Tesco Chief Executive Ken Murphy has warned the UK government against introducing additional taxes on retailers, saying the sector has already faced significant cost pressures.
Profit Upgrade Amid Rising Costs
Tesco recently upgraded its profit forecast for the year, expecting full-year adjusted operating profits of £2.9bn–£3.1bn. Despite intense competition forcing the supermarket to cut prices on 6,500 items, shoppers are buying more, boosting overall profits.
Murphy emphasized that rising costs, including higher National Insurance contributions (NICs), commodity price increases, and new packaging recycling levies under the Extended Producer Responsibility (ERP) programme, have already burdened the industry. Tesco has set aside £90m for ERP levies alone, which took effect last month.
Concerns Over the Upcoming Budget
Chancellor Rachel Reeves will present the 2025 Budget on November 26, with expectations of potential tax increases. Murphy urged the government not to make it harder for retailers to deliver value to customers.
He said, “The new taxes, higher NICs, and rising commodity prices are all additional burdens on the industry. Our one request is that the government does not increase costs further.”
The Food and Drink Federation (FDF) warned that ERP levies could cost UK producers £1.1bn, surpassing the impact of NIC hikes, with most costs likely passed to consumers, leading to higher food prices.
Industry and Public Reactions
The British Retail Consortium also cautioned that any further tax rises would keep shop prices high for longer. Meanwhile, the Unite union criticized Tesco for profiting amid the cost-of-living crisis, highlighting that millions of workers struggle with food costs while shareholders benefit.
Consumer Behavior and Market Impact
Murphy noted that many shoppers are buying fresh ingredients to cook at home, possibly as a way to save money amid rising prices. Official data shows food and drink costs across retailers grew 5.1% annually in August, with items like beef, butter, milk, and chocolate surging.
He added that Tesco is raising prices more slowly than the market average, and households may delay spending until after the Budget due to economic uncertainty.
