(qlmbusinessnews.com . Fri 3rd Oct, 2025) London, UK —
UK Retailers Face Mounting Costs as Tesco Projects Profit Increase Despite Economic Pressures
The head of Tesco Supermarket has issued a stark warning to the government, urging it not to impose any additional financial burdens on UK retailers in the forthcoming Budget, declaring that they have reached their limit.
Ken Murphy voiced his concerns over potential repeats of the previous Budget's consequences, which resulted in significant operational cost increases for the sector.
These remarks were made as Tesco, Britain's leading grocery chain, announced an uplift in its profit projections for the year.
With Chancellor Rachel Reeves scheduled to announce her financial plans on the 26th of November, there's a looming anticipation of tax hikes.
Retailers across the board have been vocal about the surge in costs they've faced since April, stemming from heightened employer contributions towards National Insurance and increased minimum wages.
Furthermore, as part of the government's Extended Producer Responsibility (ERP) scheme, Tesco among other food and beverage firms now bears the financial burden for the council's recycling of their product packaging. Tesco has earmarked £90 million for ERP levies, a new expense introduced last month.
The Food and Drink Federation (FDF) anticipates that this tax alone will cost British producers a staggering £1.1 billion, surpassing the impact of the rise in National Insurance contributions.
Jim Bligh, the FDF's Corporate Affairs Head, cautioned earlier this week that these taxes will likely be transferred to consumers, potentially escalating food prices as a direct consequence of governmental decisions over time.
Mr. Murphy highlighted these taxes as an “additional burden,” along with the increase in National Insurance contributions and commodity prices, all contributing to the escalating costs of conducting business.
He revealed that the higher National Insurance rate has already cost Tesco £235 million this year. In the light of the upcoming Budget, Mr. Murphy's plea to the government was straightforward: “Our one request is don’t make it more challenging for the industry to provide great value for our customers.”
This sentiment echoes the concerns raised by other retail executives. Earlier, the British Retail Consortium warned that any further tax increments in the imminent Budget would prolong the period of high shop prices.
In response, a Treasury spokesperson defended last year’s tax decisions, stating they have enabled significant investments in public priorities such as the NHS and provided a wage boost for millions, also noting that the corporate tax has been capped at 25% amidst business rates reforms.
These concerns arise as Tesco announces an optimism in their financial outlook for the year, predicting full-year adjusted operating profits to be in the range of £2.9 billion to £3.1 billion. Despite fierce competition necessitating price reductions on 6,500 items, an increase in shopper basket sizes suggests a rise in profits.
Unite union accused Tesco of profiting from the cost-of-living crisis, with General Secretary Sharon Graham calling for the Labour government to tackle corporate greed more assertively.
Additionally, Mr. Murphy noted a shift in consumer behaviour with more people opting to buy fresh ingredients for home-cooked meals, potentially as a cost-saving strategy. This comes amidst rising costs for essential items like beef, butter, milk, and chocolate across all retailers, with August data showing a 5.1% annual inflation rate.
However, Tesco claims to be increasing prices at a rate slower than the market average, a tactic that might align with consumer anxieties over the Budget and the broader economic forecast, as indicated by Mr. Murphy.
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