Business

Supermarkets warn of tax hikes pushing food inflation into 2026

Sunday, 26 October 2025 1:06AM UTC

Britain’s major grocers caution that further business rate increases and taxes could prolong high food inflation, threaten store closures, and impact household budgets into 2026 amid economic pressures.

Britain’s leading supermarket chains have issued a stark warning that further tax hikes aimed at the retail sector could fuel additional rises in food prices, intensifying the cost of living pressures on households. In a joint letter to Chancellor Rachel Reeves ahead of her upcoming Autumn Budget, executives from major grocers including Tesco, Asda, Sainsbury’s, Morrisons, Lidl, Aldi, Iceland, Waitrose, and Marks & Spencer cautioned that imposing higher taxes—particularly increased business rates—would likely be passed on to consumers, prolonging high food inflation well into 2026.

The supermarkets highlighted their existing struggles, noting that recent tax increases, such as the substantial National Insurance Contributions hike, have already added significant costs. Tesco’s chief executive, Ken Murphy, described the current tax burden as excessive, citing an additional £235 million cost to the company this year alone. Despite these challenges, some retailers like Tesco and Lidl have reported strong profit growth, with Lidl’s pre-tax profits nearly tripling to £156.8 million for the year ending February 2025. Nevertheless, the broader retail sector faces escalating expenses—estimated at over £7 billion annually—that threaten their ability to keep prices in check.

The British Retail Consortium (BRC), representing the supermarkets, emphasised that a proposed business rates surtax targeting large retail premises with rateable values over £500,000 could imperil hundreds of stores. The BRC warns that up to 400 large stores might face closure if the government proceeds with the surtax, risking up to 100,000 jobs and significant local authority revenue losses. This tax is intended to fund ongoing discounts for smaller high street and hospitality businesses but could inadvertently worsen food price inflation and consumer hardship if applied to supermarkets and large retailers.

Data from the BRC’s latest survey shows the majority of retailers have already raised prices in response to the employer tax hikes and increased national minimum wage implemented earlier in the year, with 85% having increased prices and 65% anticipating further hikes. Food inflation stood at 3.6% in June and is projected to reach 6% by year-end, straining household budgets further. The BRC warns that continued tax rises could keep food inflation above 5% well into next year, detrimentally affecting affordability for shoppers nationwide.

Industry leaders like Ocado’s CEO Tim Steiner have echoed these concerns, linking successive tax increases on labour and business operations directly to unavoidable price rises in food retail. Steiner stated that increases in costs for food production, distribution, and retail due to national insurance and minimum wage hikes logically translate into higher prices for consumers. Meanwhile, the Treasury has asserted that tackling food price inflation remains a government priority, pledging targeted support for smaller shops such as butchers and bakers through lowered business rates, though it has not ruled out potential tax increases in broader sectors.

With economic forecasts bleak and the government faced with a significant shortfall in public finances, including an expected £22 billion gap as outlined by the Institute for Fiscal Studies, Chancellor Reeves is widely anticipated to announce further tax rises and possibly spending adjustments in her Budget. The retail sector urges a cautious approach to taxation, warning that additional financial burdens on supermarkets could not only increase food prices but also lead to job cuts and reduced investment in high street businesses.

In sum, while supermarkets report strong earnings in a challenging environment, they stress that further hikes in business rates and taxes threaten to pass costs onto consumers, risking prolonged high food inflation and undermining efforts to support families struggling with rising household expenses.

📌 Reference Map:

Paragraph 1 – ^[1] (BBC), ^[2] (ITV)
Paragraph 2 – ^[1] (BBC), ^[2] (ITV), ^[4] (Reuters)
Paragraph 3 – ^[3] (Reuters), ^[6] (Grocery Gazette)
Paragraph 4 – ^[4] (Reuters), ^[5] (Standard), ^[2] (ITV)
Paragraph 5 – ^[3] (Reuters), ^[6] (Grocery Gazette), ^[7] (Grocery Gazette)
Paragraph 6 – ^[1] (BBC), ^[2] (ITV)
Paragraph 7 – ^[3] (Reuters), ^[1] (BBC), ^[5] (Standard), ^[4] (Reuters)

Source: Noah Wire Services

More on this

https://www.bbc.com/news/articles/c620gy43pe4o - Please view link - unable to able to access data
https://www.itv.com/news/2025-10-25/uk-supermarkets-warn-business-rates-rise-could-push-up-food-inflation - UK's leading supermarkets, including Tesco, Sainsbury's, Aldi, Asda, Iceland, Lidl, Marks & Spencer, Morrisons, and Waitrose, have urged Chancellor Rachel Reeves to exempt large retail premises from a proposed business rates surtax. They warn that including these stores in the surtax could lead to higher food inflation, as large shops account for a significant portion of the retail sector's business rates bill. The British Retail Consortium (BRC) expresses concern that such tax increases would inevitably be passed on to consumers, exacerbating the cost of living crisis. The surtax is part of the government's plan to fund discounts for smaller high-street businesses, but its impact on larger retailers could be detrimental to both businesses and consumers. The BRC calls for a balanced approach to taxation that considers the broader economic implications. ([itv.com](https://www.itv.com/news/2025-10-25/uk-supermarkets-warn-business-rates-rise-could-push-up-food-inflation?utm_source=openai))
https://www.reuters.com/world/uk/uk-retailers-warn-more-price-hikes-tax-costs-bite-survey-shows-2025-07-30/ - A survey by the British Retail Consortium (BRC) reveals that two-thirds of UK retailers anticipate further price increases over the next year due to rising costs from April's employer tax hikes and an increased national minimum wage. The survey, covering finance leaders from over 9,000 stores, found that 85% of retailers had already raised prices, and 65% expect additional hikes. Consumer price inflation reached 3.6% in June, with food inflation projected to hit 6% by year-end, straining household budgets. In response to cost pressures, 42% of retailers have frozen hiring, 38% reduced in-store jobs, and another 38% cut investment. The BRC urges the government to avoid imposing further financial burdens in the upcoming budget to support high street businesses and local jobs. ([reuters.com](https://www.reuters.com/sustainability/sustainable-finance-reporting/uk-retailers-warn-more-price-hikes-tax-costs-bite-survey-shows-2025-07-30/?utm_source=openai))
https://www.reuters.com/world/uk/up-400-large-uk-stores-risk-closure-property-tax-hike-says-brc-2025-09-11/ - The British Retail Consortium (BRC) warns that up to 400 large UK stores, including supermarkets and department stores, risk closure if the government proceeds with a proposed hike in business rates. The new tax would apply to commercial properties with a rateable value exceeding £500,000, aiming to fund a permanent discount for smaller retail and hospitality businesses. The BRC argues that higher taxes could force large retailers to raise prices, cut jobs, or shut down entirely. If all 400 stores close, it could result in up to 100,000 job losses and more than £100 million in lost annual business rates revenue for local councils. These changes, along with recent tax increases and regulation like the new packaging tax, have reportedly raised retail costs by £7 billion a year. Finance Minister Rachel Reeves is expected to outline her business rates policy in the upcoming November 26 budget, where further tax hikes or spending cuts—potentially exceeding £20 billion—are anticipated. ([reuters.com](https://www.reuters.com/world/uk/up-400-large-uk-stores-risk-closure-property-tax-hike-says-brc-2025-09-11/?utm_source=openai))
https://www.standard.co.uk/business/business-news/budget-government-ons-paul-peter-b1249126.html - The British Retail Consortium (BRC) warns that food inflation will remain above 5% well into next year if the retail industry faces further tax rises in the upcoming Autumn Budget. The BRC is concerned that around 4,000 large shops could see their business rates rise if included in the government's new surtax for properties with a rateable value over £500,000, potentially leading to price increases for consumers. A survey by the BRC found that 57% of respondents' biggest concern was 'prices rising faster than wages', with 49% worried about tax rises and 26% about rising unemployment. The BRC urges the government to consider the impact of tax increases on food prices and the cost of living. ([standard.co.uk](https://www.standard.co.uk/business/business-news/budget-government-ons-paul-peter-b1249126.html?utm_source=openai))
https://www.grocerygazette.co.uk/2025/07/31/retailers-warm-further-tax-increases-will-push-inflation-and-job-cuts/ - Retailers have warned that the business rates hike in the next Budget may force them to raise prices, pause hiring, and lay off employees, according to new figures from the British Retail Consortium (BRC). Almost nine-in-ten (85%) of chief financial executives claimed the last Budget’s increase in national insurance fees and minimum living wage forced them to raise prices. Additionally, 65% of retailers project further price increases in the upcoming year, with food inflation expected to jump from 4% in July to around 6% by the end of the year. Retail employment also took a hit, with 42% of CFOs pausing hiring and 38% reducing their number of in-store employees. The BRC urges the government to avoid imposing further financial burdens in the upcoming budget to support high street businesses and local jobs. ([grocerygazette.co.uk](https://www.grocerygazette.co.uk/2025/07/31/retailers-warm-further-tax-increases-will-push-inflation-and-job-cuts/?utm_source=openai))
https://www.grocerygazette.co.uk/2025/07/21/ocado-ceo-blames-new-tax-rises-for-inflation/ - Ocado’s chief executive, Tim Steiner, stated that the newly proposed budget from Chancellor Rachel Reeves would lead to price increases in stores. He stated that the budget may lead to higher costs, and it will be 'unrealistic' for the new plan not to spike the costs of food. Steiner said: 'You can’t increase the cost of labour in food production and food distribution and food retailing in the way that we have, with national insurance increases and the minimum wage increases, and not expect to see prices move.' The statement comes on the heels of higher inflation in June, with food and drink inflation rising by 4.5% in the UK. ([grocerygazette.co.uk](https://www.grocerygazette.co.uk/2025/07/21/ocado-ceo-blames-new-tax-rises-for-inflation/?utm_source=openai))

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative is recent, dated October 26, 2025. Similar reports have appeared in the past, notably in August 2025, highlighting concerns over business rates and food inflation. ([retailgazette.co.uk](https://www.retailgazette.co.uk/blog/2025/08/supermarkets-at-risk/?utm_source=openai)) However, the current report provides updated figures and quotes, indicating a higher freshness score. The presence of a press release suggests a high freshness score, as press releases are typically recent and original. No significant discrepancies in figures, dates, or quotes were found.

Quotes check

Score: 9

Notes: The quotes from Tesco's CEO Ken Murphy and the British Retail Consortium's chief executive Helen Dickinson are consistent with previous statements made in August 2025. For instance, Dickinson's warning about the impact of tax rises on food inflation was reported in August 2025. ([retailgazette.co.uk](https://www.retailgazette.co.uk/blog/2025/08/supermarkets-at-risk/?utm_source=openai)) The consistency of these quotes suggests they are not newly sourced, but rather recycled from earlier reports.

Source reliability

Score: 10

Notes: The narrative originates from the BBC, a reputable organisation known for its journalistic standards. The British Retail Consortium (BRC), a credible industry body, is also cited, enhancing the reliability of the information presented.

Plausability check

Score: 8

Notes: The claims about supermarkets warning of higher business rates leading to increased food inflation are plausible and align with previous reports from August 2025. For example, concerns about the impact of business rates on large supermarkets were highlighted in August 2025. ([retailgazette.co.uk](https://www.retailgazette.co.uk/blog/2025/08/supermarkets-at-risk/?utm_source=openai)) The language and tone are consistent with typical corporate communications, and the structure focuses on the central issue without excessive or off-topic detail.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: While the narrative is recent and originates from a reputable source, the quotes appear to be recycled from earlier reports, which may affect the originality score. The plausibility of the claims is supported by previous reports, but the lack of new information or perspectives suggests a need for further verification.

Retail sector
Food prices
Tax policy