Britain’s leading supermarkets have fired a warning shot across the bows of Chancellor Rachel Reeves ahead of her crucial Autumn Budget, cautioning that any fresh tax hikes on the retail sector could prolong the pain of high food prices for millions of households. In a rare show of unity, the bosses of Tesco, Sainsbury’s, Asda, Morrisons, Aldi, Lidl, Waitrose, Marks & Spencer, and Iceland have all signed a joint letter to the Treasury, arguing that further fiscal pressure would make it “even more challenging” to keep prices down for shoppers already feeling the squeeze of the cost-of-living crisis.
According to reporting from BBC and other major outlets, the supermarkets’ letter is blunt: “Our ability to deliver value for our customers will become even more challenging and it will be households who inevitably feel the impact.” The executives warn that “high food inflation is likely to persist into 2026,” and urge the government not to “prolong” the problem through new fiscal measures. The message is clear—if Chancellor Reeves opts for higher business rates or other levies in her Budget, supermarket shelves could see price tags rise yet again.
This intervention comes at a tense moment for the UK’s public finances. The Office for Budget Responsibility recently downgraded its growth forecasts, leaving Reeves with a £22 billion gap to fill. Analysts at the Institute for Fiscal Studies (IFS) say that, given weaker growth, rising borrowing costs, and unfunded spending pledges, further tax increases are “almost certain.” Reeves, who imposed a £40 billion tax package including a rise in employer National Insurance contributions in her last Budget, had previously pledged not to “come back for more tax rises.” Yet she now faces an unenviable fiscal test, with many expecting her to break that promise.
The supermarkets’ chief concern is the government’s proposed “business rates surtax” on large commercial properties. Under the plan, smaller shops and hospitality venues with a rateable value below £500,000 would benefit from lower rates, but large retail stores and distribution hubs—like those operated by the major grocers—would see their bills climb. The British Retail Consortium (BRC) points out that while these large stores account for only a small slice of the country’s retail locations, they shoulder around a third of the sector’s total business rates.
BRC chief executive Helen Dickinson put it plainly: “Retailers are doing everything possible to keep food prices affordable. But it’s an uphill battle, with over £7 billion in additional costs in 2025 alone.” She urged the Chancellor to “ensure that the proposed changes to business rates result in a significant reduction to the industry’s rates burden.”
Supermarket bosses are especially wary because, as the letter notes, “Given the costs currently falling on the industry, including from the last Budget, high food inflation is likely to persist into 2026. This is not something that we would want to see prolonged by any measure in the Budget.” Food inflation, which peaked above 19% in 2023, has eased somewhat but remains stubbornly high. According to the Office for National Statistics, staples like butter are up 19%, milk 12%, and chocolate and coffee 15% year on year—well above pre-pandemic levels.
Ken Murphy, Tesco’s chief executive, has been especially outspoken. He revealed that the recent National Insurance hike alone has cost Tesco £235 million this year. “Enough is enough,” Murphy declared, echoing the frustration of many in the sector. Despite those pressures, Tesco still expects profits of up to £3.1 billion for the full year, and Lidl reported its pre-tax profits more than tripled to £156.8 million in the year to February. Yet, as industry leaders argue, sustained tax increases will inevitably feed through to consumer prices, hitting families hardest.
Retailers also argue that the proposed surtax unfairly targets major chains with large premises, while smaller high-street firms benefit from reduced rates. The BRC-organized letter to Reeves underscores that large shops with a rateable value over £500,000 could see their business rates rise, while “smaller shops and hospitality venues will benefit from lower rates.” According to the Financial Times, the supermarkets believe this could create a two-tier system that punishes scale and efficiency—ironically, the very factors that help keep prices down for consumers.
For its part, the Treasury insists it is listening. A spokesperson told the BBC that “tackling inflation remains a priority” and highlighted recent measures to cut business rates for smaller retailers, including butchers, bakers, and high-street shops. The Treasury also emphasized that business rates will be adjusted to reflect changes in property values so that the system “continues to raise the same amount of revenue in real terms.” They added, “Even if a property’s valuation rises, its bill may still fall if the tax rate is lowered.”
Still, critics from within the retail sector—and some economists—question whether these tweaks will be enough. The IFS warns that “targeted taxes on professional partnerships or the wealthy” may not raise sufficient funds without broader measures, meaning the retail sector’s fears of being in the firing line are far from unfounded. As one unnamed retail executive put it to the press, “The chancellor talks about affordability, but every move she makes seems to make food less affordable.”
Meanwhile, Chancellor Reeves is juggling these domestic pressures with her international ambitions. Less than a month before her Budget, she travelled to Riyadh to lead a UK delegation at the Future Investment Initiative, meeting with senior Saudi royals and global business leaders in hopes of making progress on a trade deal with the Gulf Co-operation Council. But with the Budget looming and the threat of renewed food inflation at home, Reeves faces a delicate balancing act—one that could have real consequences for the cost of living in Britain.
As the debate intensifies, all eyes are on November 26, when Reeves is set to deliver her Autumn Budget. The stakes could hardly be higher: for the government’s fiscal credibility, for the supermarket giants, and above all, for the millions of UK households anxiously watching the price of their weekly shop.
