November 7, 2024 – British consumers may soon face higher prices as major companies across the retail and hospitality sectors signal that the recent National Insurance (NI) tax hikes will force them to pass on increased costs to shoppers. Following the announcement of tax increases in last week’s Budget, several high-profile firms, including Sainsbury’s, Marks & Spencer, and Wetherspoons, have raised concerns about the impact on prices.
From April 2025, employers will see their NI contributions rise from 13.8% to 15% on salaries above £5,000, a change that is expected to raise £20 billion annually for the government. The measure, one of the largest single tax-raising initiatives in UK history, has been met with concern by businesses, especially in sectors already grappling with inflationary pressures and rising wages.
Sainsbury’s Chief Executive Simon Roberts warned that the new tax could cost the supermarket chain around £140 million, not including additional wage increases. “This barrage of costs… is going to feed through into higher inflation,” Roberts said. He added that while Sainsbury’s would try to mitigate the impact, the competitive nature of the industry meant that some cost increases were unavoidable.
Marks & Spencer’s CEO Stuart Machin also expressed concerns, stating that the retailer could not rule out price increases in response to the new tax burden. He estimated that the combined effect of the NI hike and higher minimum wages could cost M&S up to £120 million. “I didn’t quite see the double whammy coming,” Machin remarked, referring to both the higher NI rates and the reduction in the earnings threshold for NI contributions.
Wetherspoons, the UK’s largest pub chain, also said it expects to face an additional £60 million in taxes and business costs, including a 67% increase in its national insurance bill. Chairman Tim Martin stated that, like many in the hospitality sector, Wetherspoons would be forced to raise prices to offset the higher tax burden. “All hospitality businesses, we believe, plan to increase prices,” he added.
Primark’s parent company, Associated British Foods, warned that the weight of the tax rises could lead to more investment abroad. CEO George Weston stated that the company, which operates globally, has options regarding where to allocate its investments and would consider expanding outside of the UK due to the “weight of tax rises.”
Chancellor Rachel Reeves defended the tax changes, saying they were necessary to secure the UK’s public finances. Speaking to the BBC, she acknowledged the criticism but emphasized that raising funds through taxes was essential for long-term fiscal stability. “We’ve got to raise the money to put our public finances on a firm footing,” Reeves said.
However, the Chancellor has faced criticism over her repeated assurance that the Budget would not include tax hikes for “working people.” According to the Office for Budget Responsibility (OBR), around 75% of the impact of the NI changes will fall on employees, as businesses are likely to freeze wages or reduce hiring in response to higher costs. OBR economist Prof. David Miles suggested that the policy could disproportionately affect lower-paid workers, a point that has raised concerns among labor advocates.
As businesses brace for higher costs, it remains unclear how much of the burden will ultimately be passed on to consumers, but with key retailers and hospitality businesses preparing for price rises, shoppers could soon see higher bills.