Lidl boss urges government to ‘see sense’ over £7bn in costs heaped on retail

The government needs to “see sense” over the £7bn in annual costs heaped on retail in the wake of the budget, according to the chief of Lidl GB.

Ryan McDonnell was among more than 80 bosses of the country’s biggest retailers to write to Chancellor Rachel Reeves over the costs on Monday, made up of £2.3bn in employers’ National Insurance rises, £2.7bn in national living wage increases and £2bn in a levy on packaging from October 2025.

“We’ve all come together and communicated to government clearly on why we find the cumulative effect quite burdensome, and it’s suppliers, it’s producers, it’s distributors, it’s retailers, and we employ a lot of people,” he told The Grocer.

“The bill for the industry is £7bn and of course for us it’s a multimillion-pound bill as well.

“We’re still looking for the government to see some sense in balancing it a bit more.”

McDonnell said Lidl was also waiting for clarity on the government’s proposals to reform business rates. The proposals include a higher tax rate from 2026 for all business properties with a rateable value over £500,000, to pay for a discount for smaller properties in retail hospitality and leisure.

“We’re still working with government and lobbying on what the reform actually looks like,” he said.

“Business rates is something that we’ve had on the table with the previous government and this government, and all I see is rising business rates year on year including this coming financial year.”

McDonnell spoke as Lidl announced its full-year results to 29 February 2024, revealing the discounter had swung back into the black as shoppers switched more than £500m of spending from rival supermarkets.

Pre-tax profits soared to £43.6m from a £76m loss in the previous year, and turnover increased by 16.9% to nearly £11bn.

Lidl claimed to have experienced the highest growth in customer visits of any supermarket last year as revenues increased by 17% to almost £11bn.

It said 60% of British households now shopped at the discounter, with more than 35 million more trips made to its stores in the period year on year.

Lidl also said it would open 18 new stores in the next few months and 40 in the next financial year.

It’s a projection that would bring it close to its rate expansion up until the start of 2022, when it cut the pipeline from about 50 new openings a year to 20 as it scaled back investment in store estate growth.

McDonnell said the investment was coming from Lidl itself but did not rule out more sale & leaseback deals. It follows Lidl’s sale & leaseback deal to fund the construction of 12 new stores this year.

“We’re always looking at exploring more flexible ways of financing but it will be our own expansion for now,” he said.

Read more:

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• Retail will be hit with additional £7bn in costs from next year, industry chiefs warn Chancellor

• Why physical retail will be punished by government’s business rates reforms

He put Lidl’s sales growth down investment in distribution, boosting availability in areas including fresh produce.

“That plays into freshness and reliability, by having better infrastructure in distribution centres,” he said.

“But we’ve also been focused very clearly on the shopping experience and playing to our strengths.

“Take the fresh fruit & vegetable category alone. We’ve grown 22% versus a market growth of only 2% and that obviously is based on switching and customers moving toward us and extra trips.

“And then bakery. Our market share doubled in bakery in the last year to 16%, and that’s us and Tesco almost competing at the top.”

Lidl also said credited its loyalty app with contributing to growth, saying it had seen a 24% increase in users this year.

McDonnell said the discounter would be exploring adding a scan & shop feature to the app, following in the footsteps of Lidl in Germany, the Netherlands and Poland.

“We would be absolutely open to looking at that and like anything we will test that,” he said.

“It’s interesting that they’ve used that, and of course knowing this landscape here is quite digital, and generally customers look for more ways to self-checkout and self-scan, there’s certainly a trend that we need to embrace.

“So we’ll be exploring that definitely.”

He said no concrete plans were in place as yet.