Britain’s largest supermarket groups have urged Chancellor Rachel Reeves to keep shops out of upcoming business rates reforms, warning that higher property taxes would feed through into higher grocery bills. In an open letter sent this week, bosses from the UK’s nine biggest chains argued that any rise in their costs would add strain at a time when food inflation remains more than double the Bank of England’s 2% target.
The retailers say the stakes are high for millions of households. They want clarity before the government outlines the next steps on rates, the property tax that weighs heavily on high-street operators. The appeal lands as ministers weigh fiscal choices and seek to manage inflation while supporting growth.
What the supermarkets want
Senior executives asked the Treasury to exclude physical shops from changes that would raise their business rates bills. They cautioned that retail margins are thin and that higher fixed costs would not be absorbed for long.
“Exclude shops from upcoming changes to business rates, or risk pushing food prices higher,” the supermarket leaders wrote.
They also stressed that the sector has invested in price cuts over the past year to help families cope. A sudden tax increase, they warned, could reverse some of that progress.
Why business rates matter
Business rates are a property-based tax paid on commercial premises across England, Scotland, and Wales. For supermarkets with large estates, the bill runs into hundreds of millions of pounds each year. Retailers have long argued that the system penalizes physical stores compared with online rivals with fewer large sites.
Rates are typically reassessed on a cycle set by government. Any change that lifts the tax take for bricks-and-mortar operators can shape pricing, investment, and staffing decisions across the sector.
- Rates are a fixed cost that rises even when sales weaken.
- Grocery operates on low single-digit margins, amplifying cost shocks.
- Store-heavy models face higher exposure than online-only competitors.
Inflation risks and consumer impact
Food prices have cooled from last year’s peak but remain elevated for many staples. Industry leaders warned that passing new tax costs through the supply chain could keep prices higher for longer.
“Food inflation is already over double the Bank of England’s target,” the letter stated.
Economists say the transmission is straightforward. If fixed costs rise, retailers either trim investment, cut promotions, or lift shelf prices. Any of those choices would hit shoppers or the broader economy.
Consumer groups have argued for targeted relief that protects low-income households. They say stable prices and steady promotions matter more than short-term tax receipts.
Industry viewpoints and potential trade-offs
Retail bosses argue that shielding shops from higher rates would support store upgrades, staff training, and regional investment. Some smaller businesses share that view, saying they lack the scale to absorb new costs.
Others urge caution. Fiscal analysts warn that carving out a single sector narrows the tax base. They suggest alternative options, such as time-limited reliefs, a phased transition, or matching any increase with cuts in employer burdens.
Property experts note that rates already reflect updated rental values in many areas. They argue that reform should balance fairness for high streets with stable funding for public services.
What happens next
The Treasury has yet to publish final details of the changes. Officials are expected to weigh inflation risks against revenue needs and long-term reform goals. Retailers want certainty before the next fiscal statement so they can set prices and plan 2025 budgets.
Analysts say three outcomes are most likely:
- A sector-wide exclusion for shops, limiting near-term cost pressures.
- A phased increase that spreads the impact over several years.
- Targeted relief for store-heavy firms, paired with broader reform later.
Each path carries trade-offs. An exclusion would support prices now but reduce tax intake. A phase-in would soften the shock while keeping policy intact. Targeted relief could help the most exposed without a blanket carve-out.
The supermarket plea raises the stakes for the Chancellor’s decision. With food inflation still running above target and household budgets stretched, any policy that raises store costs risks pushing prices higher. A clear, balanced plan—ideally with phased steps and predictable relief—would help the sector invest while keeping grocery bills in check. The next fiscal update will show how far ministers go to shield high-street food retailers and whether that is enough to steady prices into 2025.
