Convenience stores could face £634m in additional bills following the Budget, the ACS has warned.
The trade body has assessed the impact that increasing operating costs, including the national living wage (NLW), as well as potential policy changes, such as pension contributions, will have on the sector.
The current projection for the NLW rate in April 2025 is £12.10 per hour, up 5.8%, which would increase the convenience sector wage bill by £417m to over £7.6bn.
With the employer National Insurance Contributions (NICs) determined by wage costs, NICs would also increase in 2025 from £312m to £364m in April. If there were to be a one percentage point increase in the rate of NICs, from 13.8% to 14.8%, the cost would increase further to over £404m, ACS explained.
In the convenience sector, 74% of colleagues are enrolled into a workplace pension. The total cost of pension contributions for convenience retailers is set to rise by 9% to £110m in 2025. However, if employers were required to pay NICs on their pension contributions, this would cost an additional £15m.
There is also concern over the cost of business rates next year and the removal of the 75% retail and hospitality relief. In 2024/25, the business rates bill for the convenience sector is set to be around £245m, up from £199m last year, with retailers currently benefiting from 75% retail and hospitality reliefs. If this discount were to be removed, the sector’s rates bill would increase to around £300m.
Summing up the cost increases that retailers are already facing in changes to NLW and business rates valuations and multipliers, bills are set to increase by £524m next year. However, if the budget also includes the policy changes, this would rise to £634m, the ACS said.
“The government has spoken of promoting investment and growth. Each of these measures, that have been widely trailed in the run-up to the budget, would inhibit this ambition and mitigate against investment and growth in the convenience sector,” said ACS CEO James Lowman.
“The cumulative impact of more than one of these measures could be extremely serious, threatening the viability of the only businesses that remain to provide a lifeline in countless villages and housing estates across the country.
“Our sector is at the sharp end of the fight against retail crime, faces pressure on operating margins, and is set to be impacted by a host of new regulations.
“Local shops owners are facing what could be another half a billion pounds of new costs as a result of the budget, and just as the Chancellor has to make tough decisions, so these business owners will be choosing between some unpalatable options as a result: cutting investment, cutting employment or cutting back on the services they provide.
“The Chancellor must share the burden of taxes and new costs fairly, and recognise the vital role that local shops play in more communities than any other physical business, right across the counwtry.”
In its submission to the Treasury ahead of the budget, the ACS has made four recommendations to support local shops. The trade body has suggested it should increase the employer NICs threshold to £185 per week, uprating it each year, and maintain small business rate relief as well as the 75% retail and hospitality relief.
It has also recommended introducing an alternative rating methodology for online distribution warehouses, and ring-fencing revenues from the upcoming vaping products levy to fund enforcement against the illicit trade.
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