Retail and hospitality leaders met Chancellor John Healey at Downing Street on Tuesday to demand immediate tax relief. Industry executives argued that rising employment costs and business rates are stifling growth and driving up youth unemployment, as they seek urgent policy reversals ahead of the October 28 Budget.
Retailers Press for National Insurance Threshold Reversal
Major high street employers, including Marks & Spencer, Tesco, and Sainsbury’s, used a breakfast meeting at Number 11 Downing Street to press the Chancellor on the financial impact of recent tax changes.
The primary concern centers on the employer National Insurance contributions (NICs) threshold, which was lowered from £9,100 to £5,000 per year by the previous Treasury administration.
Industry leaders are calling for this threshold to be raised to £6,000. Marks & Spencer chief executive Stuart Machin, who has described the previous two budgets as a disaster
for business, argued that the current tax burden is fueling recruitment freezes and job losses.
Machin noted that at Marks & Spencer, the changes have left the business facing £150 million of new costs annually on top of a tax bill of roughly half a billion pounds.
He also pointed out that the changes hit agricultural and food manufacturing suppliers hard, with strict regulations pushing the resulting costs directly onto retailers. He also noted that former Chancellor Rachel Reeves raised employers' NICs from 13.8 per cent to 15 per cent in 2024.
Alongside Marks & Spencer and Sainsbury’s chief executive Simon Roberts, leaders from Costa Coffee and the Co-op also attended the Downing Street event. Prime Minister Andy Burnham and Chancellor John Healey hosted business leaders for pre-Budget engagement ahead of the summit, with Burnham having previously suggested that higher business rates on warehouses could fund tax cuts for high street shops.
Retail Gazette reported that after intervention from John Lewis Partnership chair Jason Tarry, the Treasury is understood to have ruled out further tax increases on warehouses at the upcoming Budget.
Jason Tarry Opposes Warehouse Tax for Anchor Retailers
John Lewis Partnership chair Jason Tarry has publicly opposed proposals for a warehouse tax,
warning that higher property taxes on large retail premises would disproportionately affect department stores and supermarkets. Major department stores and supermarkets, including our 36 John Lewis stores and hundreds of Waitrose branches, act as vital anchor tenants,
Tarry wrote in The Telegraph, as reported by The Industry. Penalising anchor retailers through higher business rates risks harming the smaller businesses operating in their orbit.
Tarry noted that the John Lewis Partnership pays about £170 million a year in business rates, making it the group’s largest tax expense and its second-largest cost after wages. Because rating changes affect more than 200 John Lewis and Waitrose shops compared to 18 distribution centres, about 80 per cent of the additional burden falls on shops.
Despite these financial pressures, the partnership is investing £50 million in John Lewis stores this year as part of an £800 million retail estate transformation plan, which also includes building three new Waitrose branches and refurbishing 28 more.
New analysis indicates that for every £1 of pre-tax profit made by retail, the equivalent of 72p is paid in business taxes, while the BRC and UKHospitality argue that these sectors now bear the highest effective tax rates in the UK economy. Helen Dickinson, chief executive of the BRC, stated that the Chancellor faces a clear choice: continue to increase the tax burden on high streets or provide the breathing space necessary to hold down prices and foster growth.
Treasury Talks Ahead of October 28 Budget
A source close to the talks noted that it felt like they were listening,
while the Chancellor did not confirm specific measures during Tuesday’s meeting. The Treasury has emphasized that its long-term goal is to tackle cost pressures through growth, pointing to existing support packages, including a £4.3bn package to help businesses manage costs.
Polling commissioned by the BRC and conducted by Opinium found that 77 per cent of people believe improving the high street should be an important part of the upcoming budget, 89 per cent want the government to prioritize reducing the cost of living, and 83 per cent want action on youth unemployment.
It’s clear to me that hospitality and the high street will hire NEETs in a way the rest of the economy simply cannot,
Simpson said, following his meeting with the Chancellor. As the October 28 deadline approaches, the industry awaits confirmation on whether the Treasury will unwind recent tax increases to stimulate employment.