Retail financial leaders have expressed concerns that government policy risks stoking inflation, warning that further tax hikes in the next Budget would trigger more price rises and widen sector job losses, according to the latest poll by the British Retail Consortium (BRC).

Original research of retail CFOs and Finance Directors, which represent a combined 9,000+ UK stores, showed that, given the concerns about potential forthcoming tax rises, over half (56%) are pessimistic about trading conditions over the next 12 months. This compares to just 11% who took an optimistic view of the sector outlook for the year ahead.

In a bid to plug the gap in the public finances, the Chancellor is said to be considering proposed reforms to business rates in the next Budget, which could see larger retailers, including supermarkets and department stores, paying more.

While the changes aim to help reduce rates for smaller stores, it has already been met with strong opposition from UK retailers, who say it would damage the High Street. Tesco CEO Ken Murphy warned it risked driving away valuable anchor stores from local communities, while Sainsbury’s boss, Simon Roberts, said the changes “would not stimulate growth or investment” if large chains pulled away from the High Street.

“Retail was squarely in the firing line of the last Budget, with the industry hit by £7billion in new costs and taxes,” Helen Dickinson, Chief Executive at the BRC, said.

85% of the CFOs polled by the BRC said that the last Budget, which saw significant increases to employer NICs and the National Living Wage, had forced them to raise prices. Almost two-thirds (65%) predict further price rises in the coming year. Now the BRC believes food inflation will reach +6% by the end of the year, posing challenges to household budgets, particularly in the run up to Christmas. 

Jobs were also at risk: 42% of CFOs said they had frozen recruitment, while 38% said they had reduced job numbers in-store.

“Retailers have done everything they can to shield customers from higher costs, but given their slim margins and the rising cost of employing staff, price rises were inevitable. The consequences are now being felt by households as many struggle to cope with the rising cost of their weekly shop.”

Helen Dickinson, CEO, BRC

She added that it is now up “to the Chancellor to decide whether to fan the flames of inflation, or to support the everyday economy by backing High Streets and the local jobs they provide.”