Supermarkets tell Reeves tax rises could push food prices higher | Supermarkets

Food prices in the UK could rise further if the Chancellor increases taxes on supermarkets in the next budget, the industry has warned.

Supermarket bosses including Tesco, Asda, Sainsbury’s and Morrisons said in a letter to Rachel Reeves that households will “inevitably feel the impact” of potential tax increases on the sector.

“If the industry faces higher taxes in the upcoming budget (such as being included in the new surcharge on business rates), our ability to deliver value to our customers will become even more challenging and it will be households who will inevitably feel this impact,” the joint letter said.

“Given the costs the sector has now fallen, including in the last budget, high food inflation is likely to continue into 2026. This is not something we would want to see extended by any measures in the budget.”

Pressure is mounting on the chancellor to increase taxes in the budget on 26 November to help close the gap in public finances.

Supermarkets complained they were hit hard by the last budget, in which Reeves announced a £25bn increase in employer national insurance contributions and a 6.7% increase in the “national living wage”. The changes came into effect this April.

The British Retail Consortium (BRC) has said it is concerned department stores could face much higher business rate tax bills if they are included in the government’s new surtax on properties with a taxable value of more than £500,000.

BRC chief executive Helen Dickinson said exempting supermarkets from this additional tax would help keep food inflation under control.

“The Chancellor has rightly made tackling inflation his top priority and ensuring that retail’s interest burden does not increase further as food inflation remains stubbornly high will be one of the simplest ways to help,” he said.

“With large office blocks and industrial sites where business rates are a smaller fraction of their cost and pay slightly more, this won’t cost taxpayers a penny.”

Official data show that inflation in the UK remained unchanged at 3.8% last month, while annual food price inflation decreased from 5.1% in August to 4.5% in September. This rate has slowed for the first time since March.

But the cumulative effect means grocery bills are much higher than they were a few years ago.

The letter, also signed by Aldi, Lidl, Marks & Spencer, Waitrose and bosses in Iceland, states that “the disproportionate tax burden of the retail sector will send a strong signal of support for the sector and the government’s determination to combat food inflation.”

A Treasury spokesman said: “Tackling food inflation is a priority, so we’re boosting incomes by increasing the national living wage, reducing business rates for butchers, bakers and other shops and sticking to our fiscal rules to reduce inflation.”

The government is understood to be of the view that even if the rateable value of a property increases, the way the system works means the bill can still fall.