The Entertainer, one of the UK’s largest toy retailers, has abandoned plans to open two new stores following the government’s decision to increase National Insurance (NI) contributions for employers.
CEO Andrew Murphy explained that rising costs had also led to a hiring freeze at the company’s head office.
The decision highlights growing business concerns over the Budget changes, which increase the National Insurance rate for employers from 13.8% to 15% from next April, while lowering the tax threshold from £9,100 to £5,000. The policy is expected to raise around £25 billion a year to stabilize public finances, after revenue cuts under the previous government.
Speaking on BBC Radio 4’s *Today* programme, Murphy said: “There is no debate about the government’s ultimate objectives… simply the balance it has taken to achieve these objectives.” He stressed that The Entertainer had completed feasibility assessments for two new sites, but rising NI had changed the financial outlook, leading to the store closing.
Other major companies, including Sainsbury’s and Marks & Spencer, have hinted that increases in National Insurance rates could lead to higher prices as companies seek to manage rising costs. Sainsbury’s chief executive Simon Roberts estimated the supermarket chain faced additional costs of £140m, warning: “This will lead to higher inflation.”
Labor defended the tax increase as a way to “restore much-needed economic stability”. Councilor Rachel Reeves responded to the criticism, saying: “We have to raise money to put our public finances on a firm footing.”
Some companies are considering expanding their operations outside the UK in response to rising employer costs. Arnab Basu, CEO of Chromic, noted that planned cuts to US corporate tax under President-elect Donald Trump, coupled with falling energy costs, make the US an increasingly attractive environment for investment.
Likewise, Primark’s parent company, Associated British Foods, has indicated that tax increases could prompt it to prioritize growth outside the UK. “We are an international company as well, and we have choices about where we invest,” commented CEO George Weston.
The Treasury has defended the NI changes as essential to the economic recovery. A government spokesman said: “This government is committed to achieving economic growth by boosting investment and rebuilding Britain.”
The Entertainer’s decision highlights a wider trend for UK companies to re-evaluate local investments as they deal with the evolving tax landscape and rising operating costs.