UK retailers face increasing financial pressures following recent government budgetary changes. Stuart Machin, the boss of Marks & Spencer, has voiced concerns over rising taxes, stating that "Retail is being raided like a piggy bank and it's unacceptable." The Treasury, however, maintains that the Budget introduced last year aims to deliver stability and growth for businesses.
The 2022 Budget brought significant changes, including an increase in employers' National Insurance Contributions (NICs) and adjustments to employment rights. Additionally, a new packaging levy, set to be introduced in October, is designed to make producers accountable for the costs associated with managing and recycling packaging waste. This extended producer responsibility (EPR) measure aims to reduce unsustainable packaging and is estimated by the British Retail Consortium to cost the sector £2 billion.
The Treasury spokesperson highlighted the Budget's objectives by stating, "We delivered a once-in-a-Parliament budget to wipe the slate clean and deliver the stability businesses need, laying the foundations for economic growth." These measures come as more than half of employers are expected to see a reduction or no change in their National Insurance bills due to exemptions for smaller businesses. However, the threshold at which employers begin paying NI has been lowered from £9,100 to £5,000, presenting additional challenges for larger businesses.
In response to these fiscal changes, Machin has called on the government to implement several adjustments to ease the burden on retailers. His recommendations include staggering the NIC changes over time and making "lightening the burden that the Budget loaded onto the retail sector" a priority. Despite these appeals, the government has increased the rate of NI paid by employers as of April and plans to permanently cut business rates for retail, hospitality, and leisure sectors on the high street starting from 2026.
Marks & Spencer has reported a jump in annual profits to £672 million for the 12 months ending in March. Despite this growth, Machin points out that retailers are facing various headwinds, including increased NICs and higher packaging levies. The National Living Wage is also set to rise in April, adding another layer of complexity for businesses striving to maintain profit margins amidst these mounting costs.