The UK’s biggest retailers have warned of “inevitable” job losses as a result of the government’s decision to increase National Insurance.
Chancellor of the Exchequer Rachel Reeves has been warned that jobs will be lost, stores will shut, and prices will have to rise due to the hike.
Reeves increased the rate of employers’ National Insurance by 1.2% to 15% from April, and also lowered the level where employers begin paying on each staff member’s salary from £9,100 a year to £5,000.
Over 70 businesses including Tesco, Sainsbury’s, Next, Amazon, and Boots have written to Reeves, in a letter organised by trade association the BRC, cautioning that the “sheer scale” of the new costs on companies meant job cuts were “inevitable”.
They argued that a mix of measures, including boosting employers’ National Insurance, raising the national minimum wage, and new levies on packaging, could raise the sector’s costs by up to £70bn per year.
The letter states: “For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale.
“The effect will be to increase inflation, slow pay growth, cause shop closures and reduce jobs, especially at the entry level.
“This will impact high streets and customers right across the country. We are already starting to take difficult decisions in our businesses and this will be true across the whole industry and our supply chain.”
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It continues: “We appreciate government’s focus on improving the fiscal situation and investing in public services; we also recognise the role businesses have in supporting this.
“But, the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”
A spokesman for the Treasury said: “With our public services crumbling and an inherited £22bn fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive.
“By doing this, more than half of employers will either see a cut or no change in their National Insurance bills, there will be £22.6bn more for the NHS and workers’ payslips will be protected from higher tax.”
The letter comes after Tesco was estimated to face a £1bn hit to its National Insurance bill earlier this month, while Asda chair Lord Stuart Rose revealed a £100m hit to bill was “not an easy swallow”.
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