The Autumn budget has been tough for shoppers and the retail and hospitality sector with impacts on food inflation, shopper behaviour and food and drink businesses, according to leading industry commentators.
James Walton, chief economist at IGD, said: “This has been a tough Budget for shoppers, with Government needing to raise significant sums of money, taking taxation to record levels. IGD expects food inflation to persist into 2027, with government policy contributing about a third of this pressure. Food inflation will run ahead of overall inflation, making food relatively more expensive. Therefore, food shoppers will remain extremely cautious and reluctant to spend and the operating environment for food businesses will remain extremely difficult. The next few years will be characterised by weak volume growth and tight profits across retail and away from home.
“It’s clear there’s no immediate relief on the horizon for consumers or businesses. The increased taxation will slow volume growth which means less investment for the future resilience of the food system. There are opportunities for growth out there and targeted policy changes could unlock this, especially in horticulture and poultry. These changes could release £5bn of investment and create 60,000 jobs, and that means genuine economic progress. Our recent Viewpoint report, Driving Growth Through a Thriving Food System, sets out how the food industry can be the growth engine the UK urgently needs.”
Reacting to retail and hospitality related measures announced in the Budget, Linda Ellett, head of consumer, retail and leisure for KPMG UK, said: “Many retailers have long called for business rates reform, as the age of e-commerce grew and the cost of bricks and mortar retail rose. Retailers will be diving into the detail of the changes announced today, with some set to gain and others set to lose, depending upon their respective rateable value. Those losing, will at least, welcome the acknowledgement of impact in the shape of transitional relief and hopefully some permanency of the new arrangement. UK-based online sellers will be more unanimous in their reaction to proposals to ensure that non-UK based online sellers don’t continue to gain a competitive advantage by not having to pay customs duty. The key now will be how quickly the Government can make the change.
“KPMG research showed that the number of people feeling that the economy is worsening increased to 62% at the start of the final quarter of the year, up from 43% when 2025 began. And this is having consequences, as despite the majority of people still feeling secure in their personal financial situation, their nervousness about what the economy may mean for them is leading to spending cuts or delay. Those unaffected by income tax thresholds or other measures announced today may now feel confident to get spending again. However, some consumers will feel a tightening as these measures come into place. Retailers and hospitality businesses will be hoping that in the coming months the Government evidence that the economy is growing and provide increased confidence to consumers about the UK’s economic health.”
Philip Pepper, employment partner at law firm, Shakespeare Martineau, said the minimum way increase piled further pressure on retailers. “Business owners knew this Budget would be a tough pill to swallow, but with an increase to minimum wage only last year – no one expected this. These changes come at a time when inflation and operating costs are already through the roof, to have labour costs substantially increase as well is a massive blow.
“Retailers must ensure they are aware of the implications to their bottom line and their payroll function. Pay disputes make up a hefty portion of employment tribunals, and even minor errors can escalate into legal action. With other payroll changes, for example an increase in Statutory Sick Pay and national insurance contributions, reviewing payroll processes and providing training for finance and HR teams is essential.
“With the increased issues around using zero hours contracts not so long ago, which also threw the retail sector into chaos, it does feel that the government have forgotten that these changes do add up. The government will have to do something about the rising cost of doing business in this country or risk it blowing up in their faces. These increases will need to be paid for somehow and it is likely these will be passed on to the consumer, having a further adverse effect on their pockets.”
Katie Wyle, managing director, customer & retail operations, Northern Europe, URW, said: “The retail industry – one of the biggest generators of jobs for the UK, attracting billions of pounds of international investment – has long suffered this outdated and unfair rates system, the abolishment of tax-free shopping and, more recently, hikes in national insurance and now the minimum wage. Whilst the news is good for smaller businesses, it is questionable whether this goes far enough with so many challenges. By pushing ahead with a higher multiplier for larger retailers, albeit at a lower rate than feared, the Chancellor is effectively taxing success and future growth.
“To protect the future of the high street and drive nationwide growth, we need to see meaningful change with lower rates for all physical retailers and ensure online giants start to contribute more fairly; make revaluations more frequent and more market relevant; and fix the relief system – both Empty Property and Improvement Relief – so that landlords and owners can reinvest and bring vacant spaces back to life.”
