Britain could ‘lose the war on inflation’: Higher business rates ‘to push up food prices’, retail bosses warn Reeves

Rachel Reeves has been warned her plans to hit big shops with higher business rates will push up food prices in a blow to millions of families.

The British Retail Consortium (BRC) said the Chancellor ‘risks losing the battle against inflation^[1]‘ if she presses ahead with raising taxes on about 4,000 shops – including supermarkets.

The warning came after figures last week showed inflation is stuck at 3.8 per cent – the highest in the G7 – having more than doubled since Labour raised taxes in October.

Alarmingly, food inflation passed 5 per cent for the first time in 18 months, going from 4.9 per cent to 5.1 per cent, sparking warnings of ‘a serious cost of living problem’.

The BRC, which represents household names including Tesco and Asda, is now warning that food inflation will stay above 5 per cent ‘well into 2026’ if Reeves presses ahead with plans to raise business rates on the country’s largest shops.

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

Warning: The BRC said the Chancellor ‘risks losing the battle against inflation’ if she pushes ahead with proposals to raise taxes on around 4,000 shops including supermarkets

‘The Government must protect food and drink businesses from any further cost pressures in the Budget,’ the group said. Labour has promised to ‘level the playing field’ between High Street stores and online retailers by reforming the hated business rates system which taxes commercial properties.

The Chancellor will lower rates paid by smaller shops by hitting larger premises with higher taxes – targeting warehouses used by internet titans such as Amazon.

But retailers say this will also hit flagship stores – ‘anchor tenants’ that attract shoppers into town centres.

Noting that many people are ‘barely recovering from the last cost-of-living crisis’, BRC chief executive Helen Dickinson said: ‘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.’

Economists have been sounding the alarm over the impact of stubborn inflation on living standards.

Reeves’ acknowledgement last week that ‘families are finding it tough’ was echoed by the BRC’s findings that people are worried about the rising cost of living.

An Opinium survey of 2,000 people commissioned by the BRC found the greatest concern was ‘prices rising faster than wages’, with 57 per cent of respondents agreeing.

Retailers are nervous after being hit with £7billion in cost increases in last year’s Budget. Reeves slapped firms with increases to National Insurance Contributions, wages and higher packaging taxes.

Firms are also braced for Labour’s workers’ rights bill that threatens to push up costs. And there are worries that the timing of the Budget on November 26 will hit consumer spending in the run-up to Christmas.

Several supermarket bosses have publicly urged the Chancellor not to damage the sector with more costs.

Aldi UK boss Giles Hurley last week warned that higher taxes ‘should be considered very carefully’.