John Lewis Partnership posts £88m loss, blames tax rises and packaging levy as GDP stalls

The John Lewis Partnership (JLP) reported a pre-tax loss of £88 million for the six months to July 26, widening from a £30 million loss in the same period last year, and said recent tax increases and a new packaging levy were major contributors to the deterioration.

JLP said the group faced specific headwinds from measures introduced after last year’s Budget, including a £29 million hit from the extended producer responsibility packaging levy and higher National Insurance Contributions. The partnership’s chairman, Jason Tarry, told national media that business rates reform and other tax changes negotiated with the Treasury would be critical for retailers facing narrow margins.

The results come as Office for National Statistics data showed UK gross domestic product was flat in July, following a 0.4% expansion in June. The ONS said manufacturing recorded its largest monthly contraction in a year, adding to concerns that economic growth is stalling ahead of the autumn Budget on Nov. 26.

JLP said first-half sales rose 4% to £6.2 billion, with Waitrose sales up 6% to a record £4.1 billion and John Lewis sales 2% higher at £2.1 billion. The group invested £191 million in the period, including launches of beauty halls and new retail initiatives. It employs about 66,000 staff and operates 36 John Lewis shops.

Despite increased sales, rising costs pushed the partnership deeper into the red. Mr. Tarry said business rates are the largest cost after staff pay and warned proposed changes that increased taxes on larger properties could hit JLP hard. He said JLP and other retailers held constructive talks with the Chancellor at Number 11 last week and urged meaningful reform when the Government provides further detail.

Chancellor Rachel Reeves has acknowledged that the economy "feels stuck" and said the Treasury is looking at business rates reforms including addressing "cliff edges" in small business relief that can discourage expansion. Officials are considering broader changes to the tax on business properties as part of efforts to boost growth and reduce red tape.

Industry groups warned that adding large-format retailers to a new higher business-rates band could force store closures. The British Retail Consortium (BRC) said its analysis showed 400 big stores could be at risk if a new surtax applied to premises with rateable values above £500,000, and that roughly 1,000 such outlets have closed in the past five years. The BRC estimated closures at that scale could put as many as 100,000 jobs at risk and reduce council business-rates receipts from retail by more than £100 million annually.

Helen Dickinson, chief executive of the BRC, said large shops act as anchors for high streets and shopping centres and warned that shifting costs onto those stores would damage employment and local economies. The BRC urged the Chancellor to exclude large shops from a new higher band and to redistribute any necessary tax adjustments across other types of large properties to avoid concentrating burden on retail.

Within JLP, management expressed guarded optimism about the Christmas trading period. Peter Ruis, managing director of John Lewis, said the retailer expected consumers to seek festive spending despite economic uncertainty and that product ranges and promotional strategies aimed at attracting shoppers would be central to performance. The partnership said it was too early to confirm whether staff would receive a profit-related bonus for the first time in four years.

Analysts said the results highlighted the squeeze on UK retailers from a combination of policy changes, wage and employment costs, and still-soft consumer spending. With the Government signalling a wider review of business rates and tax reliefs, attention will focus on the November Budget for details of any exemptions, reallocations or compensating measures designed to protect high-street and supermarket operators.

John Lewis Partnership’s expanded losses underscore the challenge facing firms that operate low-margin businesses while absorbing newly introduced environmental levies and tax rises. The combination of flat GDP for July and targeted business taxation has increased pressure on ministers to balance fiscal repair with measures to support investment and jobs in the retail sector.