England: The bosses of Britain’s largest supermarkets have cautioned that food prices could climb further if higher taxes are imposed on the sector.
Tesco, Asda, Sainsbury’s, Morrisons, alongside Lidl, Aldi, Iceland, Waitrose and M&S, signed a letter to Chancellor Rachel Reeves ahead of next month’s Budget. They warned households would inevitably feel the impact of any potential tax rises, including higher business rates for supermarkets.
In response, the Treasury said tackling food price inflation remained a priority and highlighted that business rates for butchers, bakers and other shops would be reduced.
Supermarkets highlight cost pressures
The letter from supermarket bosses stressed that additional taxes would make it harder for retailers to deliver value to customers, warning that high food inflation is likely to persist into 2026 due to existing industry costs.
The warnings come as speculation grows over the Chancellor’s upcoming tax and spending policies. Reeves, who raised $52.2 billion (£40billion) in taxes in her last Budget, has said she is not coming back for further tax hikes.
However, economists at the Institute for Fiscal Studies (IFS) have identified a $29.2 billion (£22 billion) shortfall in public finances, suggesting additional taxes may be unavoidable. Rising borrowing costs, weaker growth forecasts, and new spending commitments have been cited as key pressures on the UK’s finances.
Food prices continue to surge
Household staples are seeing significant price increases. According to the Office for National Statistics, butter has risen 19 percent, milk 12 percent, and chocolate and coffee 15 percent. Factors include higher taxes, rising minimum wages, poor global harvests, and trade tensions.
Helen Dickinson, Chief Executive of the British Retail Consortium, said retailers are doing everything possible to keep food prices affordable, but acknowledged that the sector faces over $9.3 billion (£7 billion) in additional costs in 2025 alone.
Business rates under scrutiny
Supermarket bosses also expressed concern about business rates reforms, particularly the surtax on large commercial properties. While the government has introduced lower rates for properties under $6,65,400 (£500,000) in value, larger stores and distribution warehouses will pay more.
Retailers argue that large stores make up a tiny proportion of all stores yet account for a third of the sector’s total business rates. They urged the Chancellor to ensure the reforms significantly reduce the industry’s rates burden.
Dickinson remarked that, “With food inflation stubbornly high, ensuring retail’s rates burden doesn’t rise further would be one of the simplest ways to help.”
The Treasury explained that business rates would be adjusted to reflect changes in property values, meaning bills could decrease even if individual property values rise, depending on adjustments to the tax rate.
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