The retail sector will see stores close and prices rise due to tax rises in the budget, a group of retailers have written in a letter to the chancellor.

The letter has been signed off by 79 businesses that belong to the British Retail Consortium (BRC), including Spar, Midcounties Co-operative, Scottish Grocers’ Federation, CJ Lang, One O One Convenience Stores, and major grocers such as Tesco, Sainsbury’s and Lidl, as well as trade group Associated Independent Stores.

The Budget included measures that could significantly impact independent retailers, including a national living wage rise, reduction in business rates discount and a vaping tax.

Major grocers have said the “cumulative burden” of the Budget changes and other policies already in the pipeline will add billions in costs to a sector with a 3% to 5% profit margin.

The letter said: “The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

BRC calculated the changes would add more than £7bn a year in costs to their businesses and said it would “not be possible to absorb such significant cost increases over such a short timescale”.

“The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level.”

Research by Better Retailing has estimated that local shops face cost rises of approximately £3,303 due to changes announced in the Budget.

Autumn Budget: Employer National Insurance rise, retail crime funding and vaping tax

Scottish Retail Consortium letter

The news comes as the Scottish Retail Consortium (SRC) revealed it has written to Scottish ministers, calling for the abandonment of a mooted surtax on grocery stores and for the government to deliver competitive business rates to restore “the level playing field with England” for firms paying the Higher Property Rate. The SRC is also calling for a reduction of any inflationary uplift on Scotland’s three business rates, and use of Barnett Consequentials from reductions in English rates to reduce rates in Scotland.

The group also estimates the UK’s Budget to cost Scottish retailers £190m a year, with changes to employers’ National Insurance Contributions to have a “significant and disproportionate impact” on the retail industry.

Further UK government measures impacting Scotland include “the above-expectations uplift in the statutory living wage and the soon to be introduced extended producer responsibility levy for packaging”, the letter said. 

“The sheer scale of the cost increase announced by UK ministers is alarming, more so given Scottish retail sales have been flatlining for the past five months,” it continued. “This will be incredibly difficult to absorb and will have consequences for retailers’ investment plans, staffing and employment, and potentially shop prices. It will also affect suppliers.

“Against this backdrop, it is unconscionable that Scottish ministers could compound the costs crisis facing the retail industry by introducing a business rate surtax on grocery stores.

“To this end, we implore you to ditch the mooted business rate surtax. Furthermore, as set out in our Scottish Budget recommendations paper and Tax Strategy submission, we ask for a focus on competitiveness.”

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