The boss of Sainsbury’s today lashed out as Labour’s decision to hike employers’ National Insurance rates while delaying reform of business rates.
Chief executive Simon Roberts said the grocer’s NI bill will go up by £140 million next year and warned that the “barrage of costs” facing retailers was bound to feed through to higher prices. It follows a similar warning from Marks & Spencer yesterday which faces a £60 million hit when the new regime comes in next April.
Mr Roberts was speaking as he presented strong first half results from Britain’s second biggest supermarket group with underlying operating profits of £503 million for the six months to September 14, up from £485 million for the same period last year.
He said the “unexpected” NI reforms announced by Rachel Reeves in the Budget, which increased the rate to 15% and lowered the threshold to just £5000, will lead to its NI bills going up by a “very significant” 50%.
He said :”This industry operates on a 3% margin and there just isn’t the capacity to absorb this level of unprecedented cost inflation.”
He added he agreed with the Office for Budget Responsibility (OBR) that it will cause extra inflation “and it’s clear it’s going to come pretty fast.”
Roberts also said the industry had been expecting the business rate reform that was promised in Labour’s manifesto that would have offset the NI increase. But in the Budget Rachell Reeves said there would be no business rate reform until 2026.
He said: “There was a very significant rise in NI but no action taken on business rates...the Government needs to move quickly on business rates, that needs to happen soon. The current system really penalises retailers with physical stores, the playing field is not flat and consistent for all. This fast and unexpected increaser in costs cannot be planned for and we need to see business rate reform to balance out the scale and impact on the retail industry, We didn’t expect business rates to go up, we expected them to go down. Around 80% of our stores have a rateable value above the £500,000 threshold.”
Sainsbury’s pay around £500 million a year in business rates and has a total tax bill of around £1 billion.
