Sainsbury’s is bracing for a surge in operational costs following the Chancellor’s recent budget announcement, which could drive up retail prices, warned Simon Roberts, Sainsbury’s chief executive.
The supermarket giant disclosed a projected £140 million increase in National Insurance (NI) contributions due to Rachel Reeves’s recent decision to raise the NI rate by 1.2 percentage points to 15% starting next April.
Roberts highlighted the financial strain this hike will bring to the retailer, alongside a government-mandated rise in the national minimum wage, which will increase from £11.44 to £12.21 an hour from April 2025.
He noted, “difficult decisions” lay ahead to balance the books and said that Sainsbury’s would need to adjust prices to mitigate these cost pressures.
In addition, Roberts expressed concerns about the potential impact of the new inheritance tax rules on British food security. Reeves’s reform will remove the exemption that previously allowed farmers to pass on estates without inheritance tax, potentially impacting up to 75% of British-grown produce.
Roberts urged the government to listen closely to farmers, stating, “British farmers work incredibly hard to make sure they can provide food that everyone wants to buy. We need a resilient, successful, productive food system so that we’re producing what we need here.”
Many in the industry fear the inheritance tax overhaul could lead some farmers to exit the sector, further weakening Britain’s domestic food production capacity and increasing reliance on imports.
Roberts emphasised that without measures to support domestic farming, the UK could be pushed toward “cheaper imports,” potentially jeopardising food security.
The Office for Budget Responsibility (OBR) recently noted that these budget changes would likely increase inflation, an assessment Roberts found “pretty difficult to disagree” with.
He stated, “The barrage of costs coming at us is significant… We will do everything we can to mitigate the impact, but it’s clear there isn’t the capacity to absorb this level of cost inflation in our industry’s margins.”
Already a significant taxpayer, Sainsbury’s currently contributes nearly £1 billion annually in taxes and faces further increases in its business rates next year, after the government deferred a planned review until 2026.
Sainsbury’s has supported Labour’s manifesto commitment to reform business rates, which it sees as essential to levelling the playing field between high-street stores and online retailers. Though the Treasury announced a consultation on business rates reform, new measures won’t come into effect until 2026-27.
Roberts underscored the urgency of reform, asserting that ministers should act faster to ensure sustainable growth. “We all share this ambition for growth, don’t we?” Roberts said.
“But to do that, we’ve got to enable high street retailers to invest in things that are really important for the success of the economy. We need business rates reform in order to balance the scales.”
Despite these challenges, Sainsbury’s posted resilient financial results in the first half of the year.
Excluding fuel, grocery sales grew by 4.6% in the six months to 14 September, with underlying profits rising 3.7% to £503 million, offsetting weaker performance at Argos.
With Sainsbury’s navigating an increasingly complex cost landscape, Roberts’ comments underline the need for prompt government action to support retailers facing mounting financial pressures.
