Primark’s parent company, Associated British Foods (ABF), is considering increasing investments outside the UK following recent tax increases targeting businesses, particularly those on the high street, as outlined in the latest budget by Rachel Reeves. George Weston, CEO of ABF, highlighted the significant impact of these tax rises, including a substantial hike in employers’ national insurance contributions set for next April, which could escalate the company’s costs by tens of millions.
Despite these challenges, Weston expressed that ABF, which operates in 56 countries and recently initiated its first major marketing campaign in New York to attract American customers, remains resilient. He pointed out that while the budget places a considerable financial burden on businesses, it also contains provisions that benefit the less affluent consumers, creating a mixed impact.
Primark, a leading brand under ABF, reported a substantial growth in operating profits, with a 53% increase to £1.1 billion for the year ending 14 September. However, sales growth in the UK, its largest market, was muted at just 1% due to unfavorable weather affecting the demand for seasonal clothing and footwear. Despite these regional fluctuations, collaborations with celebrities like Rita Ora and Paula Echevarría have been well-received.
The broader UK retail sector experienced a slowdown in October, with the British Retail Consortium attributing the slump to consumers postponing purchases in anticipation of Black Friday deals and a shifted school half-term break. Weston noted a general consumer reluctance to spend ahead of necessity, a trend reinforced by the ongoing cost of living crisis, which has seen significant increases in food and energy costs.
Looking forward, Weston remains optimistic about the upcoming Christmas season, buoyed by wage growth and a budget that purportedly holds off on tax increases for working individuals. Nonetheless, ABF continues to navigate challenges within its supply chain, including disruptions along the Red Sea trade routes and political unrest in Bangladesh.
