Major supermarkets like Sainsbury’s and Marks and Spencer are bracing for inevitable food price increases starting from next April, as a direct result of Labour’s Autumn Budget. The increase in food prices is expected to offset the £200 million hike in tax bills that these supermarkets will face due to changes in employer’s national insurance contributions.
Industry insiders have revealed that the looming food price increases are unavoidable, as companies will need to find ways to cover the additional costs imposed by the Chancellor’s budget changes. This warning comes ahead of the announcement of half-year profits by Marks and Spencer on Wednesday, and Sainsbury’s interim results on Thursday.
The Chancellor’s decision to raise national insurance from 13.8% to 15% starting from April 2025, with a reduction in the threshold from £19,000 to £5,000, has sparked concerns among business leaders. Stuart Machin, the Chief Executive of Marks and Spencer, expressed his worries about the impact of these tax hikes on businesses, particularly larger employers and their suppliers.
Following the Autumn Budget, the Office for Budget Responsibility (OBR) has revised its inflation forecasts, predicting that inflation will remain above the Bank of England’s target rate. The OBR now expects the Consumer Prices Index (CPI) for inflation to reach around 2.5% in 2024, up from the previous projection of 2.2%. This increase in inflation is attributed to continued pressure on household finances.
In light of these developments, there are concerns about the potential impact on consumers, as rising food prices and overall inflation could put a strain on household budgets. The uncertainty surrounding future interest rate changes by the Bank of England adds to the economic challenges faced by businesses and consumers alike.
As the effects of the Autumn Budget start to unfold, it remains to be seen how businesses will navigate the increased tax burdens and whether consumers will bear the brunt of rising food prices. The long-term implications of these changes on the economy and household finances are yet to be fully understood, but it is clear that the road ahead may be challenging for many businesses and consumers.
