Britain’s major supermarket chains are preparing for a substantial tax increase after the Treasury reversed its position on business rates reform ahead of Wednesday’s Budget.
Treasury officials have informed grocers that large retail premises will face the new higher tax band, despite earlier indications they would be excluded.
The reversal affects properties with rateable values exceeding £500,000, which encompasses most major supermarket locations.
Retail executives had received assurances in October that the Treasury would exempt large shops from the increased rates.
The about-face represents a significant blow to chains including Tesco, Sainsbury’s and Asda, which face multimillion-pound additional costs.
Industry leaders have cautioned that the increased tax burden will inevitably translate into higher prices for British consumers.
The Treasury has declined to comment on the policy reversal.
Supermarket executives had expressed optimism following meetings with Chancellor Rachel Reeves at Downing Street 11 in September.
Lidl GB chief executive Ryan McDonnell stated in October: “We’ve been very communicative with government, not just ourselves individually, but through the BRC. We think those discussions have been quite productive. I’m quite hopeful the government will see sense.”
M&S chief executive Stuart Machin shared similar confidence last month, saying: “I think thankfully that seems to be a point that has been discussed and received, so I’m hopeful.”
The executives believed their concerns had been acknowledged after what they described as productive dialogue with the government.
Their confidence followed firm indications from Treasury officials that retail would be carved out from the planned business rates increases.
In October, the leaders of nine major supermarket chains wrote to the Chancellor warning that increased business rates would harm ordinary households.
“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,” the letter stated.
The British Retail Consortium has cautioned that 400 of the nation’s largest shops could be forced to shut their doors
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GETTYThe signatories included the chief executives of Tesco, Sainsbury’s, Asda, Aldi, Morrisons, Lidl, M&S, Waitrose and Iceland.
The British Retail Consortium has cautioned that 400 of the nation’s largest shops could be forced to shut their doors.
BRC chief executive Helen Dickinson said: “We have been crystal clear with our ask. Give smaller retailers permanent discounts but not at the expense of larger retailers.”
The business rates increase will add up to 10p to the tax multiplier for properties valued above £500,000, with the revenue funding discounts of up to 20p for smaller retail, hospitality and leisure premises.
The reforms will replace temporary relief measures whilst establishing permanent discounts for smaller operators in these sectors
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PAThe reforms will replace temporary relief measures whilst establishing permanent discounts for smaller operators in these sectors.
One industry insider briefed on the latest plans expressed frustration: “This was not just speculation — this had been communicated.
“The fact they are changing things at the last minute after months of leading us up the garden path really shows the mess of their miscommunication around this Budget.”
The retail sector contributes approximately 20 per cent of total business rates revenue, generating roughly £30billion annually for the Treasury.