Tax hike could lead to higher food prices, supermarkets warn

The UK's largest supermarkets are calling on the chancellor to exclude stores from a new business rates surtax, warning that shoppers will bear the brunt of higher prices.

Tesco, Sainsbury's, Marks & Spencer, Waitrose, Morrisons, Asda, Aldi and Lidl are among the stores that have signed a letter addressed to Rachel Reeves, arguing that easing taxes on grocers would help curb food inflation.

Industry group the British Retail Consortium (BRC), which organised the letter, said large shops could face higher business rates if included in the government's proposed surtax on properties valued at more than £500,000.

Smaller high street firms are expected to benefit from reduced business rates under the government's plans.

"If the industry faces higher taxes in the coming Budget - such as being included in the new surtax on business rates - our ability to deliver value for our customers will become even more challenging, and it will be households who inevitably feel the impact," the letter reads.

"Large retail premises are a tiny proportion of all stores, yet account for a third of retail's total business rates bill - meaning another significant rise could push food inflation even higher."

The supermarkets are asking Ms Reeves to "address retail's disproportionate tax burden", saying that doing so would "send a strong signal of support for the industry and of the government's commitment to tackling food inflation".

The chancellor is widely expected to raise taxes after bleak economic forecasts and a string of reversals on welfare cuts, which have made it harder for her to stick to her borrowing limits.

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Helen Dickinson, the BRC's chief executive, said: "Supermarkets are doing everything possible to keep food prices affordable, but it's an uphill battle, with over £7 billion in additional costs in 2025 alone.

"From higher national insurance contributions to new packaging taxes, the financial strain on the industry is immense."

The Treasury has been contacted for comment.

(c) Sky News 2025: Tax hike could lead to higher food prices, supermarkets warn