UK supermarkets warn business rates rise could push up food inflation

Bosses of the UK's biggest supermarkets are urging Chancellor Rachel Reeves to exempt shops from a new business rates surtax, warning that shoppers will bear the brunt of higher costs.

A letter, organized by industry group the British Retail Consortium (BRC) and addressed to Reeves, argues that limiting the tax burden on grocers would help tackle food inflation.

It has been signed by UK executives and directors at Tesco, Sainsbury's, Aldi, Asda, Iceland, Lidl, Marks & Spencer, Morrisons and Waitrose.

The BRC said it is concerned that large shops could see their business rates rise if they are included in the government's new surtax for properties with a rateable value over £500,000 ($665,000).

This is expected to cover discounts for smaller high-street firms, which will be subject to reduced business rates under the government's plans.

The plans are set to be confirmed in next month's autumn budget statement and would come into effect from next April.

In the letter, the supermarket bosses say that their "ability to absorb additional costs is diminishing."

It reads: "If the industry faces higher taxes in the coming Budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging and it will be households who inevitably feel the impact."

"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."

"Large retail premises are a tiny proportion of all stores, yet account for a third of retail's total business rates bill meaning another significant rise could push food inflation even higher."

The letter concludes by asking Reeves to "address retail's disproportionate tax burden" which it said would "send a strong signal of support for the industry and of the Government's commitment to tackling food inflation."

Helen Dickinson, the BRC's chief executive, said: "Supermarkets 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."

"From higher national insurance contributions to new packaging taxes, the financial strain on the industry is immense."

The Treasury has been contacted for comment.