Sainsbury’s boss: Barrage of costs from Budget will lead to higher inflation

Sainsbury’s has said shoppers will face higher inflation as a result of shock tax changes from last week’s Budget, which will hit the retailer with an extra £140 million in costs.

The supermarket giant’s boss Simon Roberts said there is “already too much pressure in the pipe” for the retailer to swallow an unexpected cost rise without it affecting prices.

It has become the latest business to warn that increases to company national insurance contributions and a change in the threshold is likely to result in pressure on consumers.

Mr Roberts said Sainsbury’s will see costs rise by £140 million due to the changes, while costs will also be pushed higher by an increase in the national living wage.

He said the “unexpected barrage of costs” will “feed into a higher level of inflation” for consumers.

The chief executive of the UK’s second largest supermarket firm said he had hoped cost increases would be offset by lower business rates but said these will also increase next year.

Mr Roberts said: “I urge the Government to look at bringing forward changes to business rates sooner to help the industry.”

He also called for the Government to “really listen” to concerns from British farmers, who have fiercely criticised Rachel Reeves’ decision to cut the inheritance tax relief on agricultural assets.

It came as the retailer said it is expecting a “strong” trading performance over the festive period after revealing an acceleration in sales.

The supermarket firm said group revenues increased by 2.3% to £17.2 billion for the 28 weeks to September 14, compared with the same period a year earlier.

This came as like-for-like retail sales, excluding fuel, grew by 3.4% for the period, driven by a 4.2% jump in the most recent quarter.

Sainsbury’s said this was partly boosted by an improved performance in its Argos business.

Sales across Argos were 5% lower for the half-year, after its decline slowed to 1.4% in the second quarter from a 7.7% slump in the first quarter.

Meanwhile, sales in the Sainsbury’s business grew by 4.6% in the half-year, after growth improved to 5.1% in the most recent quarter as it continued to improve its share of the UK grocery market.

The retailer said it was boosted by strong sales of its Taste the Difference premium range and its Nectar membership pricing.

Mr Roberts said: “Our food business is going from strength to strength and we’re making the biggest market share gains in the industry, with continued strong volume growth.

“More and more customers are coming to us for their big food shop, recognising our winning combination of value, quality and service.

“As we head into the festive season, there is real energy and excitement at Sainsbury’s and Argos and we’re expecting another strong performance.”

Meanwhile, pre-tax profits dropped by 51% to £76 million because of the impact of the restructuring of its financial services division through a number of major sales.

Its total underlying pre-tax profit was up 4.7% to £356 million.