Retailers may raise prices after national insurance increase

Britain’s retailers could be forced to increase prices to protect shrinking profits after the national insurance increases announced by Rachel Reeves in the budget, according to a leading City broker.
Peel Hunt said the chancellor’s plan to raise national insurance contributions for employers represented an average 7.5 per cent “hit” to retailers’ pre-tax profits. The bank cut pre-tax profit forecasts for six retail stocks: Boohoo, Halfords, Pets at Home, Pro Cook and Topps Tiles.
Peel Hunt said the sector would have to move fast to offset the margin hit, warning that “efficiencies will be sought, investment opportunities may be cut, and prices for some retailers will have to rise”.
A new survey of medium-sized privately owned businesses found that six in ten have put hiring plans on hold as a result of the planned increase in NICs.
The survey of 400 founders by Helm, the membership group, said a further 16 per cent of the 400 business founders it surveyed planned to cut jobs to absorb the increased tax burden.
Andreas Adamides, chief executive of Helm, said: “This policy is a threat to our nascent recovery and should be reversed before it does major damage.”
As announced in the budget last month, the rate of employer NICs will increase by 1.2 percentage points to 15 per cent from April, while the earnings threshold at which employers start paying contributions will fall from £9,100 to £5,000.
The changes have sparked a backlash from businesses, charities and GPs, and warnings that the new measures risk job losses for thousands of low-paid staff in labour-intensive parts of the economy.
Supermarkets, pubs and restaurant chains, which employ large numbers of lower-paid workers, are being particularly hard hit.
Fuller, Smith & Turner has estimated a £3 million hit from the move, while the planned increase in the minimum wage will cost the pub group an extra £5 million a year.
Simon Emeny, its chief executive, said the business would need to increase prices across its hotels and pubs to mitigate the cost increases.
Michael Turner, chairman of Fullers, which employs 5,500 people, said the “unintended consequences” of the chancellor’s budget decisions will push inflation higher, pile pressure on wages and “drive many businesses to the wall”.
Tesco faces a £1 billion increase in its NI bill, according to an analysis by Morgan Stanley, which the FTSE 100 supermarket chain did not dispute.
The bosses of Sainsbury’s, Asda and Morrisons have all detailed the rises they are facing, which add up to a combined £1.3 billion over the course of this parliament.
Lord Rose of Monewden, the chairman of Asda, said the change would “hit business hard” and would be “inflationary to a degree”, while the Sainsbury’s boss, Simon Roberts, said the budget would result in higher food prices.
More than 200 hospitality bosses added to the chorus of warnings to the chancellor, writing to her to spell out their “grave fears” about the impact on the embattled sector, which they estimate will incur nearly £14 billion of extra costs, including the higher national minimum wage, during this parliament.
In the letter to Reeves, orchestrated by the lobby group UK Hospitality, businesses warned that if they cannot pass on costs they would have to “reconsider investment and drastically cut jobs and reduce the hours of team members”. Catering contracts for schools, hospitals and prisons would also be threatened.
The letter was signed by some of the biggest names in the industry, including Phil Urban of the pub group Mitchells & Butlers, Dominic Paul of Whitbread, the owner of Premier Inn, and Nick Mackenzie of Greene King.