Retailers warn higher business rates could push food prices up as inflation stays high

Britain's battle against inflation could be jeopardized if the government presses ahead with higher business rates on around 4,000 shops, including supermarkets, the British Retail Consortium warned Friday. The BRC said Chancellor Rachel Reeves risks losing the fight against inflation if she presses ahead with higher taxes on large retail properties.

The plan would apply heavier taxes to large premises while easing charges on smaller shops, a move framed as leveling the playing field between brick-and-mortar stores and online retailers by targeting warehouses used by companies such as Amazon. But retailers warn the change would also hit flagship stores that anchor town centres. "The biggest risk to food prices would be to include large shops, including supermarkets, in the surtax on large properties. This would effectively be robbing Peter to pay Paul, increasing costs on businesses further and forcing them to raise prices paid by customers." "Removing all shops from the surtax can be done without any cost to the taxpayer and would demonstrate the Chancellor's commitment to bring down inflation."

Inflation data released last week showed the rate stuck at 3.8%, the highest in the G7, having more than doubled since Labour raised taxes in October.

Food inflation rose to 5.1% for the first time in 18 months, up from 4.9%, sparking warnings of a serious cost of living problem.

The Food and Drink Federation warned inflation in the sector could reach nearly 6% this year as tax and regulation push up prices.

Labour's plan to reform the business rates system would lower rates for smaller shops by hitting larger premises, including warehouses used by online titans. Anchor tenants that draw shoppers to town centres could be affected, industry figures say.

Aldi UK chief executive Giles Hurley urged caution, saying higher taxes "should be considered very carefully".

Retailers faced about £7 billion in cost increases in last year's Budget, including National Insurance Contributions, higher wages and packaging taxes. Firms are also braced for Labour's workers' rights bill that could push up costs.

The timing of the Budget on November 26 could hit consumer spending in the run-up to Christmas, retailers warned.

An Opinium survey of 2,000 people commissioned by the BRC found 57% were concerned that prices were rising faster than wages.

Several supermarket bosses publicly urged the Chancellor not to damage the sector with more costs. The Government must protect food and drink businesses from any further cost pressures in the Budget.

Time will tell how Reeves balances inflation with budget priorities, but retailers say protecting households from rising costs while maintaining investment in the high street should be a priority as the year-end shopping season approaches.