Britain braces for cost-of-living pressures as plan to tax large shops looms over autumn Budget

Britain’s retail sector is bracing for a fresh wave of cost pressures as Labour’s plan to raise business rates on large shops could fuel inflation and push food prices higher ahead of the autumn Budget.

The British Retail Consortium said extending the large-property surcharge to about 4,000 shops, including supermarkets, risks undermining efforts to keep inflation in check. Official data show overall inflation running at 3.8%, the highest among the G7, while food inflation has topped 5% for the first time in 18 months, at 5.1% in August. The policy would widen a tax on big premises and is seen as a key lever to fund relief for smaller retailers, but industry groups warn the impact would flow through to shoppers. The Food and Drink Federation cautioned that inflation in the sector could approach 6% this year as costs from taxation and regulation push up prices. The Bank of England recently held rates at 4% amid concerns that persistent food-price pressures could keep headline inflation elevated. The government argues the plan would level the playing field between high street stores and online retailers.

The BRC’s chief executive, Helen Dickinson, said the proposal as it stands risks weakening the fight against inflation if large shops are included in the new surcharge. She noted that big stores employ a substantial share of retail staff and already contribute a significant portion of the industry’s business rates, so moving more costs onto those premises could translate into higher consumer prices across the board. Dickinson said the Treasury is finalising a package to support the high street, including reductions in business rates for retail, hospitality and leisure properties, but she stressed that extending the tax to large premises would be a major price pressure. She added that the impact would be felt not only by supermarkets but by flagship stores that anchor town centres, potentially dampening shopper footfall.

Labour has pledged to reform the business rates framework to level the playing field between online giants and brick-and-mortar retailers. The plan would lower rates for smaller shops while targeting larger premises—such as warehouses used by online titans like Amazon—with higher taxes. Retailers warn that while the intention is to aid small businesses, the broader tax on large properties could harm anchor tenants that draw customers into town centres and shopping areas.

The Food and Drink Federation also warned that inflation in its sector could rise further this year as costs from taxes and regulation feed through to prices. Economists have been watching inflation closely because of its impact on living standards, with Labour’s Reeves acknowledging that families are feeling the squeeze. A recent Opinium survey commissioned by the BRC found that the top concern among 2,000 respondents was prices rising faster than wages, underscoring the pressure on households as the winter season approaches.

Retailers say they have already faced about £7 billion in cost increases in the previous Budget cycle, driven by changes such as National Insurance contributions, wage pressures and higher packaging taxes. Firms are also preparing for Labour’s workers’ rights proposals, which could add to operating costs. With the Budget scheduled for November 26, retailers are keeping a close watch on policy signals that could shape consumer spending in the run-up to Christmas. Several supermarket bosses, including Aldi UK chief executive Giles Hurley, have urged the Chancellor to consider the impact of higher taxes on the sector and on household budgets.

Economists say the path forward will depend heavily on policy choices in the Budget. If policymakers want to shield households from further inflation while preserving high street footfall, any reform would need to balance relief for smaller shops with the potential price effects of taxing large premises. In the meantime, households face a winter where food bills and other essentials could rise even as nominal wages struggle to keep pace, heightening the risk of a prolonged cost-of-living squeeze in the years ahead.