The British Retail Consortium (BRC) has urged Government to act on domestic policy costs, as it found through polling that four in five people (80%) fear the Middle East conflict will push up food prices.
BRC said retailers were already absorbing “significant additional costs” from the conflict, as rising gas and electricity prices push up production, shipping and distribution costs throughout the supply chain. It highlighted that this would have knock-on effects for fertiliser, manufacturing and logistics, and while retailers work to mitigate costs on consumers, BRC said pressures would “inevitably filter through” to the till over the coming months.
Over the past two years, retailers have absorbed £6.5 billion in additional employment costs from rising employer NICs and the National Living Wage, said BRC, alongside a new packaging tax (EPR) costing £1.6 billion. Further regulatory “burdens” will soon be implemented, including guaranteed hours provisions under the Employment Rights Act and the proposed reformulation of thousands of food lines under the new Nutrient Profiling Model.
BRC stated that policy costs would not ease when global markets stabilise, as they are determined by Government and regulators, not supply and demand.
Polling by Opinium on behalf of BRC found that while 80% of people feared the conflict would push up food prices, 73% expect it to raise the price of other products. Meanwhile, 81% are worried about rising energy bills, 76% about petrol and diesel, and 68% about tax increases.
Food retailers met with the Chancellor Rachel Reeves in early April and set out three specific asks, each targeting costs within Government’s direct control.
Remove non-commodity energy costs
- These are the policy levies, network charges and system fees that now make up between 57% and 65% of a typical business electricity bill – up from around 20% a decade ago and projected to reach 75% by 2030. They do not fall when global energy markets ease, said BRC, and removing legacy Renewables Obligation and Feed-in Tariff costs would deliver immediate relief for businesses. Germany has already acted, moving renewable energy levies off business bills and onto general taxation. EU leaders are now actively considering the same in direct response to difficulties in the Strait of Hormuz.
Delay implementation of the Nutrient Profiling Model
- This requires manufacturers to reformulate thousands of food lines while simultaneously managing an energy crisis and supply chain disruption is an avoidable additional burden. BRC stated that adjusting the timetable costs Government nothing.
Review of the triple packaging levy
- The new Extended Producer Responsibility levy, the Plastic Packaging Tax and Packaging Recovery Notes are three overlapping charges on the same activity, together costing retailers more than £2 billion each year. No comparable European retail sector faces a burden of equivalent scale and simultaneity, said BRC.
Helen Dickinson, chief executive of the BRC, said: “The Middle East conflict is driving up costs across the supply chain and families are right to be concerned. But not every pressure bearing down on retailers comes from the Gulf. Higher national insurance, packaging levies, new regulations, and business energy charges are all domestic policy decisions, made in Westminster, and they can be addressed there. Such action by Government would help retailers to keep prices affordable for households.
“Other governments are already acting. Germany has reduced electricity costs for businesses by moving levies off bills and EU leaders are actively discussing similar responses to this crisis. The UK should be moving in the same direction, not treating global instability as cover for inaction on costs of its own making.
“Retailers are working hard to hold prices down, but they cannot do it alone. Every cost Government chooses not to address is a cost that will find its way into someone’s shopping basket. That is a political choice, and it is one ministers still have time to change – but the window to act is closing.”
