Aldi warns Chancellor higher taxes will push food prices up ahead of Budget
Chief executive Giles Hurley says employer National Insurance and a packaging levy have already fed through to shelf prices as Aldi posts £18.1bn in UK and Ireland sales and plans £1.6bn expansion
Aldi's chief executive has warned Chancellor Rachel Reeves that measures that raise business costs will push up prices for shoppers, saying the government should think "very, very carefully" before adopting policies that could make food more expensive.
Giles Hurley issued the warning as Aldi revealed sales in the UK and Ireland topped £18.1 billion in the last year and as retailers and trade bodies flagged rising food inflation ahead of the Budget on Nov. 26. The Food and Drink Federation has warned food inflation could reach 5.7 percent by Christmas, up from 4.2 percent in August, according to the British Retail Consortium.
Hurley singled out an increase in employer National Insurance Contributions and a new packaging levy, saying those changes had "already rippled through to prices on the shelf edge." He said shoppers remained challenged by "stubborn" inflation and that consumers were still "finding things difficult" as higher costs for businesses found their way back into the food system.
Aldi reported profits fell by about a fifth, from £552.9 million to £435.5 million, as the discount retailer invested in lower prices, infrastructure and higher staff wages amid a fierce price war with rivals including Lidl, Tesco and Sainsbury's. The chain said it operates 1,060 stores in the UK and had a market share of 10.8 percent last month, compared with Asda's 11.8 percent.
After gaining customers during the cost-of-living crisis, Aldi overtook Morrisons to become the fourth-largest UK supermarket in 2022. The company said it will invest £1.6 billion to accelerate its UK expansion, with about 80 new store openings planned over the next two years and a longer-term target of 1,500 UK shops.
Russ Mould, investment director at AJ Bell, said Aldi's expansion will increase pressure on its larger rivals. "That's a significant expansion, and Tesco and its peer group will need to come up with new ways to keep their customers loyal," he said.
Retailers have urged the government to avoid introducing policies that would increase the cost of doing business and to reconsider planned business rates reforms, warning that thousands of large stores could face higher bills under proposed changes. Hurley said the upcoming Budget, which is later than usual this year, had "no doubt" created "a bit of uncertainty" among consumers while the sector waits for details on business rates changes.
Trade groups and retailers have framed their concerns in terms of both immediate price impacts and broader risks to store operations and employment. Industry leaders cautioned that higher operating costs could lead to more job losses and store closures if passed through to retailers' margins or prices.
Aldi's financial results and growth plans come as supermarket competition remains intense, with the discounters and established grocers continuing to invest in price, store rollout and workforce pay to protect market share. Hurley said the company wants "domestic policy which challenges that stubborn inflation that we're seeing at the moment," emphasising the role of policymaking in influencing retail prices.
The government's approach at the November Budget will be closely watched by retailers and consumers alike for signals on taxes, levies and business support measures that could affect food prices and the broader cost of living.