Food prices in the UK could climb even further if the chancellor raises taxes on supermarkets at the next budget, the industry has warned.
Supermarket bosses, including those at Tesco, Asda, Sainsbury’s and Morrisons, have said in a letter to Rachel Reeves that households would “inevitably feel the impact” of potential tax rises on the sector.
“If the industry faces higher taxes in the coming budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging, and it will be households who inevitably feel the impact,” they wrote in the joint letter.
“Given the costs currently falling on the industry, including from the last budget, high food inflation is likely to persist into 2026. This is not something that we would want to see prolonged by any measure in the budget.”
Pressure is mounting on the chancellor to increase taxes in the budget on 26 November to help to plug a shortfall in public finances.
Supermarkets have complained that they were hit hard at the last budget, when Reeves announced a £25bn increase in employer national insurance contributions and a 6.7% rise in the “national living wage”. The changes came into effect this April.
The British Retail Consortium (BRC) said it was concerned that big shops could face much higher business rate tax bills if they are included in the government’s new additional tax for properties with a rateable value of more than £500,000.
Helen Dickinson, the chief executive of the BRC, said exempting supermarkets from this surtax would help keep food inflation under control.
“The chancellor has rightly made tackling inflation her top priority, and with food inflation stubbornly high, ensuring retail’s rates burden doesn’t rise further would be one of the simplest ways to help,” she said.
“This would not cost the taxpayer a penny, with large office blocks and industrial plants, for whom business rates is a smaller proportion of their costs, paying a little more.”
Official data shows that UK inflation was unchanged last month at 3.8%, with annual food price inflation easing from 5.1% in August to 4.5% in September. It was the first time this rate had slowed since March.
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However, the cumulative effect means grocery bills are much higher compared with a few years ago.
The letter, which was also signed by bosses at Aldi, Lidl, Marks & Spencer, Waitrose and Iceland, says addressing “retail’s disproportionate tax burden would send a strong signal of support for the industry and of the government’s commitment to tackling food inflation”.
A Treasury spokesperson said: “Tackling food inflation is a priority, which is why we’re boosting incomes through increasing the national living wage, lowering business rates for butchers, bakers and other shops, and sticking to our fiscal rules to bring inflation down.”
It is understood the government takes the view that even if a property’s rateable value increases, the way the system works means that its bill could still go down.
