Introduction: Retailers say national insurance rise will cost jobs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Some of Britain’s largest retailers are crying foul over the government’s plan to raise their national insurance contributions, warning that it will cost jobs and drive up prices.
More than 70 businesses have signed an open letter to Chancellor Rachel Reeves, saying the changes the employers’ NICs contributions – plus the higher minimum wage and a packaging levy – mean price hikes are a “certainty”, and will cost the retail sector more than £7bn each year.
They warn that retailers cannot absorb such significant cost increases quickly by making efficency savings or eating into profits. Instead, they’ll be forced to take dfficult decisions such as lifting prices, offering lower pay rises, cutting staff and closing stores.
The letter is signed by major retailers including Tesco, Asda, Sainsbury’s, Aldi, Amazon UK, Boots, Lidl, JD Sports, Primark, Morrisons and Greggs.
In it, they warn:
“We appreciate Government’s focus on improving the fiscal situation and investing in public services; we also recognise the role businesses have in supporting this.
But, the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”
In last month’s budget, Rachel Reeves increased the rate on employer’s NI contributions (NICs) from 13.98% to 15% from April 2025, and lowered the threshold at which they pay NICs on employees earnings to £5,000 from £9,100.
The plan is forecast by the government to raise £25bn per year.
Marks & Spencer warned that the measure in the budget could cost it more than £60m next year, while Asda expects a £100m cost.
Hospitality businesses have already warned that they will have to slash jobs and investment, or close, due to the increase in NICs.
The issue of higher national insurance contributions will be on the agenda at parliament later this morning, when the Treasury Committee will question the Bank of England Governor, Andrew Bailey.
MPs will also hear from three members of the BoE’s Monetary Policy Committee — deputy governor Clare Lombardelli, professor Alan Taylor and Dr Catherine Mann.
The committee say they’re likely to ask about the current economic picture, and how the measures announced in the Chancellor’s 2024 Autumn Budget will affect monetary policy.
The Bank’s plans for unwinding its QE portfolio, the most recent pay and jobs figures, and the continued issues with the reliability of official data, may also come up…
The agenda
-
10am GMT: Eurozone inflation report for October (final reading)
-
10.15am GMT: Treasury committee hearing with the Bank of England
-
1.30pm GMT: US building permits and housing starts data
Key events
Keir Starmer denies budget to blame for rise in mortgage rates
The recent rise in UK mortgage rates will probably also be raised by MPs when they grill the Bank of England this morning.
A string of high street lenders have pushed up mortgage rates modestly in recent days amid expectations of higher inflation – partly due to measures in the budget.
Sir Keir Starmer, though, has denied that the budget is to blame for a recent rise in mortgage rates.
Speaking to journalists as he travelled to the G20 summit in Rio, the PM said:
“What we have done with the budget is to stabilise the economy and that, in my view, was the essential first step.
“As a result of that, the forecasts are for interest rates to go down, inflation to go down – you saw the figures around the budget.”
Starmer added that mortgage rates were “individual decisions for the banks, but the interest rates will be coming down”.
Interest rate are indeed forecast to come down, but not quite as quickly as hoped earlier this autumn. Currently, the money markets expect rates – currently 4.75% – will drop to 4% by next December. Before the budget, they were forecast to drop to 3.75% by the end of 2025.
The group of UK retailers also say they would like to meet withe chancellor Rachel Reeves, and suggest changing the schedule for introducing various money-raising measures.
Their letter says:
“By adjusting the timings of some of these changes, the Government would give businesses time to adjust and greatly mitigate their harmful effects on high streets and consumers.”
Introduction: Retailers say national insurance rise will cost jobs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Some of Britain’s largest retailers are crying foul over the government’s plan to raise their national insurance contributions, warning that it will cost jobs and drive up prices.
More than 70 businesses have signed an open letter to Chancellor Rachel Reeves, saying the changes the employers’ NICs contributions – plus the higher minimum wage and a packaging levy – mean price hikes are a “certainty”, and will cost the retail sector more than £7bn each year.
They warn that retailers cannot absorb such significant cost increases quickly by making efficency savings or eating into profits. Instead, they’ll be forced to take dfficult decisions such as lifting prices, offering lower pay rises, cutting staff and closing stores.
The letter is signed by major retailers including Tesco, Asda, Sainsbury’s, Aldi, Amazon UK, Boots, Lidl, JD Sports, Primark, Morrisons and Greggs.
In it, they warn:
“We appreciate Government’s focus on improving the fiscal situation and investing in public services; we also recognise the role businesses have in supporting this.
But, the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”
In last month’s budget, Rachel Reeves increased the rate on employer’s NI contributions (NICs) from 13.98% to 15% from April 2025, and lowered the threshold at which they pay NICs on employees earnings to £5,000 from £9,100.
The plan is forecast by the government to raise £25bn per year.
Marks & Spencer warned that the measure in the budget could cost it more than £60m next year, while Asda expects a £100m cost.
Hospitality businesses have already warned that they will have to slash jobs and investment, or close, due to the increase in NICs.
The issue of higher national insurance contributions will be on the agenda at parliament later this morning, when the Treasury Committee will question the Bank of England Governor, Andrew Bailey.
MPs will also hear from three members of the BoE’s Monetary Policy Committee — deputy governor Clare Lombardelli, professor Alan Taylor and Dr Catherine Mann.
The committee say they’re likely to ask about the current economic picture, and how the measures announced in the Chancellor’s 2024 Autumn Budget will affect monetary policy.
The Bank’s plans for unwinding its QE portfolio, the most recent pay and jobs figures, and the continued issues with the reliability of official data, may also come up…
The agenda
-
10am GMT: Eurozone inflation report for October (final reading)
-
10.15am GMT: Treasury committee hearing with the Bank of England
-
1.30pm GMT: US building permits and housing starts data
