High street firms face ‘terrible choices’ after Budget tax rises

Hospitality and retail businesses have said they have “terrible choices to make” about potential cuts to investment and their workforces due to Budget tax rises.

It came amid reports that Tesco is the latest high street giant to face a huge increase in its national insurance bill, with industry bosses calling for the Chancellor to water down her budget plans.

Rachel Reeves revealed a £25.7 billion change to employers’ national insurance contributions in last month’s Budget, which would increase the rate of the tax and the threshold at which firms must pay.

Last week, a raft of major retailers, including Sainsbury’s, Asda and Marks & Spencer, warned they will face a major hit to their bottom line as a result, indicating this could also result in some pressure on shoppers.

The Sunday Times reported that Tesco is expected to face a £250 million impact each year due to the national insurance changes.

The figures, which are based on analysis by Morgan Stanley and have not been disputed by the company, would amount to a roughly £1 billion hit over the length of the current Parliament.

Hospitality veteran Luke Johnson, currently an investor and director in bakery chain Gail’s, told BBC Radio 4’s Today programme that companies will now face “really tough choices”.

It’s a tax on jobs, a tax on work, it’s a regressive tax because it will hit low earners, and for labour-intensive businesses like hospitality or retail it's enormously discouraging

The former Pizza Express chairman said: “I think it’s a mistake because it’s a tax on jobs, a tax on work, it’s a regressive tax because it will hit low earners, and for labour-intensive businesses like hospitality or retail it’s enormously discouraging.

“It’s millions of pounds, and we have some terrible choices to make about whether we cut back on growth or we employ fewer people or we change shifts or other impacts.

“Gail’s is pretty successful, but I’m involved with other businesses that are still recovering from the devastations of lockdowns and energy inflation and they’re going to face some really tough choices.”

Elsewhere, restaurant group Various Eateries, which runs to Coppa Club chain, said it will also be affected by the changes.

The group said the national insurance changes and a 6.7% increase in the minimum wage “will substantially increase the costs and administrative burden of employing young people”.