both retailers and households in the battle against stubborn food inflation as the UK continues to navigate economic uncertainty.