Britain could lose inflation battle as retailers warn Reeves on big shop tax plan

The British Retail Consortium warned that Chancellor Rachel Reeves's plan to raise business rates on about 4,000 shops, including supermarkets, could push up food prices and complicate the government's effort to curb inflation. The proposal would hike taxes on larger premises while lowering bills for smaller outlets as part of a broader reform aimed at leveling the playing field with online retailers. Retailers say the measure would raise operating costs and likely be passed on to shoppers.

Britain's latest inflation figures underscore the challenge. Overall inflation sat at 3.8 percent, the highest among G7 economies in recent data. Food inflation rose to 5.1 percent, the first time it has topped 5 percent in 18 months. The British Retail Consortium warned that if Reeves proceeds with the surcharge on large properties, food inflation could remain above 5 percent well into 2026. The Food and Drink Federation also warned that sector inflation could approach 6 percent this year as taxes and regulation push up prices.

The BRC's chief executive, Helen Dickinson, said the biggest risk would be to include large shops in the surtax, noting that it would raise costs for businesses and likely push prices higher for customers. She added that removing all shops from the surtax could be done at no cost to taxpayers and would demonstrate a commitment to bringing inflation down.

Economists have warned that stubborn inflation can erode living standards. Reeves acknowledged that families are finding it tough, a sentiment echoed by the BRC's Opinium survey, which found about 57 percent of respondents are worried prices are rising faster than wages. Retailers say they faced roughly £7 billion in cost increases in the last Budget, including higher National Insurance Contributions, wage costs, and packaging taxes. They also brace for Labour's workers' rights bill, which could push up costs ahead of the winter season. The Budget is due on November 26, a timing that many fear could dampen consumer spending in the run-up to Christmas. Aldi UK chief executive Giles Hurley has urged caution, saying higher taxes should be considered very carefully.

Supporters of reform argue it is needed to level the playing field between High Street stores and online platforms and to curb distortions in the rates system. Retailers warn, however, that taxing large premises could land extra costs on anchor stores that draw foot traffic into town centres and potentially lift prices on everyday goods.

As the debate unfolds, the British Retail Consortium has urged policymakers to shield food and drink businesses from further cost pressures in the Budget and to consider removing large shops from any surtax as a way to support inflation relief efforts.