Retail leaders have issued a stark warning to chancellor Rachel Reeves that plans to hike business rates for large retailers could drive up food prices, fuel inflation, and weaken the UK’s already fragile high streets.
Helen Dickinson, chief executive of the British Retail Consortium (BRC), which represents more than 200 major retailers, has criticised Treasury plans to increase charges on properties with a rateable value above £500,000. The changes, set to come into effect from April 2026, are expected to add £600 million to the tax burden of large stores and supermarkets.
“This will add to inflation at the worst possible moment,” Dickinson said, urging the government to scrap the rise and instead consider a broader reduction in business rates. “Retailers are doing everything they can to shield customers from mounting pressures, but there’s only so much they can absorb before costs start feeding through to prices.”
Her intervention follows the latest figures from the Office for National Statistics, which show UK inflation rising unexpectedly to 3.6 per cent in the year to June—its highest level since January 2024. Food inflation in particular jumped to 4.5 per cent, driven by poor harvests, disrupted supply chains, and rising operational costs.
The BRC has warned that targeting larger retailers could have a disproportionate impact on inflation, as these stores sell the majority of food and clothing across the UK. Many, it argues, already operate on tight margins and are absorbing other pressures, including the £25 billion rise in employers’ national insurance contributions introduced by Reeves in April.
A recent BRC survey revealed that two-thirds of retail CEOs intend to raise prices in the months ahead, citing rising employment and tax costs. “Families are already feeling it at the checkout,” said Dickinson. “If the chancellor presses ahead with this tax raid, it will heap pressure on businesses already at breaking point.”
The proposed reforms are part of a broader effort by Reeves to rebalance the business rates system and ease the burden on smaller retailers. The Treasury has argued that large stores and department chains can afford to pay more, and that the change will help save the UK’s struggling high streets.
Business rates are calculated by applying a multiplier to the annual rental value of a property. Under the new regime, that multiplier would increase for high-value premises, hitting an estimated 4,000 larger stores. While smaller independent shops could benefit from lower rates, the BRC fears the cost will ultimately be passed onto consumers at a time when inflationary pressure remains acute.
Economic headwinds continue to mount for the chancellor, who is facing a £5 billion hole in fiscal headroom following the reversal of winter fuel cuts and delays to welfare reform. With pay growth slowing and unemployment rising to 4.7 per cent—the highest in four years—the timing of any tax rise is under increasing scrutiny.
Dickinson has called on ministers to rule out any further taxes that could act as a drag on investment or growth in physical retail, and to prioritise stability as the economy navigates a delicate recovery.
“These stores are not only critical to keeping food affordable; they anchor high streets, support jobs and draw footfall for neighbouring small businesses,” she said. “Ministers must choose: support families and high streets, or add to inflation at the worst possible moment.”
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Retail leaders warn business rates hike will push up food prices and hurt high streets
